KCG Working Paper No. 38: Just passing through? The US-China Trade War and Reconfiguration of Global Value Chains through Vietnam

Authors: Tao Zou and Yundan Gong

We examine how the 2018-19 US-China trade war reconfigured global value chains (GVCs) through Vietnam using firm-to-firm transaction records on cross-border trade and domestic sourcing. We find that exposure to US tariffs on Chinese goods led firms in Vietnam to increase imports from China and exports to the US, with both transshipment and value-added processing contributing along distinct timelines. Tracing domestic supply-chain responses within Vietnam, we show that US tariff hikes on China also increased local intermediate sourcing, but a substantial share of this expansion embodied Chinese intermediate inputs. The results provide firm-level evidence that trade-war-driven relocation of GVCs to Vietnam stimulated local processing activity while deepening Chinese supply-chain linkages in the third country.