Geopolitical Risk and Decoupling: Evidence from U.S. Export Controls

Crosignani, Matteo; Han, Lina; Macchiavelli, Marco; Silva, André F.

doi:10.59576/sr.1096

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Geopolitical Risk and Decoupling: Evidence from U.S. Export Controls

Abstract: Hegemonic countries safeguard their dominant position by maintaining technological leadership. To this end, the U.S. has imposed export controls to restrict China’s access to strategic, cutting-edge technologies. We document that these measures lead to an immediate, broad-based decoupling of supply chains, with U.S. suppliers more likely to end relations with Chinese customers—even those not directly targeted by the policy. However, we find no evidence of reshoring or friend-shoring in U.S. supply chains. Due to these disruptions, affected U.S. suppliers experience a $130 billion decline in market capitalization, along with reductions in profitability and employment.

Keywords: geopolitical risk; Export controls; decoupling; supply chains;

JEL Classification: F38; F51; G12;

https://doi.org/10.59576/sr.1096