A new study from UC San Diego highlights the vital economic role of international students, and how recent tariff and visa policies could undermine the U.S. higher education sector.
A new study from the University of California, San Diego School of Global Policy and Strategy showcases how international education serves as a crucial counterbalance to the U.S. trade deficit, particularly with China. However, growing trade tensions and restrictive visa policies threaten to unravel these gains.
The study, soon to be published in the Review of Economics and Statistics, delves into the economic ramifications of China’s 2001 entry into the World Trade Organization (WTO).
This monumental shift not only ramped up Chinese exports to the United States but also elevated household incomes in various Chinese cities, making American college education more accessible.
“In a very real sense, international students are reversing the trade deficit,” co-author Gaurav Khanna, an associate professor of economics at UC San Diego’s School of Global Policy and Strategy, said in a news release. “America imports goods from China but exports education in return. That has been a win for both economies — and one that a trade war risks unraveling.”
Analyzing visa records, trade data and city-level economic shifts, the research highlights that Chinese cities more affected by WTO-related tariff reductions, like Qingyang and Shantou, experienced a significant upsurge in students heading to the United States for higher education.
Conversely, cities less impacted, such as Wuwei and Lincang, saw stagnant student numbers.
The study reveals a striking pattern: a 10-percentage point increase in trade exposure generated 34 more students per million city residents.
Billions at Risk
The revelation comes with a note of caution regarding recent U.S. policy approaches.
Tariffs imposed during the first Trump administration already resulted in a 25% drop in Chinese student enrollment, costing U.S. universities an estimated $1.1 billion annually — a trend that could worsen with enhanced visa restrictions and higher tariffs in subsequent administrations.
“Policymakers often talk about soybeans, oil and steel,” Khanna added. “But education contributes more to the U.S. economy than any of those. It’s an export we ignore at our own peril.”
The economic contributions of international students extend far beyond tuition. These students also spend on housing, transportation and local services, contributing to the local economy and providing long-term benefits to the U.S. workforce and innovation sectors.
International Student Enrollment Offsets Declining State Funding
Khanna’s previous research underscores how nonresident tuition has become a financial lifeline for U.S. public universities grappling with declining state funding.
For example, between 1996 and 2012, a 10% drop in state funding correlates with a 12% rise in foreign student enrollment at public research universities.
“Universities had to choose between increasing tuition levels and cutting expenditures — such as decreasing academic offerings to in-state students, or enrolling a greater proportion of students who pay out-of-state tuition,” added Khanna.
At institutions like the University of California, international student tuition has alleviated the necessity to substantially hike in-state tuition fees.
Nonetheless, the pace of Chinese student enrollment has decelerated markedly, with yearly growth falling from an average of 22% between 2007 and 2013 to under 5% in recent years.
Education, a Trade Advantage
The study argues that understanding the synergy between trade and migration is essential for formulating sound policy decisions.
“There’s often an assumption that trade and immigration are substitutes,” Khanna added. “What we found is that they can be powerful complements. Trade helped create a middle class in China that saw U.S. education as both a pathway and a product.”
In 2019, education exports contributed $45 billion to the U.S. economy. As competition escalates from other countries and student inflows dwindle, this study serves as a timely reminder of the stakes involved.
“America’s edge has always been its universities,” added Khanna. “If we make it harder for international students to come here, we’re not just closing the door on students — we’re closing the door on one of our biggest trade advantages.”
Co-authors of the study include Kevin Shih of City University of New York–Queens College, Ariel Weinberger of George Washington University, Mingzhi Xu of Peking University, and Miaojie Yu of Liaoning University.