Does Trade Policy Uncertainty Affect Firms' Imported Intermediates?

• Published in: Advances in management and applied economics 2024-05, Vol.14 (3)
• Main Authors: Zhu, Heliang, Lele Wan, Zhang, Hanyuan, Liu, Ling, Jiang, Huilu, Liu, Ziqi
• Format: Article
• Language: English
• Subjects: Trade policy
• ISSN: 1792-7544; 1792-7552

In recent years, the rise of trade protectionism and the intensifying trend of deglobalization worldwide have led to an annual increase in trade policy uncertainty faced by Chinese companies in international trade. This uncertainty may impact the import of intermediate goods by these companies. The import of intermediate goods is closely related to various aspects of a company's operations, such as productivity, mark-up rates, and innovation. Therefore, examining the impact and mechanisms of trade policy uncertainty on the import of intermediate goods by companies is of significant importance. This paper uses data from the 2001-2009 China Industrial Enterprise Database, China Customs Import and Export Database, and the World Bank's WITS database to calculate the trade policy uncertainty index for Chinese companies and test theoretical hypotheses. Empirical results show that when trade policy uncertainty increases, there is a decrease in both the amount and range of intermediate goods imported by companies, while the growth rate of intermediate goods import value increases. The mediating effect indicates that trade policy uncertainty affects companies' intermediate goods procurement strategies by reducing their production and business scale. Additionally, heterogeneity analysis finds that trade policy uncertainty has different impacts on companies with various intermediate goods import strategies.