Trade Liberalization and Chinese Students in U.S. Higher Education

Abstract We highlight a lesser-known consequence of China’s integration into the world economy: the rise of services trade. We demonstrate how the United States’ trade deficit in goods cycles back as a surplus in U.S. exports of education services. Focusing on China’s accession to the World Trade Organization, we show that Chinese cities more exposed to trade liberalization sent more students to U.S. universities. Growth in housing income and wealth allowed Chinese families to afford U.S. tuition, and more students financed their studies using personal funds. Our estimates suggest that recent trade wars could cost U.S. universities around $1.1 billion in annual tuition revenue.