Navigating international competition with ESG: Insights from the US-China trade war

This study shows that the escalation of US import tariffs prompts Chinese exporters to strengthen their ESG engagement, strategically positioning themselves in the renewed competitive landscape. This finding is robust across various model specifications, sample selection methods, and ESG performance proxies. In addition, we document the ESG ranking improvement is stronger for firms with green innovation needs and those operating in industries with high domestic growth potential, which suggests that Chinese exporters aim for product differentiation to combat the tariff escalation. Moreover, the greater ESG engagement is more pronounced among state-owned enterprises, larger firms, and firms operating in pilot free trade zones, indicating firms with higher cost advantage pre-US-China trade war take greater steps forward in product differentiation.