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Abstract

1. Using data on a near-universe of US establishments from 1991 to 2007, I show that US businesses adapt to rising trade exposure from China along several margins. First, manufacturers of “directly exposed” products experiencing high import growth from China tend to become importers and retail-wholesalers by 2007, consistent with offshoring of products that are similar to those that they produced on their own. Manufacturers in “downstream” industries that buy from directly exposed industries tend to become retail-wholesalers and servicers, consistent with sourcing from directly exposed industries, leading to a loss of manufacturing employment. However, manufacturers in “upstream” industries that sell to directly exposed industries are less likely to become importers or retail-wholesalers, likely because they lose US domestic demands. Second, direct and downstream exposure is associated with becoming exporters, consistent with theories that offshoring makes firms efficient enough to export. Third, all three types of exposure are associated with switching industries within manufacturing, typically toward less-exposed industries. Lastly, the prediction of Holmes and Stevens (2014) that large establishments are more negatively affected is supported. 2. Using data on a near-universe of US establishments from 1991 to 2007, I show that US businesses adapt to rising trade exposure from China along several margins. First, manufacturers of “directly exposed” products experiencing high import growth from China tend to become importers and retail-wholesalers by 2007, consistent with offshoring of products that are similar to those that they produced on their own. Manufacturers in “downstream” industries that buy from directly exposed industries tend to become retail-wholesalers and servicers, consistent with sourcing from directly exposed industries, leading to a loss of manufacturing employment. However, manufacturers in “upstream” industries that sell to directly exposed industries are less likely to become importers or retail-wholesalers, likely because they lose US domestic demands. Second, direct and downstream exposure is associated with becoming exporters, consistent with theories that offshoring makes firms efficient enough to export. Third, all three types of exposure are associated with switching industries within manufacturing, typically toward less-exposed industries. Lastly, the prediction of Holmes and Stevens (2014) that large establishments are more negatively affected is supported.

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