U.S. trade barriers designed to protect the domestic solar industry actually caused Chinese firms to massively increase their foreign investment and expansion.
April 1, 2026
Original Paper
Effects of Trade Barriers on Foreign Direct Investment: Evidence from Chinese Solar Panels
SSRN · 6503530
The Takeaway
Instead of being deterred by anti-dumping duties, targeted Chinese firms increased their foreign direct investment from $9 million to $145 million per year. The protectionist policy effectively backfired by forcing Chinese companies to move production to other countries and the U.S. itself, ultimately circumventing the barriers and becoming global multinationals.
From the abstract
The return of protectionism and industrial policy will affect the international allocation of resources beyond the short run. To understand these long-term effects, I study the anti-dumping and countervailing Duties (AD-CVD) implemented by the Obama Administration in 2012 on Chinese solar panel imports. Due to their differential exposure to US trade policy, Chinese firms are granted different AD-CVD rates. I leverage this variation to develop a difference-in-differences design. I estimate the ef