Sino–US trade frictions and corporate investment

• Firms are affected by Sino–US trade frictions significantly reduce their capital expenditures. • The negative effect is more salient for firms with stronger financial constraints and the value of waiting to invest is high. • Firms increase R&D investment when firms affected by trade frictions. • The overall investment efficiency increases by reducing the over-investment projects. • This paper enriches literature on the economic consequences of Sino–US trade frictions through novel firm-level data. We examine the impact of Sino–US trade frictions on corporate investment of Chinese listed firms. The results show that: (1) Firms are affected by Sino–US trade frictions significantly reduce their capital expenditures; (2) The negative effect is more salient for firms with stronger financial constraints and higher value of waiting to invest; (3) Firms increase R&D investment when firms affected by trade frictions; (4) The overall investment efficiency increases by reducing the over-investment projects. This paper enriches literature on the economic consequences of trade frictions and the relationship between trade uncertainty and corporate investment.