The paper evaluates the effectiveness of China increasing its tax rebate on textile exports to the USA. Using the difference‐in‐differences technique and employing The Harmonized System six‐digit data, it is found that the tax rebate policy boosted the growth of textile exports to the USA. Approximately 6 to 25 per cent of the growth can be attributed to this policy. The difference‐in‐differences technique appears useful in evaluating such policies and opens the door to studies measuring the impact of polices. The effectiveness of the export tax rebate policy should be a lesson for policymakers facing slumps in their exports in economic downturns and perhaps become part of the standard trade policy arsenal.