We examine the causal effect of tariff uncertainty on firms’ cost of debt. Our tests exploit a unique trade policy that reduces tariff uncertainty on Chinese imports without affecting the actual tariff rate: the U.S.-China Permanent Normal Trade Relations (PNTR). We find a significant drop in...

Due to the U.S.-China trade war, multinational firms (MNFs) may develop new contract manufacturers (CMs) outside China to evade the high tariff on Chinese exports to the U.S. market. We investigate a sourcing game where competing MNFs decide whether to develop new CMs in a new region to overcome...