Signed, Sealed, Circumvented: Evaluating the Effects of Section 301 Tariffs on Patterns of Chinese Trade Rerouting During the US-China Trade War

Between July 2018 and December 2019, the Trump administration launched a trade war with China by levying four major tranches of country-specific (Section 301) tariffs against China, raising concerns about trade rerouting. While prior research has observed limited evidence of Chinese trade rerouting through Vietnam due to the trade war tariffs, there has yet to be a cross-national analysis assessing whether Chinese trade rerouting through multiple countries is a systematic response to China-specific tariffs. In this thesis, I estimated the effect of Section 301 tariffs on patterns of Chinese trade rerouting through third-party countries between 2018 and 2022, and found that the tariff imposition slightly increased the volume of Chinese trade rerouting. Specifically, I discovered that products subjected to tariffs in 2018 exhibit significant trade rerouting effects, whereas products tariffed in 2019 show no such effect. I also observed that trade rerouting is evident when examining trade quantities, but not when analyzing trade values. Next, I used a combination of quantitative and qualitative methods to analyze the mechanisms driving these discrepancies. The mechanisms analysis finds that differences in trade rerouting between the 2018 and 2019 cohorts are primarily explained by two factors: first, the 2018 cohort included products strategic to the Made in China 2025 industrial policy (“strategic products mechanism”); and second, intermediary countries with stronger preexisting trade ties to both China and the US were more likely to serve as conduits for rerouting 2018 cohort products (“close ties mechanism”). Finally, the analysis revealed more limited evidence of rerouting in trade quantities compared to trade values, attributable to variations in pass-through rates and product complexity.