Organizing Production Across Borders in a Time of Uncertainty

December 22, 2025, Paper: "Global value chains face unprecedented challenges following the COVID-19 pandemic, rising US China trade tensions, and other geopolitical shocks (Alfaro and Chor, 2023; Aiyar, Presbitero and Ruta, 2023). In this uncertain environment, multinational firms are attempting to reorganize their production across borders. Integration of production stages located in different countries often takes place through cross-border mergers and acquisitions (M&A). For example, as a response to the US China trade war, multinational firms are acquiring firms in Mexico as a means to relocate their man ufacturing operations out of China (Reuters, 2023). The subject of organizing production across borders or global value chains remains a vital topic of study in the trade literature. However, the role played by cross-border M&As in the organiza tion of global value chains has received relatively little attention, including the nature of expanded boundaries along sequential stages of production. This paper aims to address this gap by being the f irst to examine the role of cross-border M&As in the vertical integration of production stages across borders in a time of uncertainty. In particular, we document that when economic policy uncertainty intensifies, more distant production stages in the value chain become more likely to be acquired."