The Effects of U.S. Trade War Tariff Exemptions on U.S. Trade with China and Asia

Abstract This paper studies the effects of the U.S. tariff exemption process that accompanied the dramatic escalation of U.S. tariffs during the U.S.–China trade war. Trade data at the fine product level shows that the approval of these exemptions was consistent with the expressed criteria, which sought to limit exemptions if firms had alternative sourcing options in the United States or third countries, including ASEAN nations and Mexico. Analysis of subsequent U.S. import sourcing demonstrates that tariff exemptions provided only partial relief, while tariffs led to lasting reductions in imports from China. Notably, the asymmetric sourcing responses to product-level import growth or decline, for products that were named in the trade war, indicates that in addition to tariffs, lasting changes in sourcing were also driven by the uncertainty created by the trade war.