Reports
Discussion Papers
No.986 The Effect of the US–China Trade War in a Neighboring Least-Developed Country
by Kazunobu Hayakawa, Phouphet Kyophilavong
January 2026
ABSTRACT
This study empirically examines the effects of US tariffs against China on exports to the United States from Laos, a least-developed country bordering China. Using monthly firm-level trade data from January 2018 to December 2020, we found that all firms in Laos, except those of US origin, benefit on average from trade diversion in the US market. In particular, rising exports by foreign firms other than US-origin firms are not attributable to the transshipment of Chinese products. For example, China-origin firms that expand exports to the US do not import products from China. However, Lao firms’ exports to the United States appear to increase through the transshipment or minor processing of Chinese goods, although the scale of these exports is negligible. Moreover, Lao exporters increased their exports to the United States without reducing exports to non-US countries.
Keywords: US–China trade war, Transshipment, Laos
JEL classification: F15, F53
PDF available at https://hdl.handle.net/2344/0002001717
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