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on International Trade |
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Issue of 2026–01–12
eighteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Simonato, Thiago; van der Mensbrugghe, Dominique; Chepeliev, Maksym |
| Abstract: | This paper investigates how recent and potential changes in U.S. trade policy affect regional economic performance, labor markets, and income inequality across Brazil, using an integrated global-subnational computable general equilibrium (CGE) framework. The analysis combines the Global Trade Analysis Project (GTAP) model with Brazil’s highly disaggregated subnational TERM (The Enormous Regional Model), providing a novel methodological approach to capture detailed spatial and sectoral impacts of international trade shocks. Empirical findings reveal substantial regional heterogeneity in economic outcomes, with pronounced vulnerabilities in the North and Northeast, contrasting milder effects or even gains in more diversified southern regions. Labor market responses were similarly uneven, characterized by heightened informality and concentrated losses in high-skill, trade-dependent occupations. Agriculture, particularly soybean production, emerges as a critical transmission channel, reflecting Brazil’s deep integration into China-led global value chains. Income and consumption impacts are regressive, disproportionately affecting lower-income households. These results underscore the importance of accounting for subnational heterogeneity and global value chain interactions when designing compensatory and adjustment policies. Effective policy interventions thus require spatially targeted mechanisms to mitigate adverse regional and distributional effects while leveraging strategic sectoral opportunities arising from trade realignments. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361031 |
| By: | Felbermayr, Gabriel; Hinz, Julian; Krantz, Sebastian; Mahlkow, Hendrik; Wanner, Joschka |
| Abstract: | How do adverse global trade shocks affect sub-national outcomes, and what insurance does regional integration provide? We study the EU Single Market using a large-scale quantitative trade model with regional labour mobility, calibrated to a new NUTS2- based Regionalized Inter-Country Input-Output (REICIO) database. Comparing four baselines, from a fully frag-mented Europe to deep integration, we evaluate the 2025 US tariffs. Full integration of EU goods and labour markets reduces the average regional loss in real value added per capita by about 25% and more than halves its dispersion. Further deepening barely improves the mean but compresses the distribution of regional impacts even further. |
| Keywords: | Global Trade Wars, MRIO, ICIO, European Regions, NUTS2, Global Value Chains, Sectoral Mobility Frictions, Trade Integration |
| JEL: | F15 F16 F17 R15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:334528 |
| By: | Laura Baiker; Ingo Borchert; Roberto Echandi; Ana M. Fernandes; Ishrat Hans; Joscelyn Magdeleine; Juan A. Marchetti; Ester Rubio Colomer; Ana Margarida Fernandes |
| Abstract: | The economic environment for services trade has changed dramatically over the past 15 years, driven by rapid technological progress that has expanded the possibilities for exchanging services. How has trade policy responded to these changes? How do policy stances in a wide range of service sectors compare across economies? With its unprecedented global coverage, the Services Trade Policy Database and the associated Services Trade Restrictions Index, developed jointly by the World Bank and the World Trade Organization, help address these questions. This paper makes three principal contributions. First, it offers an in-depth discussion of the current state of services trade policies and their differences across 134 economies and 34 services subsectors. Second, the paper reveals how recent (2016–22) changes in policy stances have seen progressive liberalization by lower-income economies but stabilization or even slight policy reversals in high-income economies. This dynamic differs fundamentally from the trend that unfolded after the Great Recession over 2008–16. Third, the paper shows the implications of policy changes over the past six years on services trade costs, and it showcases how the Services Trade Policy Database’s regulatory information can inform trade negotiations, regulatory analysis, and policy making. Alongside these contributions, the paper documents updates to the Services Trade Policy Database’s economy and sector coverage and explains the latest methodological improvements made to the World Bank–World Trade Organization Services Trade Restrictions Index. |
| Keywords: | services trade policy, investment, STRI, trade restrictions, quantification |
| JEL: | F13 F14 F23 L80 O24 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12347 |
| By: | Manho Kang; Xiangtao Meng; Katheryn N. Russ; James Waters |
| Abstract: | Have recent tariffs resulted in increased costs for the US healthcare system? We examine US trade data and compile a database of statutory tariff changes. Tariffs on medical goods narrowly defined resulted in $3.4 Billion in duties assessed between February and July 2025—more than 10 times the same period in 2024, with a 55.8 percent rate of pass-through at the US border. We estimate that had medical goods imports observed in 2024 been subject to the statutory tariff levels prevailing in August 2025, assessed duties would have been $15.8 Billion, almost 30 times higher than those observed in real-time. Our aggregates understate imports of medical goods and other imports used in healthcare settings, as data limitations compel us to omit purchases of imported goods for construction, maintenance, and operations of facilities, as well as imports under certain HS10 and HS6 tariff codes that are used when identifying medical goods in many contexts but contain a mixture of imports for medical and non-medical purposes. |
| JEL: | F10 F13 F14 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34531 |
| By: | Zhao, Xialing; Fan, Linlin; Xu, Yilan; Baylis, Kathy; Heckelei, Thomas; Cao, An |
| Abstract: | Understanding how production shocks influence food prices is increasingly critical in a world facing climate change and growing dependence on international trade for crops. This study examines how production shocks influence crop prices by combining machine learning methods and gravity modeling. Using a two-stage least squares (2SLS) approach with weather instruments selected via the Least Absolute Shrinkage and Selection Operator (LASSO), we first predict crop production using high-resolution weather variables. The instruments exhibit strong predictive power and pass weak instrument tests. In the second stage, we find that increases in domestic production significantly reduce local prices, while the effects of production changes in trade partners vary across crops. Higher output by major sellers lowers rice prices but raises wheat prices, and greater production by major buyers increases maize and wheat prices. We estimate trade flows using a structural gravity model, incorporating WTO membership, free trade agreements (FTA), and border effects. Results show that WTO membership significantly promotes wheat trade, while border frictions tend to reduce trade volumes, especially after 2010. These findings highlight the complex transmission mechanisms of production shocks through global trade networks and underscore the importance of accounting for both supply and demand channels when evaluating food price dynamics and international food security. |
| Keywords: | International Relations/Trade |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:361040 |
| By: | Benedikt Heid; Laura Márquez-Ramos; Harry Wardana |
| Abstract: | Industrial policy is on the rise. A key instrument used by governments is import licensing to protect domestic industries. However, evidence of its effectiveness is limited. Using customs and firm level data, we estimate the effects of the introduction of import licensing for iron and steel products in Indonesia in 2009. While we find that the number of incoming shipments of protected products is reduced, and that imports are sourced from fewer countries, the overall value or quantity of imports is not affected. At the same time, while domestic iron and steel producers increase their sales in the short run, we do not find long-lasting positive effects on their sales. Our results suggest that while import licensing imposes costs on importers who have to adjust their supply chains, sustained gains for domestic producers are limited. This suggests that import licensing is ineffective as an industrial policy. |
| Keywords: | trade restrictions, import licensing, industrial policy, Indonesia, iron and steel |
| JEL: | F13 F14 L52 L61 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12346 |
| By: | Xiao Ma; Marc-Andreas Muendler; Alejandro Nakab |
| Abstract: | Export activity shapes workers’ experience-wage profiles. Using employer-employee and customs data for Brazilian manufacturing, we document that workers’ experience-wage profiles are steeper at exporters than at non-exporters and, among exporters, steeper at exporters shipping to high-income destinations. We develop and quantify a model featuring worker-firm wage bargaining, export-market entry by multi-worker firms, and human capital accumulation by workers to interpret the data. Human capital growth can explain one-half of the differences in wage profiles between exporters and non-exporters. We show that increased human capital per worker can account for one-half of the overall gains in real income from trade openness. |
| Keywords: | export activity, wage profiles, human capital accumulation |
| JEL: | E24 F12 F14 F16 J24 J64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12350 |
| By: | Pierre Coster; Julian di Giovanni; Isabelle Méjean |
| Abstract: | The European Union has been an early adopter of carbon policies, with the introduction of the EU Emissions Trading System (ETS) in 2005. This scheme sets a common price for carbon and is applied to the most polluting manufacturing sectors. By increasing the cost of emissions-intensive production, the system incentivizes firms to decrease their use of fossil fuels. However, as we show in a companion post, the policy’s impact was moderated by firms increasing their reliance on high-emissions imports. To eliminate this workaround, the EU will expand the ETS to imports in 2026, through the Carbon Border Adjustment Mechanism (CBAM). The CBAM will essentially put a tariff on imported goods based on their carbon content. Our recent work provides a quantitative analysis of how the ETS and CBAM affect firms’ supply choice decisions, and the resulting changes in domestic prices and emissions. |
| Keywords: | firm sourcing; supply chain adaptation; carbon tax; carbon tariffs; carbon leakage |
| JEL: | F14 F18 F64 H23 Q56 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102305 |
| By: | Jesús Fernández-Villaverde (University of Pennsylvania); Tomohide Mineyama (International Monetary Fund); Dongho Song (Johns Hopkins University) |
| Abstract: | We study how uneven gains from globalization can endogenously generate protectionism as a political equilibrium. Using U.S. data, we document that regions more exposed to import competition display stronger opposition to globalization, especially among households with little financial wealth, and that firms in trade-exposed sectors sharply increase lobbying expenditures. To interpret these patterns, we develop and quantify a general equilibrium Ricardian model with heterogeneous households, input–output linkages, and endogenous trade policy shaped by voting and lobbying. Distributional shocks reallocate political support among voters, while lobbying propagates through production networks, generating strategic complementarities that sustain protectionism. Calibrated to U.S.–China sectoral data from 1991–2019, the model accounts for rising inequality, declining support for globalization, and key aggregate trends in consumption and trade. |
| Keywords: | Globalization, heterogeneous households, multi-sector, production network, Ricardian trade, voting, political lobbying |
| JEL: | D57 D58 D63 D72 F1 F2 F4 F6 |
| Date: | 2026–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-001 |
| By: | Zhuokai Huang; Benny Kleinman; Ernest Liu; Stephen J. Redding |
| Abstract: | How has aggregate income and welfare in the United States been affected by globalization and rapid productivity growth in emerging economies? We use the class of constant elasticity trade models to provide quantitative evidence on these questions. We find that reductions in worldwide trade frictions over the period from 1960-2020 reduced the share of the United States in global GDP but raised its aggregate welfare. Similarly, productivity growth in Japan and China led to a decline in the relative income of the United States, but brought aggregate welfare gains from the resulting expansion in global production possibilities. Trade integration and foreign productivity growth have relatively modest effects on domestic income and welfare compared to domestic productivity growth. |
| JEL: | F15 F60 O11 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34530 |
| By: | Giorgio Chiovelli; Francesco Amodio; Leonardo Baccini; Michele Di Maio |
| Abstract: | We show that weather shocks affect government trade policy decisions. We exploit variation in rainfall during the growing season within and across countries to show that weather shocks impact agricultural output and trade. Using information on tariff cuts by commodity from preferential trade agreements, we then show that weather shocks that happen during the negotiation period correlate strongly with the size of tariff cuts. When weather shocks increase (decrease) a country’s capacity to produce a given crop, its government negotiates a smaller (larger) tariff cut. These results are consistent with a political economy trade model with sector-specific inputs in which the government places more weight on producers relative to consumers in its objective function. They also reveal that governments update their beliefs about domestic agricultural production capacity in response to weather shocks. |
| Keywords: | weather shocks, climate change, agricultural trade, trade policy. |
| JEL: | F13 F14 Q17 Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:mnt:wpaper:2401 |
| By: | George Economides; Thomas Moutos |
| Abstract: | We develop a modified version of the Flam and Helpman (1987) framework of North–South trade in vertically differentiated products, by endogenizing the labour market participation decisions of heterogeneous households and allowing for tariffs to substitute for income taxes. The model reveals a fundamental asymmetry: while Northern tariffs depress labor force participation among low-ability households in the North, Southern tariffs do not generate comparable effects in the South. We demonstrate that the shift from the pre–Trump 2.0 environment of modest reciprocal tariffs to a Trump 2.0–style tariff war disproportionately harms low- and middle-income households in the North, whereas households in the South experience significantly smaller welfare losses. Furthermore, an escalated tariff conflict erodes the North’s relative economic power. Our results indicate that, from both a geopolitical and political economy perspective, the South is more resilient to a trade war. |
| Keywords: | tariffs, trade war, household welfare, geoeconomics |
| JEL: | F10 F13 I30 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12349 |
| By: | Wagner, Joachim |
| Abstract: | The use of advanced technologies like artificial intelligence, robotics, or smart devices will go hand in hand with higher productivity, higher product quality, and lower trade costs. Therefore, it can be expected to be positively related to export activities. This paper uses firm level data for manufacturing enterprises from the 27 member countries of the European Union collected in 2025 to shed further light on this issue by investigating the link between the use of advanced technologies and extensive margins of exports. Applying a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), which does not impose any restrictive assumptions for the functional form of the relation between margins of exports, use of advanced technologies, and any control variables, we find that firms which use more advanced technologies do more often export and do export to more different destinations. |
| Keywords: | Advanced technologies, exports, firm level data, Flash Eurobarometer 559, kernel-regularized least squares (KRLS) |
| JEL: | D22 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:kcgwps:334537 |
| By: | Giorgio Chiovelli; Francesco Amodio; Serafín Frache |
| Abstract: | We show that commodity export booms can propagate up the value chain, reshape production networks, and promote growth in the service sector. We study Uruguay’s beef export boom to China in the 2010s, combining customs, firm-to-firm transactions, employer-employee, and balance sheet data. Firms more linked to exporters experienced higher sales, especially in services, with associated gains in employment, wages, and sales per worker. Aggregate sales rose by 1.79%, with each export dollar generating 46 more cents in domestic sales, 10 cents in services. Over time, service firms reoriented their connections toward beef exporters, amplifying their gains from trade. |
| Keywords: | commodity exports, production network, services, China shock. |
| JEL: | F14 L14 O14 O54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:mnt:wpaper:2505 |
| By: | Pierre Coster; Julian di Giovanni; Isabelle Méjean |
| Abstract: | Several countries have implemented a carbon tax or cap-and-trade system to establish high carbon prices and create a disincentive for the use of fossil fuels. Essentially, the tax encourages firms to substitute toward low carbon emission energy. Costs also rise for firms down the supply chain that use production inputs with high-emission content, so the total impact of a carbon tax can be large. In practice, however, firms also have an incentive to find an offset to a carbon tax. In this post, based on our recent work, we present evidence of one such adaptation strategy. We show that French firms increased their imports of high-emission inputs from suppliers outside the European Union’s cap-and-trade system, known as the EU Emissions Trading System (EU ETS), reducing the effectiveness of this approach to cutting carbon emissions—an adaptation strategy that leads to “carbon leakage.” To help stop this leakage, the EU is implementing a “carbon tariff” in 2026, which is the topic of a companion post. |
| Keywords: | firm sourcing; supply chain adaptation; carbon tax; carbon tariffs; carbon leakage |
| JEL: | F14 F18 F64 H23 Q56 |
| Date: | 2026–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102304 |
| By: | Macchiavello, Rocco (University of Warwick); Miquel-Florensa, Josepa (Toulouse School of Economics); de Roux, Nicolás (Universidad de los Andes); Verhoogen, Eric (Columbia University); Bernasconi, Mario (University of Basel); Farrell, Patrick (Columbia University) |
| Abstract: | Do the returns to quality upgrading pass through supply chains to primary producers? We explore this question in the context of Colombia’s coffee sector, in which market outcomes depend on interactions between farmers, exporters (which operate mills), and international buyers, and contracts are for the most part not legally enforceable. We formalize the hypothesis that quality upgrading is subject to a key hold-up problem: producing high-quality beans requires long-term investments by farmers, but there is no guarantee that an exporter will pay a quality premium when the beans arrive at its mills. An international buyer with sufficient demand for high-quality coffee can solve this problem by imposing a vertical restraint on the exporter, requiring the exporter to pay a quality premium to farmers. Combining internal records from two exporters, comprehensive administrative data, and the staggered rollout of a buyer-driven quality-upgrading program, we find empirical support for the key theoretical predictions. The results are consistent with the hypotheses that quality upgrading can provide a path to higher incomes for farmers, but also that it is unlikely to be viable under standard market conditions in the sector. |
| Keywords: | buyer-driven voluntary standards, vertical restraints, relational contracts, quality upgrading |
| JEL: | O12 F61 L23 Q12 Q13 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18335 |
| By: | Wrobel, Ralph |
| Abstract: | Rare earth elements (REEs) are critical for Europe's economic competitiveness, green transition, and national security. Yet the EU remains heavily dependent on China for their supply, particularly in refining and processing. This paper examines Europe's vulnerability to supply disruptions and geopolitical leverage stemming from China's market dominance. Rising demand for REEs in renewable energy, electric vehicles, and defence technologies exacerbates this dependence, while environmental and regulatory constraints hinder European extraction and processing. Case studies, including the 2010 Senkaku crisis and 2024-25 Chinese export restrictions, illustrate how REEs can be used as strategic tools of coercion. The paper evaluates Europe's policy responses, highlighting the Critical Raw Materials Act (CRMA), domestic processing projects, recycling initiatives, and international partnerships aimed at supply diversification. While progress is evident, challenges remain: recycling is nascent, domestic capacity is limited, and EU research programs are bureaucratic and slow. Overall, Europe faces a "geopolitical trap, " requiring urgent action to secure REE supply and technological resilience. |
| Keywords: | Rare earth elements (REEs), China, Europe, geopolitics, supply chain security, strategic autonomy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:opodis:333912 |
| By: | Saadaoui, Jamel; Smyth, Russell; Vespignani, Joaquin; Wang, Yitian |
| Abstract: | Geopolitical tensions between the United States and China pose significant risks to global critical-mineral supply chains, particularly because refining capacity for most critical minerals, including aluminium, copper, nickel, tin and zinc, is overwhelmingly concentrated in China. Using monthly data from 1995–2025 and a structural VAR-local projection framework, we estimate the dynamic effects of exogenous shocks to the US-China Political Relations Index (PRI) on mineral markets. We find that geopolitical deterioration systematically induces significant precautionary stockpiling. We then construct a multidimensional friend-shoring index incorporating reserves, alignment, regime type and distance, showing that only a narrow set of United States partners, primarily Australia and Canada, offer feasible pathways for refining diversification. The policy recommendation stemming from our findings is that the United States should make strategic stockpiling of refined critical minerals, rather than raw ores, the centerpiece of its strategy to build supply chain resilience, while negotiating long-term bilateral packages for the supply of refined critical minerals with Australia and Canada. |
| Keywords: | Geopolitical risk; Critical minerals; Friend-shoring |
| JEL: | F51 Q34 Q37 |
| Date: | 2025–12–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127188 |