Who Gains the Most from Trade Wars?

I study the impact of Section 301 tariffs, focusing on how the reduction in Chinese exports was distributed between U.S. domestic suppliers and other foreign exporters. Using fixed effects regressions, I find that exports of tariffed goods increased significantly for third-country exporters that already held substantial U.S. market shares. This suggests that the benefits of the tariffs were concentrated among large foreign suppliers rather than small exporters or domestic producers. To explain this pattern, I develop a theoretical model based on the Ramsey-Cass-Koopmans framework while incorporating investment efficiency in the capital accumulation process. The model shows that high capital endowments and low input prices allow large exporters to capture the majority of gains from the tariffs. This result has clear policy implications: Section 301 tariffs could be ineffective at revitalizing U.S. industries. Instead, the gains were likely to be concentrated on large foreign exporters in both the short and long run. The model also implies that foreign governments might find wage restraint strategically advantageous in sustaining their export competitiveness. JEL Classification: F10 , F13 , F14