The ripple beyond borders: Indirect effects of US export controls on Japanese firms

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As part of the ongoing US-China trade war, since 2020 the US has restricted the exports of cutting-edge semiconductors from third countries to Huawei. This column analyses the indirect effects of US export regulations on exports of Huawei suppliers in Japan. Although Japan itself did not export cutting-edge semiconductors, exports of affected suppliers declined in 2020, particularly to unaffiliated firms in China. Furthermore, Japanese suppliers shifted exports to less risky destinations, with limited impact on overall firm performance. Thus, export restrictions can have wide-ranging effects on supply chains, beyond the targeted countries and products.

Since the initiation of the US-China trade war in the latter half of the 2010s, the US government has strengthened export control regulations. Specifically, many Chinese firms have been added to the Entity List (EL), a list of parties of concern. These regulations have decoupled US firms from Chinese firms in supply chains. For example, Crosignani et al. (2024) found that US firms that had supplied Chinese firms included on the Entity List were more likely to terminate their relationships with Chinese customers – both those listed and not listed. Furthermore, Chinese firms in the Entity List reduced their relationships with US suppliers and established new connections with alternative Chinese suppliers.

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