How Do Trade Conflicts Affect Corporate Carbon Emissions? Evidence from Global Supply Chains

This paper examines the effect of trade conflicts on corporate carbon emissions through global supply chains. Exploiting the 2018–2019 U.S.-China tariff hikes as a quasi-natural experiment, we find that U.S. firms subjected to higher import tariffs increased Scope 1 and 2 emissions by 15% and 8%, respectively, compared to minimally affected peers. The effect is amplified for firms reliant on green product imports from China, highlighting supply chain disruptions as a key channel. Financial constraints further exacerbate emissions, as tariff-induced cost pressures reduce green innovation and employment. Cross-sectional tests reveal that firms with weaker climate change ideologies and less diversified supply chains exhibit more pronounced emission increases. Overall, our findings demonstrate that geopolitical trade risks undermine firm-level decarbonization efforts, with implications for policymakers and firms navigating climate goals amid rising protectionism.