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on International Trade |
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Issue of 2025–08–11
nineteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Alessia Camplomi; Harald Fadinger; Chiara Forlati; Sabine Stillger; Ulrich J. Wagner |
| Abstract: | Carbon leakage undermines the effectiveness of unilateral carbon pricing. Taxes on import-embedded emissions, like the EU’s CBAM, prevent leakage but their product coverage is limited due to strong information asymmetries. We propose an alternative policy (LBAM) that sterilizes carbon leakage without requiring information on foreign carbon intensities. In a quantitative trade model, LBAM tariffs significantly improve over the EU’s CBAM in terms of global emissions and EU welfare. Importantly, LBAM avoids large welfare losses among EU trading partners that would result if CBAM were extended to all sectors. Combining LBAM tariffs with equivalent export subsidies reinforces these advantages. |
| Keywords: | Carbon leakage, Carbon Border Adjustment, C02 tax, Trade policy |
| JEL: | F13 F64 Q54 Q56 |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_495v3 |
| By: | Laura Alfaro; Paola Conconi; Fariha Kamal; Zachary Kroff |
| Abstract: | We leverage newly linked data from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis to study transactions within U.S. multinational enterprises (MNEs). We show that using administrative data on intrafirm trade allows us to correct for measurement error in survey data and to identify the positive relationship between input-output (IO) linkages and the probability of trade between U.S. parents and their foreign affiliates. We also document the prevalence of intrafirm trade: more than half (three-quarters) of affiliates worldwide (in North America) export to or import from their U.S. parent. Our findings provide strong empirical support for traditional theories of firm boundaries that predict trade between vertically linked units of the same firm, and underscore the importance of accounting for the trade frictions that shape MNEs’ regional supply chains. |
| JEL: | D23 F14 F23 F4 L20 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-46 |
| By: | Jorge Alonso-Ortiz; José María Da-Rocha |
| Abstract: | We quantify the short-run impact of U.S. tariffs with a 77-country, 11-sector input-output model calibrated to OECD´s ICIOs. All intermediate inputs are locked in fixed Leontief proportions, so relative prices-not quantities-absorb the shock. A uniform 10% duty trims world GDP by 0.73% and U.S. GDP by 0.83%; ratcheting the schedule to 25% on NAFTA, to 15% on EU partners, and to 145% on China deepens those losses to 3.38% and 3.78%, respectively. Global trade flows in value, measured as exports plus imports over GDP, drop by 4.60% on average, but the U.S. is the biggest loser as its trade flows drop by -2.40% with a uniform duty, but drops can be as large as -11.60%. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:fda:fdaddt:2025-09 |
| By: | Lorenzo Caliendo; Samuel S. Kortum; Fernando Parro |
| Abstract: | We develop a dynamic multi-country Ricardian trade model with aggregate uncertainty, where countries trade goods and assets, leading to trade imbalances. We introduce a method for computing counterfactuals in this setting without specifying the stochastic process of shocks or solving for asset prices. Applying the model to tariff shocks, we quantify their effects on prices, income, expenditure, and trade imbalances. We find that higher U.S. tariffs reduce the U.S. trade deficit through general equilibrium adjustments, but raise domestic prices and lower real consumption. Our findings highlight that movements in trade imbalances are shaped by the structure of global trade and finance, and that attempts to influence external balances through changes in trade barriers carry significant implications for real economic outcomes. |
| JEL: | F10 F11 F13 F40 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34003 |
| By: | Bernstein, Martin; Meyer, Josefin; O'Rourke, Kevin Hjortshøj; Schularick, Moritz |
| Abstract: | Do trade dependencies leave countries vulnerable to geopolitical coercion? We study the economic costs of trade and financial sanctions, from 1920 to the present. We first develop a continuous measure of sanction intensity, using bilateral commodity-level data to calculate the importance of specific flows that fall under sanctions. We find that sanctions inflict relatively small costs on average: sanctioning 1% of GDP worth of imports or exports leads to approximately 0.3 percentage points of lost GDP over a 5-year period and a 0.1 percentage point increase in unemployment. However, we show that sanctions are far more costly for countries whose trade is highly concentrated, and for countries that rely heavily on exporting primary commodities. Low income and developing countries appear most vulnerable to trade sanctions, while high income financial centers and some EU countries are among the most exposed to financial sanctions. |
| Keywords: | Trade sanctions, Trade dependencies, Vulnerability to sanctions, Financial sanctions, Economic coercion, Effects of sanctions |
| JEL: | F13 F14 F41 F51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:323225 |
| By: | Kenneth R. Ahern |
| Abstract: | Multinational firms play a pivotal role in the global economy, yet economic and finance research has largely examined them in isolation. Economic theory focuses on trade and multinational activity but gives relatively little attention to cross-border mergers, while finance research emphasizes empirical studies of mergers but rarely integrates broader economic theories. This chapter aims to synthesize these two literatures into a unified framework for understanding multinational firms and cross-border mergers. The discussion is organized around the decision-making process of multinational firms, from choosing to operate internationally to selecting between greenfield investment and mergers. This framework reveals the theoretical and empirical evidence on the drivers of multinational production, including productivity gains, knowledge transfers, and market frictions. The findings highlight the commonality between the two literatures, but also suggests that greater integration between economic theory and finance research will generate a deeper understanding of the role of multinational firms in the global economy. |
| JEL: | F10 F12 F14 F23 G34 G41 L41 L44 O32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34067 |
| By: | Gnocato, Nicolò; Montes-Galdón, Carlos; Stamato, Giovanni |
| Abstract: | What are the macroeconomic impacts of tariffs on final goods versus intermediate inputs? We set up a two-region, multi-sector model with production networks, sticky prices and wages, and trade in consumption, investment, and intermediate goods. We show that import tariffs on final goods have a smaller negative impact on GDP compared to tariffs on intermediate inputs, as final goods can be more readily substituted with domestic alternatives. In contrast, tariffs on intermediate inputs lead to larger GDP losses, given the limited substitutability of foreign inputs and their role in global supply chains. Moreover, inflation persistence is lower under tariffs on final goods, whereas tariffs on intermediate goods amplify cost pressures through production linkages. The results imply that a revenue-equivalent approach to import tariffs, targeting only final goods, can cushion the adverse effects of trade wars. JEL Classification: E31, E32, F12, F13, F41 |
| Keywords: | inflation, production networks, tariffs |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253081 |
| By: | Julia Gonzalez |
| Abstract: | This paper examines whether deforestation-related import regulations reshape the global trade network of forest-risk commodities such as soy, palm oil, timber, and paper. While existing research has focused on trade volumes and environmental outcomes, the structural effects of such policies on trade architecture remain underexplored. Using UN Comtrade data from 2004 to 2024 and a newly compiled dataset of import regulations, this study models global trade as a network of countries linked by bilateral flows. It applies a Difference-in-Differences framework to estimate how policy exposure affects country-level centrality, combined with community detection and modular realignment metrics to track changes in trade bloc configurations. Results show modest structural shifts. Treated importers often experience increased eigenvector centrality and reduced out-degree, especially under certification and market-based policies. However, effects are generally small and not consistently significant across all specifications. Modular realignment analysis reveals that only a few policies lead to measurable changes in trade community structure. The findings suggest that deforestation-related trade regulations can influence the architecture of global trade networks, but their structural impact depends heavily on policy design and enforcement. This paper contributes a novel network perspective to the literature on environmental trade governance. |
| Keywords: | Deforestation, Network Analysis, Modular Realignment, Global Supply Chain. |
| JEL: | E01 E16 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp03872025 |
| By: | Atsuyuki KATO; Hiroyuki NISHIYAMA |
| Abstract: | This study theoretically and empirically examines the effects of free trade agreements (FTAs) on the supply chains of multinational enterprises (MNEs). Data on Japanese overseas manufacturing affiliates indicate that Japanese MNEs develop their supply chain networks in the local and other countries’ markets instead of trading with parent firms in Japan. We develop a simple firm heterogeneity model and examine its implications to explain this finding and confirm whether FTAs encourage MNEs to construct those networks. Our theoretical model reveals that FTAs affect the sales of domestic and export firms through changes in status. However, our theoretical model cannot confirm if FTAs increase the firms’ sales in the local or other countries’ markets because the signs of exogenous variables such as fixed labor inputs for the activities to follow the rules of the FTAs, tariffs, and the number of FTA member states are ambiguous. Thus, we empirically analyze whether FTAs increase local sales or sales in other countries’ markets. Our results reveal that regional FTAs have positive effects on sales in other countries’ markets, whereas bilateral FTAs do not increase local sales. In addition, we find that FTAs between local governments and large markets have varying effects depending on the conditions of the large markets. Our results indicate that Japanese MNEs develop supply chain networks by effectively utilizing various FTAs. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25068 |
| By: | Robert Z. Lawrence (Peterson Institute for International Economics) |
| Abstract: | This Policy Brief evaluates the evolving reasons for and application of the Trump administration's "reciprocal" tariffs and finds them wanting. The tariffs, adjusted most recently on August 1, 2025, were originally supposed to achieve reciprocity between the United States and its trading partners but were based on a defective measure because bilateral imbalances do not necessarily indicate foreign unfair trade practices; the methodology used to estimate the reciprocal tariffs was biased towards overstatement, particularly for countries producing primary commodities, which will have high pass-through into US final prices, and for countries exporting products with high import content. Given these defects, the reciprocal tariffs are better seen as a dressed-up anchoring ploy to strengthen America's hand in negotiations rather than credible estimates of the unfair trade practices that the United States faces. Moreover, even if reduced to 15 percent, the application of these tariffs to America's poorest trading partners would do little to reduce the overall US trade deficit but considerably harm their economic development. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iie:pbrief:pb25-6 |
| By: | Frédéric Docquier (LISER, Luxembourg Institute of Socio-Economic Research, Luxembourg); Stefano Iandolo (DISES, Università degli Studi di Salerno, Italy.); Hillel Rapoport (Paris School of Economics, France, CEPII, LISER and CEPR); Riccardo Turati (Department of Applied Economics, Universitat Autònoma de Barcelona, Spain.); Gonzague Vannoorenberghe (IRES-LIDAM, Université Catholique de Louvain, Belgium) |
| Abstract: | We propose new ways to measure populism, using the Manifesto Project Database (1960-2019) as main source of data. We characterize the evolution of populism over 60 years and show empirically that it is significantly impacted by the skill-content of globalization. Specifically, imports of goods which are intensive in low-skill labor generate more right-wing populism, and low-skill immigration shifts the distribution of votes to the right, with more votes for right-wing populist parties and less for left-wing populist parties. In contrast, imports of high-skill labor intensive goods, as well as high-skill immigration flows, tend to reduce the volume of populism. |
| Keywords: | Globalization, Populism, Immigration, Trade. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:uab:wprdea:wpdea2509 |
| By: | Thierry Warin |
| Abstract: | Trade-gravity equations remain the empirical “workhorse” for bilateral flows, yet their strictly positive orientation can normalise volumes that depart from welfare-maximising cost allocations. Building on a friction-adjusted theory of comparative advantage, this article pairs gravity’s descriptive power with two normative indicators. First, a Cost-Based Comparative Advantage (CCA) index ranks exporters by total landed cost—combining f.o.b. factory prices with good-specific freight, insurance and policy wedges—for every product–destination pair. Second, the Redirection Advantage (CBRA) metric tests whether diverting an exporter’s incumbent shipments toward an alternative market would lower that market’s import bill, thereby revealing latent efficiency losses masked by path dependence, preferential agreements or behavioural frictions. Applying the framework to the densely intertwined Canada–United States corridor uncovers sizeable but highly asymmetric misallocations. Canadian aerospace producers could undercut incumbent suppliers in several European and Gulf economies by more than US$3, 000 per kg, while U.S. petroleum refiners enjoy occasional triple-digit mark-ups inWest Africa and the Caribbean. By contrast, cross-border automotive and most energy exchanges exhibit negative CBRA values, signalling that the prevailing North-American supply chains are already cost-efficient. The results demonstrate how proximity, home-market bias and rules of origin can simultaneously stimulate large trade volumes and conceal Viner-style trade diversion. The study advances three contributions: (i) a tractable, product-level toolkit for diagnosing cost-inefficient trade; (ii) a theoretical bridge that embeds comparative-advantage logic inside a multi-country gravity structure; and (iii) a policy agenda that combines multilateral tariff cuts, infrastructure upgrades and real-time cost monitoring to align observed flows with global cost minima. Integrating CCA and CBRA with gravity thus offers researchers and policymakers a unified lens for ensuring that “who trades with whom” also reflects “who should trade with whom.” Le modèle de gravité demeure le cheval de bataille empirique des flux bilatéraux. Cet article associe le pouvoir descriptif du modèle à deux indicateurs normatifs. Premièrement, un indice d'avantage comparatif basé sur les coûts (ACC) classe les exportateurs selon le coût total au débarquement – combinant les prix f.à.b. usine avec les écarts de fret, d'assurance et de police spécifiques aux produits – pour chaque paire produit-destination. Deuxièmement, l'indicateur d'avantage de réorientation (AR) vérifie si le détournement des expéditions existantes d'un exportateur vers un autre marché réduirait la facture d'importation de ce marché, révélant ainsi des pertes d'efficacité latentes masquées par la dépendance au sentier, les accords préférentiels ou les frictions comportementales. L'application de ce cadre au corridor Canada-États-Unis, étroitement imbriqué, révèle des allocations très asymétriques. Les résultats démontrent comment la proximité, la préférence pour le marché intérieur et les règles d'origine peuvent simultanément stimuler d'importants volumes d'échanges et masquer un détournement des échanges de type Viner. L'étude propose trois contributions : (i) une boîte à outils exploitable au niveau des produits pour diagnostiquer les échanges commerciaux inefficaces en termes de coûts ; (ii) un cadre théorique qui intègre la logique de l'avantage comparatif dans une structure gravitationnelle multi-pays ; et (iii) un agenda de politique économique qui combine des réductions tarifaires multilatérales, des mises à niveau des infrastructures et une surveillance des coûts en temps réel pour aligner les flux observés sur les coûts minimaux mondiaux. |
| Keywords: | gravity model, comparative advantage, Canada–US trade, behavioural biases, cost-based trade indicators, modèle de gravité, avantage comparatif, commerce Canada-États-Unis, biais comportementaux, indicateurs commerciaux basés sur les coûts |
| Date: | 2025–07–25 |
| URL: | https://d.repec.org/n?u=RePEc:cir:cirwor:2025s-21 |
| By: | Federico Colozza (UNIPV - Università degli Studi di Pavia [Italia] = University of Pavia [Italy] = Université de Pavie [Italie], ROMA TRE - Università degli Studi Roma Tre = Roma Tre University); Carlo Pietrobelli (UNU-MERIT - UNU-MERIT - United Nations University - Maastricht University, ROMA TRE - Università degli Studi Roma Tre = Roma Tre University); Antonio Vezzani (ROMA TRE - Università degli Studi Roma Tre = Roma Tre University, ESC [Rennes] - ESC Rennes School of Business) |
| Abstract: | In this paper we investigate the relationship between participation in global value chains and the environment from a spatial perspective. By drawing on an original dataset on global value chain participation, emissions of nitrogen oxides and sulphur oxides, and green patents for European regions, we present novel evidence about the relationship between global value chains, green technologies and air pollution at the regional level. Our findings suggest that although participation in global value chains may lead to lower polluting emissions, this effect largely depends on the capacity of regions to exploit the green knowledge deriving from participation and on the specific form of participation. When European regions are integrated with backward linkages (i.e., importing inputs to produce exports) they record lower levels of air pollution; conversely, participation through forward linkages (i.e., exporting inputs for other places' exports) leads to an increase in air pollution. Backward participation also come out to support the development of green technologies that mediate the effects of global value chains on the environment posited by the "Pollution Haven" hypothesis. Overall, the relationship between global value chains participation and air pollution will depend on the type of participation and on the capacity of territories to profit it for the development of green technologies. |
| Keywords: | Global value chains, Green technologies, Emissions, EU regions, Pollution haven hypothesis |
| Date: | 2024–02–13 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05136372 |
| By: | Stéphane Auray (ESC [Rennes] - ESC Rennes School of Business); Michael B Devereux (Vancouver school of economics, University of British Columbia - UBC - University of British Columbia [Canada]); Aurélien Eyquem (UNIL - Université de Lausanne = University of Lausanne) |
| Abstract: | This paper shows that the outcome of trade wars for tariffs and welfare will be affected by the monetary policy regime. The key message is that trade policy interacts with monetary policy in a way that magnifies the welfare costs of discretionary monetary policy in an international setting. If countries follow monetary policies of flexible inflation targeting, trade wars are relatively mild, with low equilibrium tariffs and small welfare costs. Discretionary monetary policies imply much higher tariffs, high inflation rates, and substantially larger welfare costs. We quantify the effects of a global trade war among major economies using estimates of trade elasticities, economic size, net foreign assets, and trade openness. We find large welfare benefits of an inflation targeting monetary policy for all countries. |
| Keywords: | Protectionism, Trade wars, Inflation targeting, Discretionary monetary policy, Trade imbalances F30, F40, F41 |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05151249 |
| By: | David Autor (MIT); David Dorn (University of Zurich); Gordon Hanson (Harvard University); Maggie Jones (US Census Bureau); Bradley Setzler (Pennsylvania State University) |
| Abstract: | This chapter analyzes the distinct adjustment paths of U.S. labor markets (places) and U.S. workers (people) to increased Chinese import competition during the 2000s. Using comprehensive register data for 2000-2019, we document that employment levels more than fully rebound in trade-exposed places after 2010, while employment-to population ratios remain depressed and manufacturing employment further atrophies. The adjustment of places to trade shocks is generational: affected areas recover primarily by adding workers to non-manufacturing who were below working age when the shock occurred. Entrants are disproportionately native-born Hispanics, foreign-born immigrants, women, and the college-educated, who find employment in relatively low-wage service industries in healthcare, education, retail, and hospitality. Using the panel structure of the employer-employee data, we decompose changes in the employment composition of places into trade-induced shifts in the gross flows of people across sectors, locations, and non-employment status. Contrary to standard models, trade shocks reduce geographic mobility, with both in- and out-migration remaining depressed through 2019. The employment recovery stems almost entirely from young adults and foreign-born immigrants taking their first U.S. jobs in affected areas, with minimal contributions from cross-sector transitions of former manufacturing workers. Although worker inflows into non-manufacturing more than fully offset manufacturing employment losses in trade-exposed locations after 2010, incumbent workers neither fully recover earnings losses nor predominantly exit the labor market, but rather age in place as communities undergo rapid demographic and industrial transitions. |
| Keywords: | China trade shock, Local labor markets, Sectoral reallocation, Manufacturing decline, Worker mobility |
| JEL: | F16 J23 J31 J62 L6 R12 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2537 |
| By: | Matthew Kotchen; Giovanni Maggi |
| Abstract: | We examine positive and normative questions that arise with the joint use of carbon taxes and green subsidies in an open economy. Moving from autarky to free trade induces countries to introduce green subsidies and reduce carbon taxes, in order to reduce foreign emissions. In contrast to the “leakage” effect of carbon taxes, green subsidies are associated with “reverse leakage, ” as they decrease emissions both at home and abroad, and as a consequence, the availability of green subsidies tends to be good for global welfare. International climate agreements (ICAs) seek to increase carbon taxes, but the effect on green subsidies is more nuanced. An ICA removes green subsidies, even though they exert positive international externalities at the noncooperative equilibrium. If, however, policies can only be changed gradually, an ICA may start by increasing subsidies before decreasing them over time. We also consider the welfare implications of lobbying from the fossil and green energy sectors. In a noncooperative setting, we find that pressures from the fossil lobby tend to reduce welfare, whereas pressures from the green lobby tend to increase welfare. We also find that in the presence of lobbying, an ICA can decrease welfare relative to the noncooperative equilibrium, even if it changes carbon taxes and green subsidies toward their efficient levels. |
| JEL: | F18 H2 Q48 Q5 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34080 |
| By: | Felipe Benguria; Felipe Saffie |
| Abstract: | We measure the response of financial outcomes to the US announcement on April 2, 2025, of tariffs on nearly all its trading partners. To address the challenge posed by potential anticipation by economic agents, we decompose these tariffs into a component associated with bilateral deficits and an arguably unanticipated component resulting from the rounding up of the continuous deficit measure to the next whole number or to the baseline 10% rate. We measure the short-term response of stock prices and exchange rates, focusing on all countries with which the US has a bilateral deficit. For both outcomes, the round-up component’s effect is an order of magnitude larger than that of the deficit component. We find that a one percentage point higher tariff is associated with a statistically significant 0.23% decline in stock prices. Further, we find no evidence of a dollar appreciation; if anything, higher tariffs are associated with a dollar depreciation, driven by countries with a floating regime. We show this is consistent with a model that allows for trade reallocation and in which exports to the US are invoiced in dollars while exports to the rest of the world are partly invoiced in producer currency. |
| JEL: | F1 F3 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34036 |
| By: | Philipp Heil; Emilie Höslinger; Niklas Potrafke; Tuuli Tähtinnen; Emilie Antonia Höslinger; Tuuli Tähtinen |
| Abstract: | Key Messages• On average, experts from the EU expect tariffs on US imports to be around 5 percentage points higher than they would recommend.• Tariff expectations are higher and more varied across European countries for US goods than for all imports.• Expert recommendations for tariffs diverge widely across European countries.• US experts recommend low tariffs on EU imports, despite expecting higher rates.• Gaps between expected and recommended tariffs highlight policy challenges. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_76 |
| By: | Bas Sanders |
| Abstract: | Economists use quantitative trade and spatial models to make counterfactual predictions. Because such predictions often inform policy decisions, it is important to communicate the uncertainty surrounding them. Three key challenges arise in this setting: the data are dyadic and exhibit complex dependence; the number of interacting units is typically small; and counterfactual predictions depend on the data in two distinct ways-through the estimation of structural parameters and through their role as inputs into the model's counterfactual equilibrium. I address these challenges by proposing a new Bayesian bootstrap procedure tailored to this context. The method is simple to implement and provides both finite-sample Bayesian and asymptotic frequentist guarantees. Revisiting the results in Waugh (2010), Caliendo and Parro (2015), and Artu\c{c} et al. (2010) illustrates the practical advantages of the approach. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.11967 |