The Illusion of Decoupling: 2018–2019 United States Section 301 Tariffs on China and the Persistence of Chinese Intermediate Input Dependence

Abstract

This paper examines whether the 2018–2019 US Section 301 tariffs on China achieved genuine decoupling from Chinese intermediate inputs or simply extended US supply chains through connector hubs. Using the 2025 edition of the OECD Inter-Country Input-Output (ICIO) tables, intermediate input flows into four manufacturing hubs (Vietnam, Mexico, Malaysia, and Taiwan) are analyzed across four tariff-exposed industries in 2017 and 2022. Employing difference-in-differences and triple-difference regressions with high-dimensional fixed effects, the results show that Chinese intermediate inputs grew approximately 16.8% faster than inputs from the rest of the world, and that Chinese inputs from tariffed industries specifically grew approximately 31% faster than the baseline. However, a counterfactual analysis finds no statistically significant increase in Chinese tariffed inputs relative to hub output. These findings are reconciled through a scaling hypothesis: rather than shifting their input composition toward Chinese goods, connector hubs likely disproportionately scaled industries that were already heavily reliant on Chinese intermediate inputs from industries later targeted by the Section 301 tariffs. These results suggest the Section 301 tariffs have not meaningfully decoupled the US from Chinese intermediate inputs, but have instead elongated supply chains, with Chinese intermediate goods remaining embedded upstream in connector hub manufacturing.