Trade Diversion or Pre-existing Integration? Mexico and Vietnam after the US–China Trade War

Details

Supervisors

Vannoorenberghe, Gonzague

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité spécialisée

Abstract

enThis paper aims to estimate the differential export reaction of Mexico and Vietnam to the US–China trade war using product-level BACI trade data covering 314,705 country-product observations. Exploiting cross-product variation in tariff exposure, defined here as the product of the Section 301 tariff shock and China's pre-war share of US imports, the analysis shows evidence that for Vietnam, exports grew approximately 20 percentage points faster in highly exposed sectors compared to the rest of the world. This pattern holds regardless of how the estimation window is defined or how fixed effects are structured, and is further validated by a China-side regression in which the same exposed sectors experienced measurable export contractions over the same period. Mexico's response, by contrast, is statistically indistinguishable from zero once the initial export level control is taken out of the specification. This finding reveals that Mexico's trade war gains were entirely induced by pre-existing productive capacity in exposed sectors, the product of three decades of NAFTA and USMCA integration, rather than by the tariff shock itself. The tariff opportunity resulting from the trade war just activated pre-existing global value chain relationships rather than generating new ones. The differentiation, veiled in aggregate-level analyses and, to our knowledge, unestablished in prior work, constitutes the essential contribution of the paper.