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Discussion Paper
The Anatomy of Export Controls
Governments increasingly use export controls to limit the spread of domestic cutting-edge technologies to other countries. The sectors that are currently involved in this geopolitical race include semiconductors, telecommunications, and artificial intelligence. Despite their growing adoption, little is known about the effect of export controls on supply chains and the productive sector at large. Do export controls induce a selective decoupling of the targeted goods and sectors? How do global customer-supplier relations react to export controls? What are their effects on the productive sector? ...
Report
Securing Technological Leadership? The Cost of Export Controls on Firms
To safeguard its technological leadership, the U.S. has restricted domestic suppliers from exporting specific cutting-edge technologies to selected Chinese firms. Domestic firms affected by these export controls halt sales to Chinese customers, as intended, but struggle to establish new relations with alternative customers domestically or in politically aligned regions. As a result, domestic suppliers experience a $130 billion decline in market capitalization, along with reductions in profitability, employment, and bank lending. We also show how Chinese firms strategically respond to export ...
Report
Navigating Geoeconomic Risk: Evidence from U.S. Mutual Funds
How do investors respond to firm-level geoeconomic shocks? U.S. export controls restrict technology sales to targeted Chinese firms, depressing the stock prices of their U.S. suppliers. We trace these shocks to domestic equity mutual funds. Funds more exposed to affected suppliers display higher volatility and lower performance. Although export controls target specific firms, they trigger portfolio-wide adjustments: funds rebalance away from affected suppliers and other U.S. exporters to China, leaving portfolios more concentrated. Specialist and high-fee funds see smaller performance ...
Discussion Paper
Navigating Geoeconomic Risk in the U.S. Stock Market
Geoeconomic risk—the risk that firms incur valuation losses when countries deploy economic, trade, or financial leverage for geopolitical aims—has become a first-order concern for investors. In this post, based on our recent Staff Report, we document that domestic U.S. stocks expose investors to substantial geoeconomic risk through firms’ global supply-chain relationships, affecting investors’ returns and portfolio allocation. We also find that investors are compensated for bearing geoeconomic risk through higher risk premia.