As American policymakers escalate tariffs on imported goods—particularly those originating from China—a growing body of research suggests this strategy may inadvertently jeopardise one of the country’s most valuable and quietly effective exports: higher education. A forthcoming study from the University of California, San Diego’s School of Global Policy and Strategy argues that instead of shielding American economic interests, protectionist trade policies could undermine a critical revenue stream that not only offsets the trade deficit but also sustains public universities and enriches the nation’s intellectual and innovation capital.

The study examines the effects of China’s 2001 entry into the World Trade Organization (WTO), a pivotal moment that greatly expanded Chinese exports to the United States and significantly increased household incomes in Chinese cities. As families prospered, many were able to afford the high cost of American university tuition, leading to a surge in student enrollment. The researchers found a clear link between increased trade exposure and the number of students sent abroad. Cities such as Qingyang and Shantou, which benefited most from reduced tariffs, experienced substantial growth in student migration to the U.S., in contrast to less-exposed cities like Wuwei and Lincang. A 10-percentage point increase in trade exposure, they found, resulted in 34 more students per million residents—a major contributor to the 40% rise in Chinese student enrollment between 2002 and 2013.

This phenomenon effectively turned education into a high-value American export. International students, particularly those from China, have brought billions into the U.S. economy, not only through tuition fees but also through their spending on housing, transportation, and other services. According to the study’s authors, the tariffs imposed during the first Trump administration led to a 25% decline in the number of Chinese students, resulting in an estimated $1.1 billion loss in tuition revenue per year. These figures do not even account for the broader economic contributions of these students, nor their long-term role in driving innovation and filling critical workforce gaps. With the potential for even more severe tariffs and tighter visa restrictions under a second Trump administration, the risks to this sector are mounting.

The changing demographics of Chinese students further underscore the economic importance of these international flows. While earlier cohorts were primarily graduate students in STEM disciplines, many supported by scholarships, the post-WTO period saw a sharp rise in undergraduate enrolments, particularly in business and social sciences. These students typically paid full fees, becoming an essential lifeline for public universities grappling with funding cuts. Khanna’s previous research indicates that between 1996 and 2012, every 10% drop in state appropriations led to a 12% increase in international student enrolment at public research universities. In effect, many institutions chose to attract fee-paying international students rather than drastically raise in-state tuition or scale back academic programmes.

However, growth in international student enrolment—particularly from China—has slowed dramatically. From 2007 to 2013, enrolments grew at an annual rate of 22%. In recent years, that figure has slipped below 5%, a decline driven by rising global competition, uncertain visa policies, and growing geopolitical tensions. Countries such as Canada, Australia, and the United Kingdom have capitalised on this shift, offering more welcoming immigration policies and capturing a growing share of the international education market. As the U.S. makes it harder for students to enter and stay, its competitive advantage in higher education begins to erode.

Ultimately, the study challenges a widespread assumption in trade and immigration discourse—that the two operate in tension. Instead, it reveals that trade and migration can work synergistically, each reinforcing the other. Increased trade with China helped to generate a new middle class with the means and aspirations to pursue education abroad. In turn, American universities benefited from this influx, both financially and intellectually. As Gaurav Khanna puts it, “America’s edge has always been its universities. If we make it harder for international students to come here, we’re not just closing the door on them—we’re closing the door on one of our greatest economic strengths.”

More information: Gaurav Khanna et al, Trade Liberalization and Chinese Students in U.S. Higher Education, The Review of Economics and Statistics. DOI: 10.1162/rest_a_01378

Journal information: The Review of Economics and Statistics Provided by University of California – San Diego