Trade Tensions and the Reconfiguration of Supply Chain Linkages: Evidence From U.S. Listed Firms

ABSTRACT

In recent years, the acceleration of de‐globalization has reconfigured global supply chains. Using listed firm‐level global supplier‐customer relationship data from the FactSet Revere database spanning January 2017 to December 2019, this paper examines whether and how firm‐supplier relationships change after the U.S.–China trade tensions. Our findings indicate that the U.S.–China trade tensions are followed by a significant relative decline in U.S. listed firms' reliance on direct Chinese suppliers. This phenomenon is pronounced in the manufacturing and information industries, especially in high‐tech industries. Mechanism analysis suggests that, following the trade frictions, U.S. firms appear to reduce their reliance on direct Chinese suppliers by diversifying and shortening contracts, while also taking adjustment costs into account. The extended analysis explicitly shows that U.S. firms continue to rely on China indirectly—via upstream inputs embedded in domestic suppliers and through third‐country firms closely tied to Chinese production networks. Additionally, U.S. firms tend to increase supplier links with countries that have higher institutional quality, consistent with a search for greater supply chain ‘security’.