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on International Trade |
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Issue of 2025–11–24
thirteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Committee, International Relations; Vergara Caffarelli, Filippo; de Almeida, Ana M.; Lovin, Horatiu |
| Abstract: | This paper looks at how Brexit has affected trade and foreign direct investment (FDI) between the United Kingdom and the EU. In 2020 the United Kingdom and the EU signed the Trade and Cooperation Agreement (TCA) , establishing the post-Brexit relationship and, in particular, a tariff-free area for goods produced in either of the two economies. However, non-tariff barriers to the trading of goods and services have emerged. Moreover, the United Kingdom’s departure from the EU has affected its attractiveness as an investment target. We analyse recent developments in UK imports and exports with the EU and the rest of the world, in both goods and services, including financial services and tourism. Our estimates suggest that, after the Brexit transition period, UK exports to the EU contracted by almost 40%, due to the emergence of non-tariff barriers with the EU, and the fact that no significant UK trade flows were redirected to other partners. Finally, the analysis of product-level data on German, French, Italian and Spanish exports to the United Kingdom has confirmed the significant negative impact of Brexit, especially for goods highly exposed or highly sensitive to increases in trade costs. The FDI analysis begins with a conjunctural assessment that includes recent trends in EU-UK FDI at a broad level (including sectoral and geographical details), a breakdown of foreign affiliates and an investigation of new FDI projects and jobs in the United Kingdom. The analysis continues with developments in the UK financial sector in terms of the real economy, FDI flows, banks, insurance companies and pension funds, and the evolving status of the United Kingdom as a leading global financial centre. Finally, our analysis also provides an econometric investigation into the potential impact of Brexit on EU-UK FDI, using a gravity model approach. […] JEL Classification: F14, F15, F21 |
| Keywords: | Brexit, FDI, global value chains, trade |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2025379 |
| By: | Alessandro Borin; Francesco Paolo Conteduca; Fabrizio Leone; Michele Mancini; Patrick Zoi |
| Abstract: | This paper examines how international trade shocks transmit through domestic supply chains, shaping local economic vulnerabilities. Using detailed firm-to-firm domestic and foreign transaction data, we quantify the direct and indirect exposure of Italian labor markets to two major sources of external risk: imports from China and exports to the United States. We quantify the importance of firms’ domestic and foreign linkages for overall exposure and highlight the critical role of wholesalers and top trading firms within the domestic network in shaping tails risks. Pronounced local disparities in exposure reveal that aggregate trade statistics conceal substantial and uneven regional vulnerabilities. |
| Keywords: | global value chains, local labor markets, trade shocks, firm-to-firm linkages, geopolitical fragmentation, production network |
| JEL: | F14 R12 L14 F61 R15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12271 |
| By: | Lukmanova, Elizaveta (Central Bank of Ireland); O'Grady, Michael (Central Bank of Ireland) |
| Abstract: | Ireland’s high-value export sectors are deeply embedded in global value chains, relying heavily on intermediates sourced from abroad to produce export content, leaving them highly exposed to tariffs. Using a multi-country, multi-sector model of the world economy with input-output linkages, these sectors are identified as the main drivers of the Irish economic response to import tariffs imposed under the recent US-EU trade deal. The moderate aggregate impact — a 0.6 per cent decline in real GDP — masks significant variation across sectors. Pharmaceuticals, most directly reliant on US demand, drives the decline in Irish output. Highlighting the concentration of economic activity in the pharmaceutical sector, we also show that a tariff regime targeting this sector specifically with additional US tariffs could more than double the overall output losses relative to the trade deal scenario. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:stafin:2/si/25 |
| By: | Brett A. McCully; Torsten Jaccard; Christoph Albert |
| Abstract: | Who buys imports? By augmenting U.S. grocery purchase data to include origin countries of both products and households, we provide the first evidence that immigrants exhibit substantially stronger preferences for imported consumer goods than natives. We develop and estimate a quantitative trade model to show that immigrants also reduce trade costs and expand the effective market size for foreign goods, thereby increasing local import supply for all households. Overall, however, immigrants generate considerably more local import expenditure via their own purchases than via spillovers to natives, with profound implications for the distributional costs of a negative trade shock, such as an import tariff: the average within-county difference in welfare costs between immigrants and natives is over six times the across-county standard deviation in native household costs. |
| Keywords: | gains from trade, heterogeneous preferences, spillover effects |
| JEL: | F22 J31 J61 R11 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12278 |
| By: | Heiland, Inga; Šváb, Patrik |
| Abstract: | A large number of recent papers employ value-added trade data alongside traditional gross measures of trade to estimate the impact of various trade costs on bilateral trade. Value-added gravity equations are typically justified by referencing the theoretical and empirical merits of traditional gravity equations for gross trade. Contradicting this notion, we use theory and simulations to show that value-added gravity equations are misspecified when the gross trade gravity equation is correct. Consequently, estimates from value-added gravity equations are difficult to interpret and prone to omitted variables bias. |
| Keywords: | Structural gravity, Trade in value added |
| JEL: | F12 F15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:330838 |
| By: | Badis Tabarki (Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | This paper extends the canonical Melitz–Chaney framework beyond the CES to characterize the selection effect à la Melitz (2003) under generalized demand. It uses a Gorman-Pollak demand system that nests direct and indirect separability and keeps demand curvature unrestricted. The selection effect is always operative and remains the dominant welfare channel in this gravityconsistent environment. The model generalizes the ACR formula (Arkolakis et al., 2012) and reveals that by shaping export participation patterns, demand curvature governs the intensity of the competitive pressure trade exerts on domestic firms forcing them to exit. Super-convex demand yields an upper bound for the probability of exporting and the average export productivity and thus magnifies trade-induced firm exit. Hence, by magnifying the selection effect, it yields an upper bound for the gains from trade. These patterns are reversed under sub-convex demand. Within these bounds, CES demand delivers an intermediate outcome. This paper thus uncovers new implications of demand curvature previously unexplored in the trade literature |
| Keywords: | International trade; Melitz-Chaney model; Firm heterogeneity; Selection effect; Demand curvature; Generalized separability; Variable markups; Structural gravity |
| JEL: | F12 D11 L11 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:mse:cesdoc:25023 |
| By: | Ferracane, Martina F.; Hoekman, Bernard; van der Marel, Erik; Santi, Filippo |
| Abstract: | Between 2000 and 2020, the EU granted 14 so‐called adequacy decisions, permitting EU citizens' personal data to flow freely between the EU and the respective trading partners, including among the countries accorded adequacy. Most adequacy decisions are unilateral, complementing the more commonly observed and analysed mutual recognition arrangements for technical regulations. Using structural gravity to assess the relationship between EU adequacy decisions and digital trade, and applying different approaches to define digital trade, we find that adequacy increases bilateral digital trade between the EU and the adequate countries by 7–9% compared to non‐digital trade. We also provide evidence of a ‘club effect, ’ with digital trade increasing between countries that have been granted adequacy, but only to the extent that the USA is part of the club. Using synthetic control methods, we show that the magnitude of the club effect varies across countries. |
| Keywords: | trade costs; recognition; data protection; clubs; digital trade |
| JEL: | D18 F13 F14 L88 O38 |
| Date: | 2025–11–06 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130102 |
| By: | Christian Gréus; Philipp Heil; Niklas Potrafke; Ramona Schmid; Tuuli Tähtinen |
| Abstract: | Key MessagesIn the short term, a 10 percent import tariff is expected to reduce trade volumes and investment, while raising inflation and unemploymentEconomists across the EU expect tariffs to lower economic growth by 0.59 percentage points over the next five yearsMost experts report a high level of perceived trade policy uncertainty in both the EU and the USThe uncertainty is expected to cause further slowdowns in growth (-0.6 percentage points) and firm investment (-4.7%) in the medium term |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_79 |
| By: | Malik Curuk; Jérôme Héricourt; Gonzague Vannoorenberghe |
| Abstract: | Estimating the effects of goods and labor market power on firm pricing behavior is difficult since firm-level output and employment are jointly determined. We exploit the variation in the sets of destination countries across exporting firms, which enables us to separately identify the effects of goods and labor market power on pass-through rates by reducing the comovement of firm size across specific sales markets and in its local labor market. We present a theoretical framework in which multi-destination exporters are oligopolists in their goods markets and oligopsonists in their local labor market. Combining firm-level trade data per product-destination with establishment-level balance sheet data and employment zone identifiers for the universe of French firms from 1995 to 2015, we construct theoretically sound proxies for labor and goods market power and jointly estimate their effects on export prices using exchange rate shocks as the source of identifying variation in firm demand. Consistent with the model's predictions, we provide robust evidence that firms with stronger labor market power have a lower pass-through of changes in their effective exchange rate into export prices conditional on their goods market power. The findings indicate a sizable degree of labor market power for French exporters. |
| Keywords: | Labor Market Power;Goods Market Power;Exchange Rate;Pass-through |
| JEL: | F16 F31 J42 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cii:cepidt:2025-15 |
| By: | Toshihiko Mukoyama; Kanato Nakakuni; Makoto Nirei |
| Abstract: | This study analyzes the Japanese economy during the Great Recession period (2007-2009). The Japanese GDP dropped significantly during this period, despite limited exposure to the US housing market, and exports also declined sharply. Motivated by this fact, we construct a multi-sector, multi-region small open economy model. Each region has a representative consumer, and regions and sectors are linked through inter-regional input-output tables and consumers’ final demand. We measure the export shocks in each region-sector using trade statistics. Using our model, we quantitatively evaluate how the decline in export demand propagates throughout the country. We find that export shocks account for a significant portion of the GDP decline in many regions. To inspect the mechanism, we conduct counterfactual exercises in which we examine the change in GDP resulting from an export shock in a specific industry-region. The propagation is decomposed within and across regions, as well as within and across sectors. |
| Keywords: | Great Recession, export demand, inter-regional input-output table, multi-sector model |
| JEL: | D57 E32 F41 F44 R15 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_711 |
| By: | Régis Barnichon; Aayush Singh |
| Abstract: | In this paper we exploit 150 years of tariff policy in the US and abroad to estimate the short-run effects of tariff shocks on macro aggregates. A careful review of the major changes in US tariff policy since 1870 shows no systematic relation between the state of the cycle and the direction of the tariff changes, as partisan differences on the effects and desirability of tariffs led to opposite policy responses to similar economic conditions. Exploiting this quasi-random nature of tariff variations, we find that a tariff hike raises unemployment (lowers economic activity) and lowers inflation. Using only tariff changes driven by long-run considerations—a traditional narrative identification—gives similar results. We also obtain similar results if we restrict the sample to the modern post World War II period or if we use independent variation from other countries (France and the UK). These findings point towards tariff shocks acting through an aggregate demand channel. |
| Keywords: | tariff; inflation; unemployment; narrative approach; political |
| JEL: | F41 F13 E31 N10 E52 |
| Date: | 2025–11–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:102099 |
| By: | Jeffrey D. Sachs (Center for Sustainable Development, Columbia University, New York, NY 10027, USA); Andrew M. Warner (International Monetary Fund, 700 19th Street NW, Washington, DC 20431) |
| Abstract: | One of the surprising features of modern economic growth is that economies with abundant natural resources have tended to grow less rapidly than natural resource-scarce economies. In this paper we show that economies with a high ratio of natural resource exports to GDP in 1971 (the base year) tended to have low growth rates during the subsequent period 1971-89. This negative relationship holds true even after controlling for variables found to be important for economic growth, such as initial per capita income, trade policy, govern ment effciency, investment rates, and other variables. We explore the possible pathways for this negative relationship by studying the cross-country effects of resource endowments on trade policy, bureaucratic effciency, and other deter minants of growth. We also provide a simple theoretical model of endogenous growth that might help to explain the observed negative relationship. |
| Date: | 2025–11–19 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:802 |
| By: | Masahiro ENDOH; Toshiyuki MATSUURA; Akira SASAHARA |
| Abstract: | This study analyzes the effect of import shocks from China on population movement within and across regional employment zones in Japan based on Japanese census data from the 1990s to the 2010s. This effect was estimated for eight population groups defined by combinations of age and gender: the total population, and those aged 15–29, 30–44, and 45–59 by age group, and males and females by gender. Increases in imports from China had no significant effect on population movements within commuting zones or on net outflows from zones, but they significantly reduced both inflows to and outflows from zones, suggesting that import shocks tend to suppress inter-regional migration. The effect was observed across all age groups and for both men and women. Estimates indicate that regional differences in import shocks lowered both inflow and outflow rates. The magnitude was generally moderate compared with the actual ratios, but inflow migration of young women was relatively strongly suppressed. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25108 |