Modern Trade Warfare: Trade War Response and Contingency Frameworks: A Case Study on Optimal Response and Contingency Strategies for MNCs in Complex Trade War Environments

Abstract

A recent rise in protectionism has led to an increase in trade disputes and trade wars which cause changes to the trade environment. These changes often cause negative impacts on multinational companies (MNCs), which MNCs are strategically ill-prepared to cope with. This paper utilizes the case of the Sino-US trade war to conduct quantitative and qualitative analyses which empirically test theoretical insights regarding optimal strategic MNC behavior in a trade war. The paper finds that MNCs can optimally mitigate trade war impacts by utilizing strategies that fit their commitment to the affected market. Strategies with different costs and different impact mitigation potentials are presented in strategic frameworks which showcase recommendations for optimal strategic MNC behavior given certain impact and commitment levels. This paper thus establishes strategic frameworks MNCs can utilize in trade war situations and paves the way for further research in the underexplored field of firm trade war strategy.