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on International Trade |
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Issue of 2025–10–13
fourteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Agustina Giraudy (American University); Ernesto Stein (Tecnologico de Monterrey); Francisco Urdinez (Pontificia Universidad Católica de Chile); Victor Zuluaga (Banco de México) |
| Abstract: | This paper investigates the impact of the first Trump administration's (2016-2022) US-China Trade War on the sectoral composition and geographic allocation of Chinese foreign direct investment (FDI) in Mexico. Leveraging a novel dataset of Chinese investment projects (2001-2024) and exploiting product-level variation in US tariff exposure, we implement a difference-in-differences design to identify causal effects. The analysis reveals three key findings. First, Chinese firms responded to increased US tariffs by relocating production to Mexico (i.e., nearshoring), with sectors more exposed to the Trade War (that is, receiving larger tariff hikes) having significantly higher Chinese FDI inflows. Second, these effects emerge with a lag of approximately three to five years following tariff imposition. Third, place-based policies significantly influenced the geography of Chinese investment: Mexico's Zona Libre de la Frontera Norte program altered the relative attractiveness for Chinese FDI of the affected regions compared to others. The findings highlight how global trade disputes interact with place-based policies to shape investment patterns, offering lessons for developing economies seeking to attract nearshoring FDI while balancing employment and regional development objectives |
| Keywords: | Foreign Direct Investment, Trade War, Nearshoring, Mexico, China, Place-based Policy |
| JEL: | F13 F14 F21 F23 O19 P33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:gnt:wpaper:11 |
| By: | Anh Do; Sharat Ganapati; Woan Foong Wong; Oren Ziv |
| Abstract: | The majority of global trade moves by sea through hub-and-spoke shipping networks. We investigate the returns to being a hub country by analyzing how transshipment activity shapes trade and supply chains. We show that most US imports especially from smaller origin countries are transshipped via key hubs, and transshipment is positively correlated with the hubs product-level trade. Leveraging the indirect shipping network structure to construct an instrument, we find that transshipment increases hubs imports from origins for which they facilitate trade and exports of downstream goods, highlighting their central role in shaping modern global trade and supply chain dynamics. |
| Keywords: | trade costs, scale, hubs, transport costs, transportation networks, international trade, shipping |
| JEL: | F10 F13 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12187 |
| By: | Dzhamilya Nigmatulina; Konstantin Egorov; Alexey Makarin; Vasily Korovkin |
| Abstract: | How effective are trade sanctions? We examine the economic impact of the unprecedented sanc- tions imposed on Russia following February 2022, when Western countries banned exports ac- counting for 36% of Russia's prewar import value. Combining novel, manually collected records of these sanctions with Russian customs data, firm balance sheets, domestic railway shipments, and government procurement contracts, we provide the most comprehensive analysis of the economic impact of trade sanctions on a target country to date. Using a difference-in-differences approach, we find that imports of sanctioned country-product varieties into Russia saw a sharp 62% decline following the war's onset. While we see substantial rerouting through third countries, it did not fully offset the direct import losses: total imports of sanctioned products fell by 27%. Firms that had relied on soon-to-be-sanctioned imports experienced a 14% decline in output, also observed in manufacturing, technology, and firms linked to military supply chains. Affected firms also saw reduced government procurement sales and incurred additional losses when their buyers or suppliers were exposed to sanctions. Overall, our findings suggest that, contrary to widespread claims of ineffectiveness, import sanctions on Russia had far-reaching adverse effects. |
| Keywords: | geopolitics, international trade, Russia-Ukraine war, sanctions |
| JEL: | D22 D74 F14 F51 H56 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1516 |
| By: | Ana-Isabel Guerra; Ferran Sancho |
| Abstract: | Obstacles to free trade hinder economic growth and limit opportunities for optimizing resource allocation. While trade theory is clear on this point, a mindset associated with an assumed, albeit false, zero-sum game may possibly lead to confusing desires with the reality of interconnected economies. One major barrier to trade is tariffs, which raise the cost of imports to protect local industries from foreign competition. In this paper, we use the most recent input-output data from the United States to quantify the economy-wide effects of increased tariffs on imported goods. To capture the substitution effects between domestic and imported commodities at both the intermediate and final demand levels, we employ a novel nonlinear input-output model. In this model, each category of commodity is available in several varieties, with the final mix being driven by the interplay of domestic versus import prices while capturing vertical and horizontal substitution in demand. |
| Keywords: | barriers to trade, nonlinear input-output, tariffs |
| JEL: | F14 F47 D57 C67 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1514 |
| By: | Fernando Broner; Alberto Martin; Josefin Meyer; Christoph Trebesch |
| Abstract: | How do shifts in the global balance of power shape the world economy? We propose a theory of alignment-based “hegemonic globalization, †built on two central premises: countries differ in their preferences over policies (such as the rule of law or regulatory frameworks) and trade between any two countries increases with the degree of alignment in these policies. Hegemons promote policy alignment and thereby facilitate deeper trade integration. A unipolar world, dominated by a single hegemon, tends to support globalization. However, the transition to a multipolar world can trigger fragmentation, which is particularly costly for the declining hegemon and its closest allies. To test the theory, we use international treaties as a proxy for alignment and compile a novel "Global Treaties Database, " covering 77.000 agreements signed between 1800 and 2020. Consistent with the theory, we find that hegemons account for a disproportionate share of global treaty activity and that treaty-signing is a leading indicator of increasing bilateral trade. |
| Keywords: | Hegemon, globalization, trade integration, international coercion, international treaties, cooperation, multipolar world |
| JEL: | F02 F15 F50 F51 F55 F60 P45 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1907 |
| By: | Florencia Airaudo; Francois de Soyres; Alexandre Gaillard; Ana Maria Santacreu |
| Abstract: | This paper analyzes recent structural transformations in the global economic system, emphasizing the increasing geopolitical fragmentation and strategic realignments driven primarily by technological competition. We focus on China’s rise as a technological competitor. We introduce novel quantitative metrics such as the Export Similarity Index, the Partner Similarity Index, and the Ideal Point Distance to examine global shifts in trade patterns and sectoral competition. Our findings highlight competitive pressures in critical sectors, including machinery and advanced manufacturing, with implications for geopolitical alignment and economic stability. We explore strategic policy responses by major economies, with a particular focus on the evolving policy stance of the Euro Area and assess emerging vulnerabilities stemming from changing patterns of import dependence. We conclude by discussing the broader implications of these developments for economic resilience and policy strategy in an increasingly fragmented global economy. |
| Keywords: | global trade; geopolitical fragmentation; strategic rivalry; critical minerals; global supply chains; Euro area; China |
| JEL: | F13 F14 F15 O33 |
| Date: | 2025–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:101882 |
| By: | Fairbairn, Oskar; Fiedler, Lena; Görg, Holger; Hanley, Aoife |
| Abstract: | • Around 60% of Irish net exports to US are pharma products. • A 200% US tariff would devastate all EU exports, not just Ireland's. • Irish business leaders we interviewed are confident that pharma's competitiveness will ensure its survival |
| Abstract: | • Circa 60 % der irischen Nettoexporte in die USA sind Pharmaprodukte. • Die Erhebung eines US-Zolls von 200 % würde alle EU-Exporte zerstören, nicht nur die Irlands. • Irische Wirtschaftsführer sind zuversichtlich, dass die Wettbewerbsfähigkeit die Pharmaindustrie sichert. |
| Keywords: | US-EU trade, Pharmaceuticals, Ireland, Multinational Firms, US-EU-Handel, Pharmazeutika, Irland, Multinationale Unternehmen |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkpb:327994 |
| By: | Alexandro de Gois Oliveira; Wallace Patrick Santos Farias de Souza; Jevuks Matheus de Araújo |
| Abstract: | This article investigates the impacts of economic shocks resulting from trade liberalization in Brazil on educational indicators in microregions from 1990 to 2010. The analysis explores disparities between different age cohorts, genders, qualification levels and racial groups, in addition to examining the effects on other dimensions of education. We also assess the effects of these shocks on formal employment in large occupational groups over time, as well as the role of China’s growing presence in international trade between 2000 and 2010. The results indicate that the regions most exposed to tariff reductions showed significant increases in schooling, especially among individuals aged 10 to 24. From a gender perspective, men were initially the most affected by the shocks, although the effects redistributed over time. Regarding racial composition, white individuals were the most affected in the short term. As a consequence, an increase in educational inequalities between individuals and between regions was observed, revealing the heterogeneity of the impacts of trade liberalization on human capital. |
| Keywords: | Economic Shocks; Trade Liberalization; Education |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ris:nereus:021671 |
| By: | Andrea Ariu (University of Milan); Katariina Nilsson Hakkala (Asian Development Bank) |
| Abstract: | This paper examines the determinants of service exports in emerging Asian economies, with particular emphasis on digital services, which have experienced considerable expansion across the region. Utilizing a structural gravity model, the findings indicate that supply-side factors predominantly drive service exports growth, rather than demand factors or trade policies. An in-depth analysis of these supply-side factors underscores the pivotal role of human capital, specifically education and English proficiency, in bolstering exports, especially within the region’s digital business process services sector. Further evidence reveals that stringent regulatory environments and barriers to digital infrastructure considerably impede exports in sectors such as telecommunications, computer and information services, and other business services. Conversely, enhanced internet connectivity not only increases exports of digital services but also boosts the exports of non-digital services. |
| Keywords: | Asia;emerging economies;trade in services;digital services |
| JEL: | F10 F14 L80 |
| Date: | 2025–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021650 |
| By: | Kazuhiro Takauchi (Kansai University); Hajime Sugeta (Kansai University); Tomomichi Mizuno (Kobe University) |
| Abstract: | Real-world cost asymmetries highlight the importance of firm heterogeneity. Studies focus on monopolistic competition owing to model tractability but overlook oligopoly settings. We analyze how the productivity gap between efficient and inefficient oligopolistic firms affects export policies within a standard third-market model. We show that a "subsidy-tax-subsidy" export policy pattern emerges depending on the degree of the productivity gap. Extending our model to multiple firms, we consider whether the gap in firm numbers affects export policies. We find that when this gap is large, one exporter may receive an export subsidy whereas the other faces an export tax. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2522 |
| By: | Alejandro Cuñat; Robert Zymek |
| Abstract: | Do trade imbalances boost incomes in surplus economies at the expense of deficit economies? We show that the answer is yes in an important subclass of quantitative trade models. This is the consequence of scale economies concentrated in the traded sector. A rise in net exports causes the traded sector to expand, which raises productivity and real income in surplus economies. The flipside is a decline in productivity and income in deficit economies. Under plausible calibrations of the strength and incidence of scale economies, observed trade imbalances cause a sizeable redistribution of the gains from trade towards surplus economies. If these imbalances are modelled as the outcome of steadystate equilibrium in international asset markets, major deficit economies may prefer to correct their traded-sector underproduction by moving to financial autarky. However, financial autarky reduces global welfare and is generally not the optimal policy to bolster the traded sector in the presence of scale economies. |
| Keywords: | trade imbalances; gravity; spillovers; gains from trade |
| Date: | 2025–09–26 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/191 |
| By: | Amit Khandelwal |
| Abstract: | In a fracturing world, how can low- and middle-income countries (LMICs) continue to leverage trade for economic development? Drawing on recent research at this intersection, this review argues that countries should look inward toward domestic reforms in key factor markets. I review evidence on how trade in LMICs is shaped by frictions in labor, capital, material, land, and information markets, and highlight areas where the evidence base remains thin. I concluded with a discussion of vertical policies relevant for LMICs—particularly the role of services—and suggest areas where further research is needed to assess whether development can be service-led. |
| JEL: | F1 O10 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34333 |
| By: | Fernando Broner; Alberto Martin; Josefin Meyer; Christoph Trebesch; Jiaxian Zhou Wu |
| Abstract: | This article explores the interplay between economic hegemony and political alignment. Using theoretical and empirical insights from Broner et al. (2024), we posit that hegemonic states, such as the U.S., foster political alignment, which enhances globalization. We use UN voting data to proxy for international alignment and show that hegemons induce alignment. This data has shortcomings, however. UN voting only covers the post-WWII period, refers to a narrow set of issues, and displays little time variation. As for military alliances, they were not widely used before the mid-20th century. We propose an alternative measure of alignment based on international treaties. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1902 |
| By: | Gustavo de Souza; Gabriel Garber |
| Abstract: | We study the effect of an innovation subsidy on the long-run growth of firms in a developing country. Using administrative microdata from Brazil and a quasi-experimental design that compares near-winners to near-losers of R&D subsidy applications, we find that the program had a persistent effect on firm size: fourteen years after receiving the subsidy, subsidized firms were 59% larger. The effect is strongest among small and young firms facing high borrowing costs, which is consistent with the subsidy alleviating financial constraints. This growth, however, did not come from firms developing frontier innovations. Instead, firms used the subsidy to expand their product lines into high-tariff markets, producing local versions of foreign goods. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:631 |