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on International Trade |
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Issue of 2026–06–22
twenty-one papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Barthélémy Bonadio; Andrei A. Levchenko; Nitya Pandalai-Nayar |
| Abstract: | This paper quantitatively evaluates other countries' optimal tariffs and the prospects of sustaining international trade cooperation when a large player—the United States—exits the cooperative trade regime. To guide the analysis, we rely on an analytical characterization of the optimal tariff in a simplified multi-country trade model with endogenous labor supply. A country's optimal import tariffs are a function of its trade partners' expenditure shares on its goods, and the trade and labor supply elasticities. In both the simplified model and the full quantitative multi-country, multi-sector global network model, the impact of the US withdrawal from free trade on other countries' optimal tariffs and the sustainability of the cooperative trade regime is minimal. This is because quantitatively, the key determinants of these objects—domestic and international trade shares of other countries—change little from the US withdrawal. This main finding is not sensitive to the trade or labor supply elasticities. Thus, the fall of the US free trade domino is unlikely to cause further dominoes to fall. |
| JEL: | F02 F13 F55 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35303 |
| By: | Xiao Ma; Zi Wang; Xiaodong Zhu |
| Abstract: | We develop a dynamic multi-country trade model with trade-related technology diffusion and endogenous R&D to quantify the impacts of trade policies and trade wars on innovation, technology rivalry, and welfare. We estimate the model using data on trade and patent citations and validate it in the context of U.S. export controls on China. Counterfactual analysis yields three main results. First, U.S. export controls on China reduce technological progress in both countries: China experiences a sharp contraction in knowledge inflows, while the U.S. faces a decline in R&D. Second, trade-driven diffusion and endogenous innovation substantially amplify the technological and welfare gains in the U.S. and losses in other major economies from the 2025 Liberation Day tariffs. Third, U.S. optimal tariffs on China, under varying geopolitical concerns, reflect a trade-off between curbing technology diffusion to China and sustaining U.S. innovation. |
| Keywords: | Trade-related Technology Diffusion; Innovation; Endogenous Growth Model; Trade War; Optimal tariffs |
| JEL: | F12 F13 F14 O31 O33 |
| Date: | 2026–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-824 |
| By: | Pierluigi Murro; Valentina Peruzzi |
| Abstract: | This paper examines whether judicial enforcement shapes firms' participation in global value chains (GVCs). Exploiting Italy's 2013 court reorganization as a natural experiment, we combine firm-level survey data with administrative records and implement a spatial discontinuity IV design. We find that longer trials significantly reduce the probability of GVC participation: even delays of just a few weeks in civil proceedings translate into sizeable declines, underscoring the economic value of timely enforcement. The effect is concentrated among downstream firms and in trade with advanced markets, and operates through external finance, product complexity, and firm opacity. |
| Keywords: | Global value chains, Judicial enforcement, Regional development, Product complexity |
| JEL: | F10 F61 K41 R11 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00190 |
| By: | Paweł R. Galiński (Narodowy Bank Polski; SGH Warsaw School of Economics); Jakub Mućk (Narodowy Bank Polski; SGH Warsaw School of Economics) |
| Abstract: | This paper introduces a novel Bayesian SVAR framework to identify the short-run drivers of export fluctuations across 18 EU economies, focusing on transmission through Global Value Chains (GVCs). By applying shock identification via sign restrictions within a hierarchical block exogeneity structure (domestic, foreign, and global), we offer four key insights. First, we show that while the Great Trade Collapse was primarily driven by global demand and uncertainty, the COVID-19 crisis involved a complex confluence of non-domestic demand and supply shocks. Second, tight integration within European production networks does not shield these economies from global structural shocks, which remain the primary drivers of export variance. Third, we provide evidence that trade openness and participation in investment-specific GVCs heighten the sensitivity of domestic exports to global shocks, particularly through cost-push mechanisms in backward linkages, while shorter GVC forward linkages tend to reduce this exposure. |
| Keywords: | structural VAR, exports, sign restrictions, Global Value Chains |
| JEL: | C32 F14 F15 F43 F60 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:nbp:nbpmis:387 |
| By: | Shoumitro Chatterjee; Arvind Subramanian |
| Abstract: | China's resurgent trade surplus has revived concern in the United States and Europe, but its development consequences for low and middle income (LMIC) countries remain underappreciated. This paper documents a "China Squeeze": the compression of industrialization space available to poorer economies in labor-intensive manufacturing. Using gross trade, value-added exports, historical benchmarks, and labor-endowment comparisons, we show that China, despite becoming richer and moving up the technology value chain, continues to occupy a historically unusual share of global low-skill export markets, especially once value added embedded across supply chains is counted. We estimate this squeeze at hundreds of billions of dollars of foregone valued added exports in labor-intensive manufacturing in LMICs. The squeeze also operates through rising Chinese import competition in LMIC domestic markets and through China's limited absorption of low-skill imports from poorer countries. We then ask whether this dominance reflects unusual productivity performance or policy distortions. Although definitive micro evidence is unavailable, macro indicators on wages, productivity, and exchange-rate policy suggest distortions, especially an undervalued renminbi, may have played a role. The central concern is developmental: China's export strength may foreclose industrialization pathways for poorer countries. |
| Keywords: | export competition, low- and middle-income countries, industrialization, low-skill manufacturing, value-added trade, China shock, exchange-rate policy |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdc:wpaper:432 |
| By: | Gregory Casey; Kyle C. Meng; Ivan Rudik |
| Abstract: | Carbon import tariffs, traditionally considered a complement to domestic climate policy, are increasingly proposed as standalone policies. We build a quantitative trade model to compare U.S. carbon tariffs with and without a domestic carbon tax, each applied to a set of carbon-intensive, trade-exposed sectors. We find three main results. First, a U.S. carbon tariff increases U.S. emissions, lowers foreign emissions, and on net achieves half the global emissions reductions of the combined policy, which lowers both U.S. and foreign emissions. Second, both approaches increase U.S. GDP and welfare, but the combined policy has a larger effect due to terms of trade improvements. Third, global emissions reductions from multilateral tariff-only agreements are modest and do not increase monotonically with greater membership, whereas under combined policies they scale considerably with membership. |
| JEL: | F18 H23 Q5 Q58 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35307 |
| By: | Shekhar Aiyar (Indian Council for Research on International Economic Relations (ICRIER)); Franziska Ohnsorge; Hakan Yilmazkuday |
| Abstract: | Geoeconomic fragmentation—the phenomenon of international transactions being increasingly restricted to politically aligned partners-creates risks for individual countries but also opportunities that some hope to seize by becoming "connector" countries. We modify a standard trade model by introducing iceberg costs that increase with geopolitical distance between country pairs. The response of per capita consumption to a geopolitical shock is shown to depend on two related but distinct indices: vulnerability, which is a country's transaction-weighted geopolitical distance from its trade partners, and connectedness, which is a country's transaction-weighted standard deviation of geopolitical distance from trade partners. The latter captures a country's geopolitical diversification. We distinguish between this type of "horizontal" connectedness and the supply chain-related "vertical" connectedness discussed by previous authors, arguing that the horizontal measure is more relevant in a geoeconomically fragmenting world. We construct a comprehensive database to examine geoeconomic vulnerability and connectedness across multiple types of international transactions, documenting several stylized facts. |
| Keywords: | geoeconomic fragmentation, geopolitics, economic vulnerability, database, trade, international lending, foreign direct investment, FDI, portfolio investment, BIS-reporting banks, icrier |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bdc:wpaper:430 |
| By: | Holger Breinlich (University of Surrey); Valentina Corradi (NYU Abu Dhabi); Nadia Rocha (Inter American Development Bank); Michele Ruta (International Monetary Fund); J.M.C. Santos Silva (University of Surrey); Tom Zylkin (University of Richmond) |
| Abstract: | Modern trade agreements contain a large number of provisions besides tari¤ reductions, in areas as diverse as services trade, competition policy, trade-related investment measures, or public procurement. Existing research has struggled with over…tting and severe multicollinearity when trying to estimate the e¤ects of these provisions on trade ‡ows. In this paper, we build on recent developments in the machine learning and variable selection literature to develop data-driven methods for selecting the most important provisions and quantifying their impact on trade ‡ows and apply them to a recent database with highly detailed information on the provisions included in trade agreements. We …nd that provisions related to technical barriers to trade, antidumping, competition policy, subsidies, trade facilitation, sanitary and phytosanitary measures, and export taxes are associated with enhancing the trade-increasing e¤ects of trade agreements. Interestingly, we …nd that the majority of the 305 provision variables in our data have no measurable impact on goods trade, including virtually all provisions that fall within commonly included policy areas such as services, labor markets, and public procurement. |
| JEL: | F14 F15 F17 C52 C55 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:sur:surrec:0426 |
| By: | Kris James Mitchener; Mathieu Pedemonte |
| Abstract: | Using newly digitized monthly data on the quantities and prices of imports as well as product-level data on tariff rates, we estimate that in the first year after the passage of the Smoot-Hawley Tariff Act, imports facing rate increases fell swiftly and dramatically relative to imports not affected by tariffs: for a one-percentage-point increase in the tariff rate, they declined by an average of 4%. We also estimate that the incidence of Smoot-Hawley was almost entirely borne by U.S. importers. Using an open-economy model, we attribute our high measured short-run trade elasticity of greater than 4 to fixed exchange rates that the U.S. maintained with most trade partners in the first 15 months after enactment. Our model also suggests that Smoot-Hawley accounted for 27% of the decline in total US imports in the first year after enactment. Finally, we construct both partial equilibrium and general equilibrium welfare estimates of Smoot-Hawley. Both methods deliver welfare losses of about 0.2% of GDP, reflecting the high measured elasticity of substitution and low US import-GDP ratio. |
| JEL: | F10 F13 F14 F63 F68 N12 N72 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35249 |
| By: | Rolando Avendano (Asian Development Bank); Emily Blanchard (Dartmouth College); William Olney (Williams College); Amelia Santos Paulino (United Nations Conference on Trade and Development); Claudia Trentini (United Nations Conference on Trade and Development) |
| Abstract: | This paper examines how global greenfield foreign direct investment (FDI) flows are evolving amid rising geoeconomic fragmentation. We use difference-in-differences and event study approaches to analyze changes in FDI around key bilateral inflection points. We find a decline in FDI from the US and broader Group of Seven Plus (G7+) into the PRC, concentrated in trade-exposed, efficiency-seeking sectors. Investment diversion—particularly from the PRC to Association of Southeast Asian Nations (ASEAN) members and Latin America—is evident, but this growth was concentrated in less global value chain (GVC)-integrated activities, suggesting that GVC links may act as a constraint on investment relocation. These findings suggest that while tensions may be reshaping global investment, GVC dependencies are likely limiting firms’ ability to reallocate production at scale, making the “great reallocation” least evident where it was most expected. |
| Keywords: | FDI;tensions;global value chains;globalization;reallocation |
| JEL: | F21 F23 L23 C23 |
| Date: | 2026–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:022699 |
| By: | Markkanen, Jaakko; Siikanen, Markku; Valmari, Nelli |
| Abstract: | Abstract A country that cannot devalue its currency can still cut its exporters’ costs through industrial policy and steal business from foreign rivals. We call this beggar-thy-neighbor by other means and measure it for Finland’s 2017–2019 internal devaluation policy. We estimate the export demand for nine large manufacturing industries, together accounting for roughly 4 percent of Finnish GDP, using a BLP-style demand model and a sufficient-statistic identity for cost incidence. We document super-pass-through to export prices, averaging about 1.18, above the CES gravity ceiling. The realized policy cut labor costs by 3.6 percent and raised Finnish export revenue by €239.0 million over 2017–2020, 0.6 percent of baseline. A more ambitious original government proposal with 5 percent cost decrease would have shifted €567.8 million in revenue away from rival exporters in the same destinations. A hypothetical four-day work week would have cost €2.4 billion with wage costs rising 28 percent. Internal devaluation captures export-market share from foreign rivals. The cross-border revenue transfer is comparable in magnitude to the domestic gains. |
| Keywords: | International trade, Markups, Pass-through, Industrial policy, Internal devaluation |
| JEL: | F12 F14 L11 L13 L52 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:141 |
| By: | Gabor Bekes; Matyas Molnar; Claudia Steinwender |
| Abstract: | Search and matching frictions prevent firms from forming international trade linkages. Despite trade fairs being a common and often subsidized tool to overcome these frictions, we lack causal evidence on how they facilitate link formation. We exploit a unique feature of Hungarian firms' participation in the 1900 Paris World Exhibition, where a trial exhibition revealed firms' ex-ante export potential category to develop a novel bounding strategy that compares treated firms to control groups from "above" and "below" in export potential. To implement our empirical strategy, we constructed a novel panel dataset of approximately 3, 600 Hungarian manufacturing firms for the 1896-1906 period by digitizing, parsing and linking over 12, 000 records across eleven historical sources, including exhibition catalogs, government surveys, commercial directories, official gazettes and patenting directories. We find that participation increases export probability by 4-10 percentage points, patenting probability by 4-6 percentage points and employment by 16-23% over eight years. Effects are larger when firms face fewer domestic competitors and more potential international buyers. This highlights both matching benefits and congestion effects when search and matching frictions are reduced. |
| Keywords: | buyer-supplier links, export promotion, trade fairs, search frictions, industrial policy, economic history |
| Date: | 2026–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2192 |
| By: | Kleifgen, Eva (Institute for Employment Research (IAB), Nuremberg); Roth, Duncan (Institute for Employment Research (IAB), Nuremberg); Stepanok, Ignat (Institute for Employment Research (IAB), Nuremberg) |
| Abstract: | The COVID-19 pandemic has caused major disruptions in international trade and has raised concerns about adverse effects on international supply chains. Using a unique establishment survey matched with administrative data from Germany, we provide novel evidence on how establishments have adjusted their supply chains in response to pandemic-induced disruptions. We find that establishments that experienced difficulties in obtaining intermediate inputs as a result of the pandemic are significantly more likely to change their network of suppliers than establishments without such problems, especially if disruptions affected imports from abroad. Establishments experiencing supply chain difficulties are more likely to replace a distant with a closer supplier. However, these adjustments in response to the pandemic appear to be temporary. |
| Keywords: | COVID-19 pandemic, establishments, supply chains, imports, Germany, intermediate inputs |
| JEL: | D22 F14 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18669 |
| By: | Megumi NAOI; Banri ITO; Naoto JINJI |
| Abstract: | Rising geopolitical tensions have led governments to restrict trade and investment under economic security justifications. While these restrictions are costly for firms, opposition to protectionism is not universal among them. Why? We demonstrate a demand-side mechanism in which geopolitical tensions increase global firms’ demand for government restrictions to coordinate and facilitate collective adjustment of supply chains. We predict that firms facing higher supply chain coordination costs are more likely to support restrictive economic security policies and test this prediction using an original survey of Japanese manufacturing firms merged with confidential microdata documenting supply chains. The results suggest that firms with deeper integration into global supply chains are more likely to support government restrictions, especially among firms with overseas contract manufacturing and a high number of affiliates in China. Global firms may demand government intervention due to the social costs of supply chain adjustments. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26049 |
| By: | Joshua Aizenman; Hiro Ito; Jamel Saadaoui |
| Abstract: | This paper asks why openness has been such a strong catalyst for catch-up growth in some regions or countries, while in others openness has been followed by stalled convergence, divergence, or stagnation. We conclude that “openness” in today’s geoeconomically fragmented world is much more than trade intensity or trade integration. Positioning in trade networks, trade fundamentals, human capital, institutional capacity and stability matters for the potential for trade-induced productivity gains. We explore the global heterogeneity across continents between 1960 and 2024, unbalanced panel of up to 145 economies per year and estimate a growth equation using a dynamic approach for countries and years. We build a baseline equation relating real GDP growth to lagged income and growth. We complement the traditional drivers of growth by contorting for positionings variables the world economy: a proxy for economic integration measuring the number of regional trade arrangements ratified by each economy, a commodity dependence indicator; metrics related to export networks geoeconomic vulnerability (GeoV). measure country’s export position with geopolitically distant partnerships; geoeconomic connectivity (GeoC) measuring the degree that trade relationships are across greater spectrum of geopolitics. The GeoC measures external “connectors” positioning that may counterbalance costs of geoeconomic fragmentation by securing access to greeter variety of markets and resources. Notably, the Geoeconomic linkages add an important element of “positioning, ” indicating that the more “geopolitically” connected is a country, the greater are the investment-growth links. A greater diverse positioning of countries’ economies improves their capacity to transform investment into output in a more diversified setting. This also indicate a lesser dependent growth on “momentum” by countries’ economy, pointing to a greater shock-absorption capacity, confirming the benefits of diversified structure for growth from investments facing pressures from fragmentation. |
| JEL: | F42 F50 F52 F63 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35242 |
| By: | Bekkers, Eddy; Jhunjhunwala, Kirti |
| Abstract: | In a simple partial equilibrium setting without externalities industrial subsidies promote manufacturing output in the subsidizing region but harm welfare, whereas spillover effects to welfare in other regions are positive if the country is large. In a general equilibrium model instead the welfare effects are ambiguous, because of pre-existing distortions and general equilibrium terms of trade effects. The aim of this paper is to analyse the welfare and spillover effects of industrial subsidies in a standard general equilibrium quantitative trade model with multiple sectors and intermediate linkages without externalities and profits by exploring counterfactual experiments of the introduction of manufacturing output subsidies. The analysis generates four main findings: (1) welfare falls in most regions raising industrial subsidies except for regions where pre-existing distortions fall sufficiently or where terms of trade rise in other sectors (services); (2) welfare in non-subsidizing regions rises for most regions with variation in these welfare cross-border spillover effects driven by the strength of four effects: an output competition effect, an input competition effects, a downstream effect, an upstream effect; (3) subsidy wars between two global stylized blocs of economies can result in excessively high subsidy rates that are globally inefficient, with outcomes depending on the weight placed on expanding their manufacturing sectors relative to real income; (4) raising industrial subsidies in all regions together has a positive impact on many regions and a negative impact on a relatively small set of regions with the highest initial share of output in manufacturing. However, in the long run welfare can be adversely affected in all regions if there would be positive externalities from specializing in sophisticated sectors, since the upstream effects pull resources out of the sophisticated sectors. |
| Keywords: | Subsidies, Industrial Policy, Spillover effects, General equilibrium |
| JEL: | H23 L52 C68 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wtowps:341428 |
| By: | Brezis, Elise |
| Abstract: | The historical record of the past 350 years reveals recurrent cycles in the international distribution of power: periods of hegemonic leadership, in which a dominant state shapes the international order, alternate with periods of balance-of-power rivalry, when no single state is preeminent and major powers compete on more equal terms. Trade policy also follows a cyclical pattern, with phases of liberalization giving way to periods of protectionism. This paper examines the relationship between these two cycles, and analyzes how the international power structure changes the optimal trade regime.. It argues that hegemonic periods, such as 1870–1910 and 1945–2015, are more conducive to free trade, because the hegemon provides security guarantees, access to markets, and institutional linkages that reduce the risks of liberalization and increase the benefits of openness. By contrast, during balance-of-power periods, such as 1910–1945 and the period since 2015, intensified rivalry among great powers strengthens nationalism, heightens concerns over sovereignty, and encourages protectionist policies. The paper proposes an explanation for this correlation grounded in theories of national identity and sovereignty. More broadly, it shows that shifts in the structure of the international system affect not only interstate relations but also domestic policy choices. The empirical analysis supports this argument: hegemonic eras are associated with waves of trade liberalization, whereas balance-of-power eras are linked to higher tariffs and a stronger turn toward protectionism. |
| Keywords: | Balance of Power, Geopolitics, Hegemony, National Sovereignty, Trade Policy, Free Trade, Protectionism, Social Identity. |
| JEL: | F40 F42 F52 N4 Z13 |
| Date: | 2026–04–28 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128967 |
| By: | Neuhoff, Karsten; Sato, Misato; Ballesteros, Fernanda; Böhringer, Christoph; Borghesi, Simone; Cosbey, Aaron; Deletombe, Thibault; Felsmann, Balázs; Ismer, Roland; Johnston, Angus; Linares, Pedro; Matikainen, Sini; Pauliuk, Stefan; Pirlot, Alice; Quirion, Philippe; Rosendahl, Knut Einar; Sniegocki, Aleksander; van Asselt, Harro; Zetterberg, Lars |
| Abstract: | The European Carbon Border Adjustment Mechanism (CBAM) has the dual objective of preventing carbon leakage and encouraging adoption of low-carbon technologies abroad. Yet, pursuing both objectives with the same mechanism results in incomplete carbon leakage protection unless global carbon prices converge. As the current geopolitical situation makes rapid convergence seem unlikely, an extension of free allowance allocation is being discussed for affected sectors. This would, however, mute most carbon pricing incentives and reduce carbon pricing revenues. This paper argues that until progress on global carbon pricing is reached, the CBAM should be reformed to use standardized values rather than production-specific emission intensities for materials with complex value chains. With the reform, emission trading with free allowances at benchmark level continues to provide the carbon price and incentives for conventional producers. To close the carbon pricing gap, a standardized liability per ton of material is included, independent of production process or location. It can be subject to established border adjustments along the full value chain, including export relief. Such a reform would not create direct incentives for climate-friendly material production and carbon pricing in third countries but would ensure carbon pricing incentives along the domestic value chain and carbon pricing revenue to fund climate action. This would enhance investment stability, support industrial transformation, and address carbon leakage risks in a fragmented global policy landscape. |
| JEL: | R14 J01 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138672 |
| By: | Kyriakos Drivas; Afroditi Anagnosti |
| Abstract: | Innovation and exports are closely related concepts that are frequently explored in the academic literature, particularly in the fields of economics, business strategy, and intellectual property management. The purpose of this paper is to explore these concepts via two complementary approaches. First, while the relationship between innovation and exports is well established, the specific contributions of different stages of innovation remain underexplored. We therefore use the principle of relatedness and examine how different stages of innovation—namely technology, market, and design activities—are related to export specialisation. The results show that technology- and market-related capabilities serve as key drivers of new export specialisation. Second, we conducted an in-depth survey of Greek inventors with the aim to identify the motives, challenges and opportunities they face throughout the complex process of patenting and valorisation. The study reveals significant differences in the patenting motivations of Greek inventors according to their affiliation. Independent inventors and university-affiliated researchers see patents primarily as tools for commercialisation, exploiting them through licensing or sales. In contrast, large companies focus on strategic patenting to protect products and block competitors. |
| Keywords: | Innovation, export, patents, inventors, motives to file IPRs |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:hel:greese:207 |
| By: | Markkanen, Jaakko; Siikanen, Markku; Valmari, Nelli |
| Abstract: | Abstract We assess what a four-day, 32-hour work week would cost Finland’s goods exports across nine large commodity markets. Absent a productivity gain that offsets the lost hours, it would cut export revenue substantially, by about €2.4 billion (-6.4%) over the sample period. In capital-intensive industries the cost increase could, at worst, push the least profitable producers out of the market. As a benchmark, we also assess the effects of Finland’s 2017–2019 Competitiveness Pact (kiky), which raised export revenue in these markets by about €239 million (+0.6%). The Sipilä government’s original, more ambitious package would have raised it even further, by roughly €442 million (+1.2%). |
| Keywords: | Four-day work week, Working time, Exports, Price competitiveness, Cost policy |
| JEL: | F12 F14 J22 L11 L52 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:184 |
| By: | Leo Feler; Sinem Hacioglu Hoke |
| Abstract: | This paper estimates the effects of the 2025 U.S. tariffs on household spending using transaction-level data linked to tariff exposure and a tariff sentiment survey. Comparing high versus low tariff-exposed categories, we find 15 to 20 percent price pass-through. At the mean increase in tariff exposure, prices rise by 1 to 2 percent while spending falls by roughly 4 percent. Survey evidence linking stated intentions to revealed behavior identifies a mechanism for the large spending response: reallocation toward essentials and trade-down within categories, concentrated among middle-income households with discretionary slack who express tariff concerns. Low-income households bear a disproportionate welfare burden through regressive pass-through. |
| Keywords: | consumption; trade policy; welfare economics; distribution (economics); consumer economics |
| JEL: | F13 D12 E31 |
| Date: | 2026–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:103379 |