Trade sanctions and supplier stock collapse

•U.S. trade sanctions on Huawei increase crash risk of Chinese suppliers' stock prices.•Trade sanctions increase crash risk of stock prices by affecting business stability.•Differences exist in the impact of trade sanctions on crash risk based on ownership type.•Trade sanctions have a more significant impact on electronics suppliers' stock crash risk compared to non-electronics suppliers. Based on data from 163 listed companies in Huawei's supply chain and other suppliers in the same industry from 2013 to 2022, this article systematically explores the intrinsic link between U.S. trade sanctions on Huawei and the risk of stock market crashes among its suppliers. The research finds that these sanctions significantly increase the risk of stock price crashes faced by Chinese suppliers, primarily by undermining their business stability. The impact is more pronounced on private and electronic suppliers, while state-owned and non-electronic manufacturing suppliers are relatively less affected.