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on International Trade |
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Issue of 2025–07–14
eighteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Natalie Chen; Dennis Novy; Diego Solórzano |
| Abstract: | In 2018 and 2019, the US administration increased tariffs on imports from China. Did these tariffs lead to more US imports from other countries such as Mexico? Using highly disaggregated data on the universe of Mexican firm-level exports, we find evidence of trade diversion from China to Mexico. We then combine the export data with detailed longitudinal employer-employee data to investigate the impact of trade diversion on labor market outcomes for workers employed by Mexican exporters. We find that trade diversion increased the labor demand of exporters exposed to US tariffs against China, resulting in more employment and higher wages, especially for low-wage workers such as female, unskilled, younger, and non-permanently insured employees. The effects were concentrated in technology and skill-intensive manufacturing industries. |
| Keywords: | employment, exports, firms, tariffs, trade costs, trade diversion, wages, workers |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11941 |
| By: | Devasmita Jena ((corresponding author) Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Uzair Muzaffar (Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Rahul Nath Choudhury (Economist, EY LLP India) |
| Abstract: | Over the past couple of years import dependency on China has deepened and expanded globally. Incidences like supply chain disruption during COVID19 due to over dependence on single supply source, and countries’ heavy reliance on Chinese imports—often termed the “China shock”— has garnered anxiety worldwide and forced them to make efforts to wean away from China. The weaning attempt started in 2018 when the US imposed additional tariffs on its imports from China. Gradually, the process of decoupling or weaning away from China, was adopted by other economies. Despite the motivation to move away from China, data shows that nations continue to depend increasingly on imports from China. In this study we empirically quantify the trade dependence on China and estimate the costs associated with weaning away from China using structural gravity model of trade. We find that lowering dependence on Chinese imports results in diminishing countries’ propensity to export. Furthermore, general equilibrium counterfactual simulations show that if US progressively reduces import dependency on China, the welfare loss will be higher for the US as compared to that of China. The rest of the world will also suffer welfare losses owing to US’ action to bar Chinese imports. |
| Keywords: | China, Decoupling, Import Dependency, Structural Gravity, Welfare, PPML |
| JEL: | F13 F14 F17 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2025-279 |
| By: | Schulte, Erik V.; Kaplan, Lennart |
| Abstract: | Global powers increasingly use trade as a tool of geopolitical influence. But can trade also foster soft power? We provide novel evidence on this relationship by combining geo-referenced survey data from 22 African countries sourced from the Gallup World Poll with Chinese import data. Exploiting plausibly exogenous variation in manufacturing imports induced by the "China shock, " we find that trade does not affect African citizens' attitudes towards China in the aggregate. However, the China shock is associated with higher perceived incomes and contributes to more favorable views of China in African countries with low technological intensity. Most notably, among citizens in democratic regimes, increased trade exposure is associated with more favorable perceptions of China, suggesting that political context mediates the effectiveness of trade-based soft power. |
| Keywords: | Trade, soft power, China-Africa, China shock, Gallup World Poll |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cegedp:320431 |
| By: | James R. Boohaker |
| Abstract: | When competitors compete in more than one market they are said to have multi-market contact (MMC). Firms with MMC are more likely collude to avoid cross-market retaliation. This paper investigates the impact of MMC among U.S. battery exporters on the prices they set in foreign markets using confidential export transaction data provided by the U.S. Census Bureau. The ability of firms to exploit MMC for collusive gain in international markets can be both detrimental to import-dependent consumers and harder for anti-trust authorities to detect. Motivated by litigation finding evidence of collusive behavior by multi-national battery manufacturers, MMC has an upward effect on export prices set by U.S. battery exporters. These results are robust across different panel regression specifications using different measures of MMC. |
| Keywords: | multi-market contact, oligopoly, export prices, collusion |
| JEL: | D43 F12 F13 F14 L13 L14 L40 L63 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-32 |
| By: | Charlotte Emlinger; Kevin Lefebvre |
| Abstract: | While exports from sanctioning countries to Russia declined significantly after February 2022, a third of sanctioned products and two thirds of strategic products have been fully compensated by non-sanctioning countries. However, this trade diversion comes at a cost: Between the first and second quarter of 2022, the price index of Russian imports jumped by 15.7%, breaking a long period of moderate growth. The overall increase in Russia’s import prices is not related to Russian imports switching to more expensive exporters. On the contrary, after 2022, Russia began importing from new origins that are cheaper, suggesting that these new suppliers were offering lower-quality products. The surge in Russian import prices is primarily attributed to suppliers who had been exporting to Russia prior to 2022. This increase is more pronounced for non-sanctioning origins (+22%) compared to other sources and is especially notable for strategic products (+122%). Part of this increase is explained by a rise in transport and insurance costs for Russian imports (3%). Companies supplying the Russian market have also increased their prices, net of freight costs (FOB – free on board) by an average of 9%. Finally, the circumvention of sanctions does not explain the observed overall increase in Russian import prices. This suggests that the rise in Russian import prices is mainly the result of exporters increasing their margins when exporting to Russia. |
| Keywords: | Sanctions;Diversion;Trade;Price;Russia |
| JEL: | F13 F14 F51 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cii:cepipb:2025-50 |
| By: | John Chung |
| Abstract: | To what extent do domestic distortions influence the gains from trade? Using data from Chinese manufacturing surveys and U.S. census records, I document two novel stylized facts: (1) Larger producers in China exhibit lower revenue productivity, whereas larger producers in the U.S. exhibit higher revenue productivity. (2) Larger exporters in China exhibit lower export intensity, whereas larger exporters in the U.S. exhibit higher export intensity. A model of heterogeneous producers shows that only the U.S. patterns are consistent with an efficient allocation. To reconcile the observed patterns in China, I introduce producer- and destination-specific subsidies and estimate the model without imposing functional form assumptions on the joint distribution of productivity and subsidy rates. Accounting for distortions in China leads to substantially smaller estimated gains from trade. |
| JEL: | F14 F12 D61 O17 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-33 |
| By: | Shafiqullah Yousafzai; Hisahiro Naito |
| Abstract: | This study examines the effect of exports on subnational income and regional inequality between urban (trade hub) and rural (non–trade hub) areas, using nighttime luminosity as a proxy for economic activity. We construct a country-period panel dataset covering 104 countries, based on five-year average data from 1997 to 2020. Trade hub areas are defined as the union of areas within a 30 km or 50 km radius of each of the three largest ports and three international airports in a country, while all remaining areas are classified as non–trade hub areas. To address endogeneity, we employ a two-stage least squares (2SLS) approach, using predicted trade as an instrumental variable. Predicted trade is derived from a dynamic gravity equation in which time dummies are interacted with sea and air transport distances. This instrument captures variation in transportation costs driven by technological advances that have shifted trade from sea to air, thereby influencing trade volumes. Our results show that a 1\% increase in exports raises nighttime luminosity by 0.3% in trade hub areas and by 0.06\% in non–trade hub areas. Export growth also leads to population increases in trade hub areas, but not in non–trade hub areas. Furthermore, we find that a 1% increase in exports raises nighttime luminosity per capita by 0.18% in trade hub areas and by 0.06% in non–trade hub areas. These findings suggest that while exports stimulate economic activity in trade hubs, population inflows partially offset per capita gains. Nonetheless, exports significantly exacerbate regional inequality. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:tsu:tewpjp:2025-001 |
| By: | Mario Larch; Philipp Meinen; Arne J. Nagengast; Yoto V. Yotov |
| Abstract: | We develop and test a theory of efficient international trade. Efficiency gains arise through lower trade costs faced by ‘trade specialists’, whose superiority over ‘common traders’ manifests itself through lower trade costs. To test our theory, we construct and deploy a novel dataset based on firm-level merchanting data. Our estimates reveal that, on average, the trade costs for the ‘trade specialists’ are about four times lower than for non-specialists. The corresponding welfare effects from globally efficient trade amount to a remarkable gain of 80%, on average, which sends an encouraging message for the potential gains from trade that are missing in the existing literature. |
| Keywords: | efficiency, international trade, trade costs, gains from trade |
| JEL: | D60 D61 F14 F12 F10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11942 |
| By: | Mao, Haiou; Görg, Holger |
| Abstract: | Geographical Indication (GI) is a rising policy in developing countries, which has been relatively neglected in the existing literature. This article studies Chinese agricultural GIs and its impact on firms’ exports. By relating newly authorized GIs with firm‐product‐location‐destination level customs trade data according to GIs’ geographical coverage and product type, we estimate the impact of these new GIs on firm's exports. Importantly, we can distinguish GIs with and without quality supervision. For the latter we find negative impacts on export quality, which is not the case for GIs with quality supervision. We interpret this in the context of our theoretical framework as evidence for quality free‐riding, where individual firms have an incentive to lower the quality of the export product. We show that this negative effect is less, the more concentrated an industry is or the more GIs there are for a particular product. Furthermore, our results suggest that the China‐EU agreement on Geographical Indications may play the role of quality supervision and prevent the possibility of free‐riding. |
| Keywords: | Agricultural Geographical Indications, China, export quality, free‐riding |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:319297 |
| By: | Tröster, Bernhard; Papatheophilou, Simela; Küblböck, Karin |
| Abstract: | Global demand for specific mineral raw materials is increasing, driven largely by the energy and digital transition. Although the EU is making efforts to boost domestic supply, it will remain highly dependent on imports of those minerals from third countries to achieve strategic autonomy in manufacturing capacities for both transition-related and military sectors in Europe. As global competition over access to raw materials intensifies, the EU is adapting its policy approaches in response. This briefing paper examines how geopolitical dynamics and evolving EU priorities are shaping EU's external raw materials policies. It assesses the use of different trade policy instruments and raw materials diplomacy, including new approaches such as the introduction of Strategic Projects, Raw Materials Club or Strategic Partnerships on raw materials. These partnerships reflect the EU's broader goal of strengthening manufacturing in Europe by integrating raw materials sectors from partner countries into these new value chains. However, we find that the incentives offered by the EU - such as more sustainable mining, increased investment, and mutual economic gains - remain non-binding and challenging to implement in practice. This is largely due to the lack of enforceable sustainability provisions and the absence of a coherent strategy to support investment and value-added processing in the raw materials sector. At the same time, traditional tools such as free trade agreements and regulatory cooperation remain central. These instruments must balance EU interests with the development needs of partner countries, particularly by allowing policy space for industrialization strategies and ensuring that environmental and social standards are effectively implemented. |
| Keywords: | EU raw materials policy, Critical Raw Materials, Critical Raw Materials Act (CRMA), Strategic Partnerships, Energy and Raw Materials Chapters in Free Trade Agreements |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:oefseb:319648 |
| By: | Mamun, Abdullah; Laborde Debucquet, David |
| Abstract: | This paper investigates the drivers of export restrictions on agricultural products based on an original dataset developed at IFPRI. We focus on four food price crises when export restrictions (e.g., ban, tax, licensing etc.) were applied: the 2008 and 2010 food price crises, the COVID-19 pandemic, and the 2022 crisis associated with the Russia-Ukraine war. Although the justifications for such trade policies have been discussed in the literature, the ability to forecast their implementation remains understudied. The probit model used in this study suggests that the inflation rate has a higher power to predict export restrictions than do international commodity prices. The probability of export restrictions increases more when price change is measured from a reference level in the long interval than the short interval. Among the covariates, agricultural land per capita, commodity share in production and export, weather condition increases the chances of imposing export restrictions. Per capita income, population density, share of agriculture in GDP, urbanization rate, political economy indicators - all have a negative influence on this likelihood. |
| Keywords: | agricultural products; commodities; COVID-19; export controls; international trade; war; trade liberalization; exports |
| Date: | 2024–03–29 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:140687 |
| By: | Grover, Arti; Vézina, Pierre-Louis |
| Abstract: | This paper examines the relationship between geopolitical fragmentation and friendshoring of foreign investments over time, countries, and sectors. The analysis uses comprehensive data on foreign direct investments covering greenfield projects, mergers and acquisitions, and stocks of affiliates, as well as data on four alternative measures of geopolitical distance between countries. The gravity estimations suggest that, first, geopolitical differences have a negative effect on foreign investments and the magnitude has heightened in the post-pandemic period compared to a decade ago. Second, it is primarily the companies from advanced Western economies whose foreign investment decisions are increasingly shaped by friendshoring forces. Finally, the paper shows that friendshoring is not only confined to strategic industries, implying that allocations of foreign direct investments may not solely reflect national security or resilience considerations. |
| Date: | 2025–06–23 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11149 |
| By: | Martin, Will; Mamun, Abdullah; Minot, Nicholas |
| Abstract: | Food trade barriers in many countries are systematically adjusted to insulate domestic markets from world price changes—a response not predicted by traditional political economy models. In this study, policymakers are assumed to minimize the political costs associated with changing domestic prices and deviating from longer-run political-economy equilibria. Error correction techniques applied to domestic and world price data for rice and wheat collected to measure trade policy distortions allow estimation of policy response parameters. The results suggest that systematic short-run price insulation reduces shocks to domestic prices but sharply increases world price volatility and the costs of trade distortions. However, idiosyncratic domestic price shocks resulting from inefficient policy instruments such as quantitative restrictions increase domestic price volatility relative to the magnified volatility of world prices—frequently outweighing the stabilizing impacts of price insulation. This fundamentally changes our understanding of the impacts of price-insulation—from a zero-sum game where some countries reduce the volatility of their prices using beggar-thy-neighbor policies that raise price volatility elsewhere, into one where price volatility rises in most countries. National policy reforms to move away from discretionary, destabilizing policies could lower costs, reduce volatility in domestic and world prices, and facilitate reform of international trade rules. |
| Keywords: | food prices; volatility; consumer economics; trade policies; behaviour; econometric models |
| Date: | 2024–05–09 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:141800 |
| By: | Laura Alfaro; Maria Brussevich; Camelia Minoiu; Andrea F. Presbitero |
| Abstract: | Finding new international suppliers is costly, so most importers source inputs from a single country. We examine the role of banks in mitigating trade search costs during the 2018–19 US-China trade tensions. We match data on shipments to US ports with the US credit register to analyze trade and bank credit relationships at the bank-firm level. We show that importers of tariff-hit products from China were more likely to exit relationships with Chinese suppliers and find new suppliers in other Asian countries. To finance their geographic diversification, tariff-hit firms increased credit demand, drawing on bank credit lines and taking out loans at higher rates. Banks offering specialized trade finance services to Asian markets eased both financial and information frictions. Tariff-hit firms with specialized banks borrowed at lower rates and were 15 percentage points more likely and three months faster to establish new supplier relationships than firms with other banks. We estimate the cost of searching for suppliers at $1.9 million (or 5 percent of annual sales revenue) for the average US importer. |
| Keywords: | financial frictions; bank lending; supply chains; trade policy |
| JEL: | G21 F34 F42 |
| Date: | 2025–05–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:101193 |
| By: | Michitaka NAKATOMI |
| Abstract: | Due to the expansion and diversification of the WTO membership, the complexity and conflict of economic interests, and the rise of economic security demands, consensus-based rulemaking in the WTO has become stagnant and chaotic, and concerns about unilateral measures and protectionism are increasing. In this environment, since 2018, the WTO has been drawing attention to the importance of plurilateral agreements under the JSI, which has produced certain results. It is also no exaggeration to say that the entire trade agreements since the inception of the WTO have been based on plurilateral agreements. This paper will focus on the importance of plurilateral agreements. This paper will discuss the background to the attention paid to plurilateral agreements, their definitions and extensions, the conditions and factors for the realization of plurilateral agreements, their contribution to WTO rules and the path to multilateralization and their potential and limitations based on analysis of actual cases. The current status and future issues of JSI (Joint Statement Initiatives) and WTO decision-making issues will also be touched upon. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:eti:polidp:25010 |
| By: | Oscar Perello |
| Abstract: | Supply chain disruptions hamper the gains from globalization and require costly investments in resilience. I study how input sourcing through specialized intermediaries helps firms to mitigate disruptions in risky markets. Combining customs and tax records from Chile, I document that the share of intermediated imports rises with supply chain risk, as intermediaries maintain more diversified and robust supply networks. These facts motivate a model of global sourcing with costly supplier matching, insecure supply relationships, and access to intermediaries. Heterogeneous producers balance input prices and disruption probabilities across locations to minimize expected production costs. More productive firms match with multiple suppliers per location, while less productive firms contract with intermediaries, paying higher markups for a more resilient network than they could build directly. Despite double marginalization, intermediation relaxes the efficiency-risk trade-off due to greater supply network operability. Model quantification reveals sizable profit losses from disruptions, which intermediaries halve for mid-size producers that lack the scale to diversify. Intermediation is thus instrumental for supply chain resilience, suggesting a role for policies that make these services more accessible. |
| Keywords: | Trade, global value chains, supply chain risk, trade intermediation, diversification |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpm:docweb:2503 |
| By: | Maihold, Günther |
| Abstract: | With the reconfiguration of international supply chains, Mexico has gained importance as a location for new foreign investments. The country has been able to benefit from nearshoring, that is, the relocation of services or production processes closer to consumer markets. This is associated with lower logistics costs and often better management of supplier relationships. However, this boom in investments has abated due to various uncertainties - not least being Washington's threats to raise tariffs, which burdens the economic prospects associated with nearshoring. Mexican President Claudia Sheinbaum is attempting to counter this trend, but in view of the increasingly urgent demand by the United States for third countries to adopt an anti-Chinese course, Mexico is at risk of being caught in the trap of "security-shoring" and losing its autonomous room for manoeuvre. This is already forcing Mexico - as well as its economic partners who have invested there - to realign their production processes. |
| Keywords: | Mexico, foreign direct investment (FDI), nearshoring, relocation, services, production processes, consumer markets, President Claudia Sheinbaum, Donald Trump, Uniteds States, China, United States-Mexico-Canada Agreement (USMCA), Tesla, Elon Musk, International Monetary Fund (IMF) |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:swpcom:319689 |
| By: | Stephanie Schmitt-Grohé; Martín Uribe |
| Abstract: | We estimate transitory and permanent import tariff shocks in the United States over the postwar period. We find that transitory tariff increases are neither inflationary nor contractionary, and are not associated with monetary tightening. In contrast, permanent tariff increases trigger a temporary rise in inflation (a one-off increase in the price level) and a brief tightening of monetary policy. Consistent with the intertemporal approach to the balance of payments, transitory tariff increases reduce imports and improve the trade balance, whereas permanent increases leave both largely unchanged. Transitory shocks account for approximately 80 percent of tariff movements. Overall, tariff shocks are estimated to be a minor driver of U.S. business cycle fluctuations on average and even during episodes of substantial tariff hikes, such as Nixon 1971, Ford 1975, and Trump 2018. |
| JEL: | E31 E52 F13 F41 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33997 |