The Impact of the U.S.-China Trade War on Profitability and Investment
This paper presents evidence that the U.S. trade war with China is having a significant negative impact on corporate investment. We identify the link between trade policy and corporate investment rates by merging together two seemingly separate literatures. The first is a literature that has used a specific-factors framework to show that fluctuations in the prices of tradable goods causes movements in abnormal returns of listed firms. The second is a literature that builds on Tobin’s q as a theory of corporate investment. In this setup, investment is linked to firm expected future profitability as measured by the market value of equity relative to the book value. Putting these two channels together yields a mechanism through which import protection can affect investment—namely, protection lowers expected firm profits and this lowers the incentives of firms to invest.

Please sign up for meetings here: docs.google.com/spreadsheets/d/1Qit6GP4lzZwReWIsT6Fm-ODyqxhCaXvETfEYO_l1gSc/edit#gid=0
Date: 10 March 2020, 16:00 (Tuesday, 8th week, Hilary 2020)
Venue: Manor Road Building, Manor Road OX1 3UQ
Venue Details: Skills Lab
Speaker: David Weinstein (Columbia University)
Organising department: Department of Economics
Part of: International Trade Seminar
Booking required?: Not required
Audience: Members of the University only
Editor: Melis Clark