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on International Trade |
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Issue of 2026–04–20
sixteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Ken ITAKURA; Yutaro KIMATA; Shujiro URATA |
| Abstract: | This study provides a quantitative evaluation of the economic impact of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest regional trade agreement. We adopt two methodological approaches. First, we conduct an ex post evaluation using a structural gravity model applied to panel data on bilateral trade in goods and services, inward foreign direct investment (FDI), and import tariffs. Second, we implement an ex ante analysis using a computable general equilibrium (CGE) model to simulate potential medium-term economic gains from deeper integration. Our ex post results indicate that RCEP has limited short-term effects on goods trade and inward FDI within the region. However, services trade shows clear gains, and the responsiveness of goods imports to tariffs has increased. Drawing on empirical estimates, the CGE analysis simulates a set of policy scenarios that include tariff reductions, reductions in non-tariff barriers (NTBs) in goods and services trade, and improved investment conditions. The simulation results show that deeper integration, particularly in NTB reductions and investment commitments, produces substantial economic benefits: by 2040, real GDP in RCEP increases by 1.5%, and economic welfare by 1.3%. These findings imply that realizing RCEP's full economic potential depends critically on progress in reducing NTBs and facilitating cross-border investment. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26029 |
| By: | Ernst, Anne; Hinterlang, Natascha; Jäger, Marius; Stähler, Nikolai |
| Abstract: | Since 2018, tariffs have re-emerged as a tool for protecting domestic economies, particularly in the US. This paper examines the macroeconomic and welfare effects of various import tariff scenarios using a four-region dynamic general equilibrium model with a multi-sectoral production network. The scenarios include unilateral US tariffs, coordinated US-EU tariffs, Chinese retaliation, Europe's non-participation, and sector-specific versus broad tariffs. Our results show that tariffs initially boost domestic value-added output by making local goods relatively cheaper. While consumption can increase permanently, the output benefits are short-lived. Increased production costs and reduced global income largely offset the output gains over time. Tariff-targeted countries have an incentive to retaliate, and when they do, these output/consumption gains do not materialize. As a result, welfare effects are negative. Regardless of direct involvement in tariff conflicts, the rest of the world suffers from reduced aggregate income. The effects of tariffs and strategic interac- tions depend on which sectors are subject to tariffs. Overall, tariffs appear to be an inefficient tool for economic protection due to the high probability of retaliation. |
| Keywords: | Tariffs, Trade Conflict, Protectionism, International Trade, DynamicGeneral Equilibrium Model, Production Network |
| JEL: | F12 F13 F40 D57 E27 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:340010 |
| By: | Andreas Baur; Lisandra Flach; Xabier Moriana-Armendariz |
| Abstract: | The protectionist trade policy of the second Trump administration poses a significant challenge to the European economy, hitting export-oriented manufacturing particularly hard. Against this backdrop, this study quantifies the economic potential of a new European free trade initiative (“Global Europe 2.0”) centered on new trade agreements with seven key trading partners: the Mercosur countries, India, the United Arab Emirates, Australia, Indonesia, Malaysia, and Thailand (the P7). Despite accounting for 13 percent of global merchandise imports, the P7's share in EU exports has stagnated over recent decades, pointing to untapped potential that new agreements could help unlock. Using the ifo Trade Model, a quantitative general equilibrium model, we simulate two scenarios: a baseline capturing the medium-term effects of current US tariff policy, and a scenario adding new EU–P7 trade agreements. We find that P7 agreements would more than offset the adverse effects of US protectionism, generating a net positive effect on EU economic activity. Depending on agreement depth, EU real GDP rises by 0.18 to 0.43 percent and total exports by 1.3 to 3.4 percent. Gains are broad-based across all 27 member states, and the turnaround is most striking for EU manufacturing. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpr:_57 |
| By: | Michael E. Waugh |
| Abstract: | This paper documents facts about international trade in AI-related products. I develop a large language model (LLM) classification tool that maps HS10 codes in U.S. trade data to products used in the construction and operation of AI infrastructure. AI-related products account for 23 percent of U.S. imports in 2025, and imports of these products have grown by 73 percent since 2023. Over the same period, imports of non-AI-related products have grown by only 3 percent, with the divergence between the two categories beginning in early 2024. Mexico is a key market on both the import and export side, and together with Taiwan these two countries account for about half of all U.S. trade in AI-related products. Trade policy has treated these products lightly with product-level exemptions shielding much of AI-related imports from tariffs. Absent the AI boom, a simple accounting exercise suggests that the U.S. goods trade deficit would have been nearly $200 billion smaller in 2025. |
| JEL: | F1 F40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35053 |
| By: | Ruben Gaetani; Gustavo de Souza; Martí Mestieri Ferrer |
| Abstract: | Long-run economic growth depends on the international diffusion of frontier technologies. Using Brazilian data, we identify a channel through which tariff cuts slow this diffusion: they weaken foreign firms' incentives to transfer technology to domestic producers. Exploiting variation in import tariffs across origin countries within narrowly defined industries, we find that tariff reductions lead to fewer technology transfers and fewer citations to foreign technology, with the largest declines occurring among firms located near previous technology recipients. To interpret these findings, we develop a growth model in which foreign firms choose between exporting goods and transferring technology, with learning from exports being less efficient than learning from transferred technologies, as informed by the empirical evidence. Trade liberalization shifts learning from transferred technologies to imported goods, raising welfare in the short run but slowing diffusion and productivity growth. An optimal subsidy to technology transfers substantially amplifies the welfare gains from trade liberalization. |
| Keywords: | growth, international trade, technology diffusion, technology transfer |
| JEL: | O33 O40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1572 |
| By: | Mario Larch; Leandro Navarro; Dennis Novy |
| Abstract: | International trade flows show strong persistence over time. Standard static gravity models cannot rationalize this persistence and lack a micro-foundation for including lagged trade flows as a determinant of current trade. We develop a structural dynamic gravity framework in which persistence arises from firms' sluggish adjustment of destination-specific prices, analogous to sticky prices in macroeconomics but operating at the bilateral level. The model delivers a gravity equation with lagged trade flows as a structural feature rather than an ad hoc add-on. We propose a novel estimation approach for dynamic gravity models that explicitly accounts for persistence. Empirically, we show that ignoring persistence can lead standard gravity estimates to substantially understate the effects of trade policy changes. As an application, we find that the estimated trade impact of regional trade agreements can increase by 30 percent or more once persistence is taken into account. |
| Keywords: | dynamic gravity, persistence, sluggish price adjustment, sticky prices, RTA, trade costs |
| JEL: | E31 F13 F14 F41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12599 |
| By: | Ina Simonovska; Michael E. Waugh |
| Abstract: | We consider five models of international trade that belong to the class of models in which the trade elasticity and domestic trade share are sufficient statistics for the welfare cost of autarky. Three are fixed-variety models featuring increasing micro-level margins of adjustment: versions of the Armington model, the Ricardian model, and its variable-markup counterpart. Two are endogenous-variety models featuring monopolistic competition: versions of the Krugman model and the Melitz model. For the three fixed-variety models, we show theoretically that, although they imply the same mapping from the trade elasticity to welfare, they imply different mappings from the trade elasticity to observed order statistics of price gaps of identical goods across countries. This result implies that choosing the parameter that governs the elasticity of trade to match the same order statistics in the data differentially impacts each model's measured welfare cost of autarky. We quantify these differences for all five models. |
| Keywords: | elasticity of trade, gravity, price dispersion, welfare gains |
| JEL: | F10 F11 F14 F17 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12597 |
| By: | Lea Karbevska; Liming Xu; Zehui Dai; Sara AlMahri; Alexandra Brintrup |
| Abstract: | As global political tensions rise and the anticipation of additional tariffs from the United States on international trade increases, the issues of economic independence and supply chain resilience become more prominent. The importance of supply chain resilience has been further underscored by disruptions caused by the COVID-19 pandemic and the ongoing war in Ukraine. In light of these challenges, ranging from geopolitical instability to product supply uncertainties, governments are increasingly focused on adopting new trade policies. This study explores the impact of several of these policies on the global electric vehicle (EV) supply chain network, with a particular focus on their effects on country clusters and the broader structure of international trade. Specifically, we analyse three key policies: Country Plus One, Friendshoring, and Reshoring. Our findings show that Friendshoring, contrary to expectations, leads to greater globalisation by increasing the number of supply links across friendly countries, potentially raising transaction costs. The Country Plus One policy similarly enhances network density through redundant links, while the Reshoring policy creates challenges in the EV sector due to the high number of irreplaceable products. Additionally, the effects of these policies vary across industries; for instance, mining goods being less affected in Country Plus One than the Friendshoring policy. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.11479 |
| By: | Pablo D. Fajgelbaum; Amit Khandelwal |
| Abstract: | In 2025, the U.S. raised average tariff duties from 2.4% to 9.6%, bringing protectionism to its highest level in eighty years. We explore the structure of these tariffs, estimate their short-run impacts, and summarize the growing literature on their effects. Across trade partners, the tariffs are correlated with trade deficits but not with geopolitical or strategic industrial goals, other than targeting China. In our baseline estimate, 90% of the tariffs are passed through to tariff-inclusive prices paid by U.S. importers. Incorporating the estimated price and trade responses into a static trade framework, we find an overall welfare impact ranging from a loss of 0.13% of GDP to a gain of 0.10%. These small net welfare impacts reflect sizable consumption losses roughly offset by income and revenue gains, with their sign hinging on whether U.S. terms-of-trade adjusted (on which the data are inconclusive). Among their stated rationales, the tariffs have been effective at raising federal revenue and diverting trade from China. However, it remains uncertain whether they will reduce the trade deficit, lower prices set by foreign exporters, promote manufacturing jobs, increase “friend-shoring” among aligned countries, or reshore key sectors; evidence from 2018-19 and 2025 indicators suggests a narrow path towards achieving these goals. |
| JEL: | F01 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35064 |
| By: | Elliott, M.; Jackson, M. O. |
| Abstract: | We introduce a parsimonious multi-sector model of international production and use it to study the impact of a disruption in the production of some goods propagates to other goods and consumers, and how that impact depends on the goods’ positions in, and overall structure of, the production network. We show that the short-run impact of a disruption can be dramatically larger than the long-run impact. The short-run disruption depends on the value of all of the final goods whose supply chains involve a disrupted good, while by contrast the long-run disruption depends only on the cost of the disrupted goods. We use the model to show how increased complexity of supply chains leads to increased fragility in terms of the probability and expected short-run size of a disruption. We also show how decreased transportation costs can lead to increased specialization in production, lowering the chances for disruption but increasing the impact conditional upon disruption. We use the model to characterize the power that a country has over others via diversions of its production as well as quotas on imports and exports. |
| Keywords: | Supply Chains, Globalization, Fragility, Production Networks, International Trade |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2625 |
| By: | Jeanne Astier; Geoffrey Barrows; Raphael Calel; Helene Ollivier; Hélène Ollivier |
| Abstract: | This paper presents a method for estimating treatment effects of local climate shocks when regions trade with each other. Because trade creates spillovers, comparing the change in outcomes of regions with different exposure to shocks leads to biased estimates. We model these between-region spillovers using standard assumptions from international trade theory, and develop a model-consistent strategy for estimating key parameters and deriving counterfactuals. We use our estimation strategy to revisit the literature on the impact of climate change on gross output. We find that accounting for trade spillovers yields substantially larger climate damage projections. |
| Keywords: | climate change, spillovers, trade, gravity |
| JEL: | Q48 L1 L5 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12602 |
| By: | Alishan Khan (Syracuse University) |
| Abstract: | This paper studies when financial sanctions induce BRICS countries to coordinate alternative trade settlement regimes. I develop a dynamic quantitative gravity framework in which countries trade under a dominant dollar-based settlement regime and face stochastic financial sanctions that raise the effective cost of dollar-settled transactions through payment-system frictions. Countries may instead coordinate on an alternative trade settlement arrangement that insulates intra-coalition trade from the sanctions wedge but entails scale-dependent network costs together with one-time switching costs and smaller return costs. Equilibrium wages, prices, and welfare are computed in an Eaton--Kortum general equilibrium, and forward-looking regime choice is determined by value iteration in a persistent sanctions environment. The model generates endogenous switching thresholds corresponding to economically meaningful trade-cost shocks, roughly equivalent to 20–25% reductions in trade under dollar settlement, together with coalition formation dynamics under collective and sequential arrangements. Quantitative results show that collective adoption becomes optimal at moderate sanctions intensity, while bilateral initiation typically requires higher sanctions because marginal costs remain elevated in small coalitions. The founding bilateral coalition is China--Russia, whose combined trade scale generates sufficient marginal cost compression to trigger an immediate cascade to the full BRICS bloc. Coordination frictions between the collective benchmark and the self-enforcing full-coalition threshold are small, and redistribution can sustain coordination over a somewhat wider range of sanctions intensities. Evaluated at current country-specific sanctions intensities, the model is consistent with the observed bilateral shift in China--Russia trade settlement while explaining the absence of switching among other BRICS pairs. The framework provides a tractable approach to studying trade coalitions and financial sanctions in a geoeconomic environment. |
| Keywords: | International Trade; Financial Sanctions; Trade Coalitions; BRICS; Geoeconomics |
| JEL: | F15 F51 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:drx:wpaper:202610 |
| By: | Crowley, M. A.; Palacios, M. D.; Faraglia, E.; Giannitsarou, C.; Havemeister, L. |
| Abstract: | Geopolitical uncertainty alters the incentives of firms to organise their corporate structure across borders, creating a distinct margin of adjustment in response to policy risk. We study this margin using the Brexit referendum as a quasi-natural experiment. We combine firm level data on parent-subsidiary links for UK and EU firms between 2011 and 2021 with measures of Brexit-related uncertainty and study changes in foreign subsidiary formation at the extensive margin. Following the referendum, there was an increase in the number of subsidiary formation from the UK into the EU, while the number of EU firms that expanded with subsidiaries into the UK dropped. UK firms establishing their first EU subsidiary after the referendum were systematically weaker ex ante than comparable firms that did so before the referendum. Increased Brexit-related uncertainty is associated with increased foreign subsidiary formation from the UK into the EU, driven primarily by small firms, alongside suggestive evidence of decreased domestic subsidiary incorporation by UK firms. We interpret these findings as evidence of a 'precautionary' foreign direct investment channel, operating through changes in the corporate structures of firms in response to geopolitical uncertainty. |
| Keywords: | Brexit, Foreign Subsidiary, Geopolitical Uncertainty, Parent Firm |
| JEL: | F21 F23 G32 F15 D22 |
| Date: | 2026–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2619 |
| By: | Chang Ma; Shang-Jin Wei |
| Abstract: | China's large current account surplus has been an irritant to its trading partners. While industrial and trade policies often lead to sector-level imbalances, they play a relatively limited role in the economy-wide surplus. Structural factors such as an unbalanced sex ratio and uneven access to financing by state-owned and non-state firms are more important determinants of the current account imbalance. While macroeconomic stimulus can boost imports and reduce the surplus in the short run, any long-term solution would need to involve reforms aiming at addressing the structural problems. |
| JEL: | F3 F4 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35056 |
| By: | Hiroshi IYETOMI; Yuta ARAI; Yuichi IKEDA |
| Abstract: | The ongoing geopolitical tensions between the United States and China are reshaping global production networks, particularly in the electronics industry, where East Asia serves as a central manufacturing hub. This study empirically examines Japan's position within the evolving East Asian electronics value chain using firm-level supply chain data. We construct a global supply chain network consisting of 15, 292 nodes (firms) and 27, 751 links (transactional relationships), centered on the electronics industry along with its two closely related sectors: the automotive and aerospace-defense industries. Our findings indicate that Japan continues to occupy an important upstream position, particularly in electronic components, manufacturing equipment, and precision instruments. However, a decline in the relative market share and network centrality of Japanese firms in the mainstream semiconductor industry suggests a departure from Japan's former dominance. In contrast, we identify a distinct automotive cluster in which Japanese firms remain highly competitive. The analysis also reveals an aerospace and defense community dominated by U.S. and European firms, characterized by limited participation from Japanese firms and the potential strategic exclusion of China. Furthermore, we uncover a separate cluster linking electronics, automation, and utilities, where Japanese firms play a prominent role with a 58% share. This cluster highlights a unique structural feature of industrial organization in Japan. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26025 |
| By: | Nigar Hashimzade; Haoran Sun |
| Abstract: | Industrial policy has returned to the centre of economic governance, particularly in the high-tech sectors where positive network externalities in demand make market dominance self-reinforcing. This paper studies the welfare effects of an industrial policy targeting a sector with network externalities in a two-country model with strategic trade and R&D investment. We show how the welfare consequences of this policy are determined by the interaction between the strength of the externality, the type of R&D, and the degree of product differentiation between the home and the imported goods. When externalities are weak or the goods are close substitutes, the business-stealing effect produces a race to the bottom that dissipates more surplus than it creates. Under sufficiently strong externalities and weak substitutability or complementarity of the goods, industrial policy competition can make both countries simultaneously better off compared to the laissez-faire outcome because of the mutual business-enhancement effect. The case is stronger for the product innovation than for the process innovation, as the former directly affects the demand and triggers a stronger network effect than the latter which operates indirectly through the supply. Thus, network externalities create an opportunity for win-win industrial policies, but its realisation depends on the market structure and the nature of innovation. |
| Keywords: | industrial policy, network externalities, R&D subsidies, strategic trade, Cournot competition |
| JEL: | F13 H25 L13 O38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12592 |