The Impact of the US-China Trade War on Firm Innovation
Research Article
Open Access
CC BY

The Impact of the US-China Trade War on Firm Innovation

Hejun Chen 1*
1 Beijing Foreign Studies University
*Corresponding author: chjf219@gmail.com
Published on 6 August 2025
Volume Cover
AEMPS Vol.203
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-80590-275-1
ISBN (Online): 978-1-80590-276-8
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Abstract

Innovation is a vital factor driving the development of core competitiveness and the upgrade of economic structure., and its dynamic evolution mechanism has always been the research focus in the field of industrial economics and international trade. As complex international dynamics emerge in a globalized world, negative economic shocks can leave long-lasting impacts on firms’ innovation capabilities. This study utilizes the 2018 US-China trade war as a quasi-natural experiment, and a multi-dimensional econometric analysis framework are constructed to examine how trade frictions influence firm-level innovation in China. Constructing a difference-in-differences model, analysis of 2013-2023 firm data indicate that the US-China trade conflict causes a significant decline in innovation activity, but high industry competition and government subsidies mitigate its impact. This study further clarifies the effects of trade friction on firm innovation by contributing to the existing literature and providing empirical evidence as well as policy implications for fostering innovation capacity and resilience.

Keywords:

US-China trade war, firm innovation, industry competition, government subsidy

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Chen,H. (2025). The Impact of the US-China Trade War on Firm Innovation. Advances in Economics, Management and Political Sciences,203,82-89.

References

[1]. Melitz, M.J., Redding, S.J. (2022) Trade and innovation. National Bureau of Economic Research Working Paper

[2]. Liu, Q., Ma, H. (2020) Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession. Journal of International Economics 127, 103387.

[3]. Zhang, D., Zheng, W., Ning, L. (2018) Does innovation facilitate firm survival? Evidence from Chinese high-tech firms. Economic Modelling 75, 458-468.

[4]. Kong, D., Liu, C., Narayan, P.K., Sharma, S.S. (2024) The US–China trade war and corporate innovation: Evidence from China. Financial Management 53(3), 501-541.

[5]. Ding, Z., Qian, D., Wang, X. (2025) Research on the impact of trade friction on the green innovation efficiency of cities: A study from the perspective of profit-quality analysis. Science Research Management 46(3), 160-169

[6]. Yoon, C., Park, J. (2022) The US-China Trade War and Firm Innovation. Working Paper.

[7]. Xu, Z., Zhong, X., Zhang, Z. (2022) Does the Sino–US trade friction promote firm innovation? The role of the export grab effect. Sustainability 14(5), 2709.

[8]. Chen, Y., Zhang, S., Miao, J. (2023) The negative effects of the US-China trade war on innovation: Evidence from the Chinese ICT industry. Technovation 123(5), 102734.

[9]. Xie, L., Liu, X., Tan, Y. (2025) Reverse push effect or suppression effect? International trade friction and corporate innovation. Journal of Management Sciences in China 28(4), 17-31.

[10]. Xu, P., Jin, Z., Li, J. (2025) Trade Friction, Talent Policy and Export Enterprise Innovation. Review of Industrial Economics (3), 187-206.

[11]. Benguria, F., Choi, J., Swenson, D.L., Xu, M.J. (2022) Anxiety or pain? The impact of tariffs and uncertainty on Chinese firms in the trade war. Journal of International Economics 137, 103608.

[12]. Wang, Y., Zhao, J., Kong, D. (2025) Research on the Impact of Trade Friction on the Transformation and Upgrading of Manufacturing Enterprises: A Quasi-natural Experiment Based on Listed Companies in China. Modern Finance and Economics-Journal of Tianjin University of Finance and Economics 45(2), 110-129.

References

[1]. Melitz, M.J., Redding, S.J. (2022) Trade and innovation. National Bureau of Economic Research Working Paper

[2]. Liu, Q., Ma, H. (2020) Trade policy uncertainty and innovation: Firm level evidence from China’s WTO accession. Journal of International Economics 127, 103387.

[3]. Zhang, D., Zheng, W., Ning, L. (2018) Does innovation facilitate firm survival? Evidence from Chinese high-tech firms. Economic Modelling 75, 458-468.

[4]. Kong, D., Liu, C., Narayan, P.K., Sharma, S.S. (2024) The US–China trade war and corporate innovation: Evidence from China. Financial Management 53(3), 501-541.

[5]. Ding, Z., Qian, D., Wang, X. (2025) Research on the impact of trade friction on the green innovation efficiency of cities: A study from the perspective of profit-quality analysis. Science Research Management 46(3), 160-169

[6]. Yoon, C., Park, J. (2022) The US-China Trade War and Firm Innovation. Working Paper.

[7]. Xu, Z., Zhong, X., Zhang, Z. (2022) Does the Sino–US trade friction promote firm innovation? The role of the export grab effect. Sustainability 14(5), 2709.

[8]. Chen, Y., Zhang, S., Miao, J. (2023) The negative effects of the US-China trade war on innovation: Evidence from the Chinese ICT industry. Technovation 123(5), 102734.

[9]. Xie, L., Liu, X., Tan, Y. (2025) Reverse push effect or suppression effect? International trade friction and corporate innovation. Journal of Management Sciences in China 28(4), 17-31.

[10]. Xu, P., Jin, Z., Li, J. (2025) Trade Friction, Talent Policy and Export Enterprise Innovation. Review of Industrial Economics (3), 187-206.

[11]. Benguria, F., Choi, J., Swenson, D.L., Xu, M.J. (2022) Anxiety or pain? The impact of tariffs and uncertainty on Chinese firms in the trade war. Journal of International Economics 137, 103608.

[12]. Wang, Y., Zhao, J., Kong, D. (2025) Research on the Impact of Trade Friction on the Transformation and Upgrading of Manufacturing Enterprises: A Quasi-natural Experiment Based on Listed Companies in China. Modern Finance and Economics-Journal of Tianjin University of Finance and Economics 45(2), 110-129.

Cite this article

Chen,H. (2025). The Impact of the US-China Trade War on Firm Innovation. Advances in Economics, Management and Political Sciences,203,82-89.

Data availability

The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.

About volume

Volume title: Proceedings of ICEMGD 2025 Symposium: Resilient Business Strategies in Global Markets

ISBN: 978-1-80590-275-1(Print) / 978-1-80590-276-8(Online)
Editor: Florian Marcel Nuţă Nuţă, Li Chai
Conference website: https://2025.icemgd.org/CAU.html
Conference date: 20 September 2025
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.203
ISSN: 2754-1169(Print) / 2754-1177(Online)

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