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on International Trade |
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Issue of 2026–02–16
twenty-one papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Charles Serfaty; Sebastian Stumpner |
| Abstract: | This paper analyzes the welfare impacts of trade decoupling in a multi-sector general equilibrium trade model with global value chains. We show that decoupling leads to a fall in world trade and world welfare, and that losses are larger if fragmentation arises via trade costs than if it arises via tariffs. Decoupling creates both winners and losers, with neutral countries typically gaining from fragmentation. This makes blocs unstable, as bloc members have an incentive to take a neutral stance. In a final exercise, we therefore ask which bloc neutral countries would choose if forced to choose one. Here the Western bloc has a natural advantage due to its size, and it can expand in several rounds |
| Keywords: | Geoeconomic Fragmentation; Trade Blocs; Global Value Chains; Tariffs; Welfare |
| JEL: | F11 F13 F15 F60 F61 C67 C68 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1030 |
| By: | Charlie Joyez (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | This paper develops a new product-space-based measure of export–import similarity, the Trade Proximity index. The index captures the structural alignment between a country's import and export baskets by accounting for inter-product relatedness, rather than relying solely on categorical overlap, which ignores any inter-industry relatedness. We position Trade Proximity relative to the traditional Grubel–Lloyd index of intra-industry trade, clarifying their conceptual differences and showing how the two measures diverge when trade similarity is evaluated through the lens of productive capabilities. Using historical product-level trade data spanning 1962–2023, we document the long-run evolution of Trade Proximity and compare it to conventional intra-industry measures for developed and developing economies. While the two indices are positively correlated, Trade Proximity reveals distinct dynamics, including a stronger convergence of developing countries during the 1990s and a subsequent divergence that is not captured by the Grubel–Lloyd index. We conclude by discussing how the Trade Proximity index can inform future research on global value chains, learning through imports, structural upgrading, and trade policy. |
| Keywords: | Trade similarity; intra-industry trade; product space; global value chains |
| JEL: | F14 F60 O14 C43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2026-02 |
| By: | Hiau Kee (The World Bank); Cristina Neagu (The World Bank); Yoto Yotov (Center for Global Policy Analysis, Drexel University) |
| Abstract: | We propose a theory-based tariff index - the Balanced Trade Tariff Index (BTTI) - a uniform tariff that results in balanced bilateral trade. The BTTI decomposes into a preference-adjusted tariff term and a trade deficit term. Constructing the BTTI requires bilateral product-level import demand elasticities, which we estimate via a translog GDP function with US data, 2010-2023. The elasticities are heterogeneous across products, trade partners, and depending on the direction of trade, with broader implications for quantifying the gains from trade. The resulting BTTIs are significantly smaller than the 'Liberation Day' tariffs for most countries, and incurring less deadweight losses. |
| Keywords: | Reciprocal Tariffs, Balanced Trade, Bilateral Import Demand Elasticity, Trade Deficits |
| JEL: | F13 F14 F16 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202604 |
| By: | Martin Cameron (Trade Research Advisory (Pty) Ltd, South Africa); Wim Naudé (RWTH Aachen University, Germany & University of Coimbra, CeBER and Faculty of Economics) |
| Abstract: | In this paper we explain the extended Decision Support Model (DSM) methodology, operationalized through the AEXI Market Finder, which is designed to identify realistic export opportunities from large international trade datasets, such as that of UN Comtrade and CEPII-BACI. Grounded in the scientific literature on the need for and determinants of exports - specifically New New Trade Theory, the Balls-and-Bins model, and the Gravity Equation, we argue that best practice in export promotion must prioritize the provision of information to reduce frictions and correct market failures caused by information asymmetries. We then describe the extended DSM, which processes global trade data through four distinct filters.Furthermore, we compare the DSM’s elimination-based approach to the estimation-based gravity models used by the International Trade Centre (ITC), highlighting the DSM’s distinct ability to incorporate risk and realistic transport costs and transit dimensions, and to support innovation in export marketing. We conclude by discussing the limitations of the approach and offering recommendations for future research. |
| Keywords: | Exports, international trade, data-driven decision making, trade facilitation |
| JEL: | F13 F17 F14 M31 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:gmf:papers:2026-02 |
| By: | Fariha Kamal; Zachary Kroff |
| Abstract: | We document the augmenting role of services exports in U.S. multinationals' goods-export growth during the global financial crisis. Using newly linked data on U.S. firms' foreign sales of goods and services and a triple-difference identification strategy combined with propensity-score matching, we find that compared to multinationals that only export goods (mono-exporters), multinationals that also export services to the same destination (bi-exporters) experienced higher goods-export growth. This result is driven by sales of intellectual property rights related to industrial processes (e.g., patents, trademarks). We also find higher growth in bi-exporters' foreign affiliate services sales and domestic employment in services sectors. These results reveal a pivotal role of services exports in supporting foreign demand for U.S. goods during the crisis. |
| Keywords: | multinationals, financial crisis, services exports, goods exports |
| JEL: | F1 F13 F14 F23 H2 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-04 |
| By: | Lin Jones (United States International Trade Commission); Serge Shikher (United States International Trade Commission); Yoto Yotov (Center for Global Policy Analysis, Drexel University) |
| Abstract: | This paper examines the impact of various determinants of trade, including geopolitical risks, on global supply chains using a structural gravity model and the newly constructed International Trade and Production Database by End Use (ITPD-U), which disaggregates trade into intermediate, capital, and consumer goods. Results show that intermediate goods trade responds differently to standard trade determinants compared to capital and consumer goods: distance is the largest barrier, while regional agreements and currency unions have weaker effects. Geopolitical risks reduce trade overall, though its impact is notably smaller for intermediate goods, reflecting the "stickiness" of global supply chains. These results highlight the relatively high trade costs and structural inertia characterizing intermediate goods trade amid geopolitical uncertainty. |
| Keywords: | Intermediate goods trade, New data, Determinants |
| JEL: | F10 F14 F16 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202603 |
| By: | Mariam Camarero (Universitat Jaume I = Jaume I University); Antonia López-Villavicencio (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Cecilio Tamarit (UV - Universitat de València = University of Valencia = Universidade de Valencia) |
| Abstract: | This paper examines the relationship between globalization and unemployment in the EU from 1990–2015, focusing on Global Value Chains (GVCs). We analyze the effects of the composition of the workforce and GVC-type trade on unemployment. Our findings show that GVC participation reduces unemployment in less advanced EU economies but increases it in core countries. Lower labor costs and low-skilled workers enhance the positive impact on reducing unemployment. Some sectors (especially services such as Telecommunications) experience significant employment gains. We recommend policies to remove regulatory barriers and support technological advancement to ensure equitable benefits from GVC integration across the EU. |
| Keywords: | Global value chains, EU, Local projections, Unemployment |
| Date: | 2025–08–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05474157 |
| By: | Pierre Cotterlaz (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Guillaume Gaulier (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, Centre de recherche de la Banque de France - Banque de France); Aude Sztulman (DIAL - Développement, institutions et analyses de long terme, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique); Deniz Ünal (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, UP1 - Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | The intensity of global value chains can be proxied by the share of intermediate goods in world trade. This indicator is however affected by price effects, which were particularly strong during the recent inflation episode of the early 2020s. To neutralize these price effects, we compute price deflators by production stage, obtaining series of trade in volume. The deflated series reveal that the share of intermediate goods in world trade is relatively stable since the early 2000s. If anything, trade in parts and components, a key feature of global value chains, seems slightly more dynamic than other production stages. Our results further show that parts and components, as well as capital goods, experienced the fastest trend growth between 2000 and 2023, while primary goods lagged behind. Finally, trade volumes appear strongly procyclical overall, except for primary goods, which display no significant correlation with the global output gap. |
| Keywords: | Globalization, Global value chains, International trade in volume, Intermediate goods, Production stages, Parts and components |
| Date: | 2026–02–04 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-05492525 |
| By: | Adam Jakubik; Yuting Wei |
| Abstract: | This paper investigates the implications of trade policy uncertainty (TPU) in the United States for current account balance (CAB) dynamics, given renewed interest in pursuing trade policy measures to address persistent current account deficits. We examine whether TPU, a distinct source of policy uncertainty and separate from enacted tariff and non-tariff measures, can influence aggregate macroeconmic outcomes. Using a local projection framework that controls for domestic and global macroeconomic factors and enacted trade policy changes, we find that TPU shocks generate a statistically significant but transitory positive effect on the CAB, primarily through a sharper contraction in imports relative to exports, with durable goods relatively more affected. From a savings and investment perspective, TPU raises precautionary savings in the private sector and modestly depresses investment. This is primarily driven by government investment and partially offset by private investment, particularly in high-tech sectors. Bilateral trade effects are heterogenous across different groups of trading partners: geopolitical distance and closer GVC and FDI linkages imply larger declines. Our findings suggest that while TPU can momentarily shift external balances, it does not deliver sustained improvements, highlighting the importance of transparent and predictable trade policy frameworks that mitigate costly uncertainty and avoid unintended macroeconomic distortions. Our findings also imply that econometric analyses of the CAB effects of trade policy should control for uncertainty in order to avoid spurious correlations. |
| Keywords: | Trade Policy Uncertainty; Current Account Balance |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/017 |
| By: | Andrew Greenland; James Lake; John Lopresti |
| Abstract: | Against a backdrop of sharply rising inequality, the Tokyo Round of the GATT resulted in a 1.6 percentage point reduction in average US tariffs – larger than CUSFTA, NAFTA, and the liberalization accompanying the granting of PNTR to China. We construct a novel IV based on the so-called “Swiss formula” that governed the Tokyo Round tariff liberalization to provide evidence of its effects on imports and inequality. Instrumented tariff reductions explain approximately 20% of the rise in income inequality between non-production and production workers between 1979 and 1988. This effect is largest among women, workers in routine occupations, and workers in more technology-intensive industries, suggesting a complementarity between trade liberalization and skill-biased technological change. |
| JEL: | F13 F14 F66 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34785 |
| By: | Jason Lu; Dimitre Milkov |
| Abstract: | A striking feature of US-China trade tensions in mid-2025 is China’s acceleration of exports to the US ahead of new tariff increases, a phenomenon we term export frontloading. To understand how this was achieved, we develop a factor model analytical framework to characterize China’s product-level exports, across time and destinations, according to a set of latent export baskets. Applying this to data from China’s General Administration of Customs, we document the channels behind the 2024-25 episode and compare them with the 2018 US-China trade tensions. Our analysis points to broad-based adjustments across multiple dimensions in a manner not observed in 2018: (i) shipments to the US accelerated in the second half of 2024, possibly supported by the retention of intermediate inputs that facilitated a ramp-up in domestic production; (ii) from January 2025, domestic production slowed and shipments of intermediate inputs to Vietnam and other ASEAN economies accelerated, consistent with the relocation of export-oriented manufacturing following US tariffs; (iii) exporters prioritized shipments to the US through March 2025, reallocating flows away from third destinations with similar export profiles; and (iv) as shipments to the US fell sharply in April-May amid the escalation of reciprocal tariffs, the decline was offset by increased shipments to third destinations consistent with fulfilling previously deferred orders. |
| Keywords: | Export Frontloading; Trade Tariffs; Production Relocation |
| Date: | 2026–01–23 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/013 |
| By: | Mazen Fathy (Egypt Impact Lab); Chahir Zaki (Laboratoire d’Economie d’Orleans) |
| Abstract: | Despite rising levels of Global Value Chains (GVC) integration in several emerging and developing economies, the latter failed to experience a significant structural change. Thus, this paper examines how participating in global supply chains can have implications on labor reallocation in the economy, and to what extent technological advances can alter this effect. To do that, we use the EORA database and calculate structural change variables. Moreover, we control for the endogeneity between these two variables. Our main findings show that overall, global value chains participation has an insignificant effect on structural change. This result holds for different measures of GVC (backward and forward) and of structural change (static and dynamic). Several mechanisms explain the missing link between GVC and structural change, namely their inability to create enough jobs, the increase in capital intensive industries, the dominance of natural resources and the skill bias technological change. |
| Date: | 2025–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1778 |
| By: | Matyas, Laszlo; Konya, Laszlo; Harris, Mark N. |
| Abstract: | The gravity model has long been used for modelling and predicting trade flows. This paper generalises the gravity model allowing for proper representation of local and target country effects and also the business cycle(s). The new approach is based on a panel data framework (instead of a simple cross sectional or times series approach) where the additional information available from using both types of data is utilised to properly model all the specific effects. The model is then estimated for a panel of APEC countries. |
| Keywords: | International Relations/Trade, Research and Development/Tech Change/Emerging Technologies |
| URL: | https://d.repec.org/n?u=RePEc:ags:monebs:267923 |
| By: | Yoshimichi Murakami (Research Institute for Economics and Business Administration, Kobe University, JAPAN) |
| Abstract: | Although upstream positions in GVCs are expected to expand unskilled-intensive activities and reduce wage inequality in developing countries, empirical studies based on cross-country analysis have largely failed to provide evidence supporting the theoretical prediction. Employing exogenous industry-level variations and combining industry-level GVC indicators with plant-level detailed panel data, this study empirically analyzes whether upstream positions in GVCs are negatively associated with skilled labor wage share in Chile from 1995 to 2006. The results revealed that upstream positions in GVC were negatively associated with skilled labor wage share, indicating that upstream activities are related to unskilled- intensive tasks, as expected. Although the upstream positions were positively associated with skilled labor wage share in highly technological-intensive plants, the number of such plants was very limited. The findings were robust to the exclusion of affiliates with changing their industry affiliations and control for the persistent effect of the dependent variable and endogeneity of plant-level variables. Additionally, we found that the negative effects of the upstream positions in GVCs are primarily derived from plants operating in industries that were initially located in downstream position and shifted towards upstream position. |
| Keywords: | Global value chains; Upstream positions; Wage inequality; Chile |
| JEL: | D24 F14 F16 F66 J31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2026-04 |
| By: | Alan Wm. Wolff (Peterson Institute for International Economics) |
| Abstract: | The Trump administration's trade team has vowed to employ alternative legal strategies to keep its high tariff wall in place if the Supreme Court invalidates President Trump's sweeping "reciprocal tariffs" by striking down his use of the International Emergency Economic Powers Act (IEEPA) to impose them. Wolff reviews the four possible tariff statutes that could be invoked-- Sections 122, 338, 301, and 232--but they have major limitations. Each is either narrow, temporary, or specific, compared with IEEPA, and cannot be used to recreate Trump's across-the-board tariff wall. Key Takeaways The administration's next moves will depend on how the Supreme Court defines the president's "emergency" powers to impose tariffs. Tariffs imposed under section 122 have to be justified by a serious balance of payments problem and expire after 150 days unless Congress extends them. Section 338 has not been invoked in 100 years and requires strong proof of discrimination against American goods. Two other familiar statutes can be used only selectively but require findings of unfair foreign trade practices (section 301) or threats to national security (section 232). |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:iie:pbrief:pb26-5 |
| By: | Mohammad Reza Farzanegan (Philipps-Universität Marburg); Jerg Gutmann (University of Hamburg) |
| Abstract: | This study investigates the case of Iran to evaluate how changes in the intensity of international sanctions affect internal conflict in the target country. Estimating a vector autoregressive model for the period between 2001q2 and 2020q3, we find that an increase in sanction intensity causes an increase in both civil disorder and terrorism risk. In contrast, the risk of civil war declines after an increase in sanction intensity. These findings for Iran are consistent with our theoretical predictions and indicate that higher intensity sanctions against a stable autocracy with high repression capacity allow sender country governments to put pressure on a political regime without risking an outbreak of major violent conflicts. Therefore, more intensive sanctions may also not be helpful in inducing violent regime change in such countries. |
| Date: | 2025–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1786 |
| By: | Mary Amiti; Christopher Flanagan; Sebastian Heise; David E. Weinstein |
| Abstract: | Over the course of 2025, the average tariff rate on U.S. imports increased from 2.6 to 13 percent. In this blog post, we ask how much of the tariffs were paid by the U.S., using import data through November 2025. We find that nearly 90 percent of the tariffs’ economic burden fell on U.S. firms and consumers. |
| Keywords: | tariffs; import prices |
| JEL: | F1 |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:102432 |
| By: | R. LAFROGNE-JOUSSIER (INSEE) |
| Abstract: | To reduce their exposure to supply-chain risk, firms commonly rely on two strategies: input stockpiling and diversification of supply sources. This paper presents new evidence on how French manufacturing firms used inventories and diversified their country-specific supply risks between 2012 and 2023. The use of these strategies varies widely: large firms are generally more diversified and maintain lower inventories relative to smaller firms. Overall, firms that diversify more tend to stockpile less, even conditional on firm size. Diversification is also linked to lower import volatility. Together, these patterns suggest that inventories act as a buffer when firms are unable to reduce risk through diversification. These insights matter for assessing trade vulnerabilities: products sourced from few countries may appear exposed to risk, yet in practice they are often imported by firms holding large stocks. Accounting for inventories can halve the number of products considered highly vulnerable. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:nse:doctra:2025-22 |
| By: | Jean-Marie Baland (Development Finance and Public Policies, University of Namur); Cédric Duprez (National Bank of Belgium); Wouter Gelade (Economics and Research Department, National Bank of Belgium, University of Mons); François Woitrin (Development Finance and Public Policies, University of Namur) |
| Abstract: | In this paper, we develop a model of North-South trade to investigate the impact of Fair Trade. In the absence of a label, Southern producers are exploited by monopsonisitic traders who export to Northern markets. The Fair Trade label, given to some existing traders, certifies the adoption of high labour standards or the payment of fair prices to producers in the South.We first show that such a label is never Pareto improving: the welfare of unlabeled and some label led producers in the South falls while the welfare of Northern consumers increases. An expansion of Fair Trade tends to exacerbate those effects. We also show that the consequences of fair trade are systematically dampened in environments where traders enjoy more market power. We also explore an alternative setting in which new Fair Trade cooperatives are introduced alongside private traders. The cooperatives maximize the welfare of the producers they trade with. We show that our main results also apply in this context. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nam:defipp:2602 |
| By: | Mohammad Reza Farzanegan (Philipps-Universität Marburg, Germany); Nader Habibi (Brandeis University, Waltham) |
| Abstract: | This study examines the impact of international economic sanctions, imposed on Iran due to its nuclear program, on the development of the middle class. Specifically, it investigates how the middle class in Iran would have developed in the absence of these sanctions post-2012. To address this question, we employ a synthetic control model to create a counterfactual scenario for Iran, using a weighted average of other comparable countries that mirror pre-2012 Iran, but did not experience significant international sanctions. By comparing the size of the middle class in this counterfactual Iran with the actual Iran that faced major economic sanctions, our results indicate that the annual middle-class size would have been approximately 11 percentage points larger, on average, without the post-2012 sanctions. Our findings are robust across various tests, including placebo tests and synthetic difference-in-difference analyses. The latter analysis shows that the estimated average effect of sanctions on the middle-class size of Iran from 2012 to 2019 is highly statistically significant. Finally, we provide evidence on the relevance of real GDP per capita, merchandise imports and exports, investment, industry value added, informal and vulnerable employment as key selected channels through which sanctions negatively affect the size of the middle class. |
| Date: | 2025–07–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1782 |
| By: | Rocco Macchiavello (LSE); Josepa Miquel Florensa (Toulouse School of Economics.); Nicolás de Roux (Universidad de los Andes); Eric Verhoogen (Columbia University); Mario Bernasconi (University of Basel); Patrick Farrell (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 highquality 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, both the lack of pass-through of quality premia under normal circumstances and the possibility of a buyer-driven solution through a vertical restraint. Calibration of the model suggests that one-third to two-thirds of the (substantial) gains from the program accrue to farmers, with the vertical restraint playing a critical role. 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: | Quality Upgrading, Relational Contracts, Vertical Restraints, Buyer-Driven Voluntary Standards |
| JEL: | O12 F61 L23 Q12 Q13 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:022173 |