Speaker: Ka Zeng, Professor of Political Science, University of Massachusetts-Amherst

Amid rising U.S.-China strategic competition, efforts to decouple the two largest economies or mitigate the vulnerabilities posed by increased economic interdependence through “de-risking” strategies have threatened to upend the extensive supply chain relationships between the two countries. To what extent have recent geopolitical tensions generated by events such as the trade war influenced the decision of China-based U.S. multinational corporations to bring production back home through the so-called backshoring? Are U.S. firms more heavily dependent on China-centered supply chains more or less likely to engage in such activities? This paper addresses these questions through an analysis of a novel firm-level dataset on publicly reported backshoring cases. Our analysis yields some evidence that U.S. tariffs negatively impacted firms’ investment activities. Interestingly, firms with more Chinese supply chain partners are more likely to backshore production in response to trade protectionism, but it also takes them longer to do so. In other words, while trade policy uncertainty may compel firms to relocate production, factors such as contractual commitments, significant sunk costs, and the high costs of switching business partners may nevertheless limit their ability to sever existing supply chain relationships and prolong the process of backshoring. Our findings therefore highlight the contradictory incentives that trade policy uncertainty presents to firms and point to the importance of a sound supply chain ecosystem in mitigating external risks, while also serving as a potential source of resilience in U.S.-China trade relations.