SME performance and the US-China trade war: Evidence of China

This paper examines the impact of the US-China trade war on the operating performance of Chinese export-oriented SMEs with US customer concentration. Using a unique dataset derived from textual analysis and company information from the New Third Board Market, we employ matched pairs analysis to compare the abnormal performance of export-oriented SMEs before and after the introduction of tariffs, controlling for performance, industry and size. We find that tariff changes did not negatively impact the operating performance of Chinese export-oriented SMEs, as compared with domestic matched firms. In general, returns on assets, return on sales and sales growth were higher after the introduction of tariffs, although we find that the first year of tariffs negatively impacted operating performance for SME firms the higher their level of American customer concentration. Our findings suggest that export oriented Chinese SMEs are resilient to changes in tariffs, effectively managing customer concentration and have operating flexibility to hedge against adverse changes rules which regulate the flow of goods through global supply chains.