How Certain Companies Navigate Trade Wars More Successfully Than Others

In 2018, the U.S. government imposed tariffs on over $250 billion worth of Chinese products, prompting American buyers to seek alternative suppliers to avoid the increased costs. Research shows that transactions between U.S. buyers and Chinese suppliers dropped by more than 18% immediately after the trade war began. However, not all companies were affected in the same way: innovative and socially responsible Chinese firms were more likely to retain their U.S. buyers, while those with strong local political ties saw a decrease in business. To prepare for trade wars, suppliers should focus on innovation and corporate social responsibility, while being cautious about involvement in local politics. Regulators should support these efforts, and buyers should assess their reliance on suppliers when evaluating their resilience.