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Trade wars with China could cost U.S. universities $1.15 billion

Christian Fernsby |
Uncertainties around the trade war between the U.S. and China have hurt businesses and weighed on the global economy.

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Topics: CHINA   

However, new research from the University of California San Diego also shows lesser known consequence: up to $1.15 billion in reduced tuition to U.S. universities.

According to the authors of the new working paper from the Center for Global Development, the recent guidelines from Immigration and Customs Enforcement (ICE) barring international students from having online classes could have the same chilling effect on universities.

Their study is the first to demonstrate how increased trade with China joining the World Trade Organization in 2001—when Normal Trade Relations tariff rates were made permanent—was a crucial determinant of student flow from China to the U.S. for acquiring higher education.

"We show that trade-driven growth raised wealth among upper-income families, shifting the composition of demand to U.S. services, and higher education in particular," said Gaurav Khanna, assistant professor of economics at the UC San Diego School of Global Policy and Strategy. "However with the recent trade wars, for the first time, growth in students from China has stopped, hurting American universities."

The revenue from international students also aids domestic students as their tuition has helped stabilize U.S. universities, especially public schools, suffering large, adverse shocks from state budget cuts.

"Such accusations miss that money which flows out of the U.S. when they buy goods from China flows back, as Chinese students pay for higher education in the U.S.," Khanna explained. "Thus, the U.S. trade deficits cycle back to the U.S. in with exports surplus of higher education services."

Direct evidence of this in the study shows that cities in China that grew faster because of trade are also the ones that sent more and more international students to the U.S.


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