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on International Trade |
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Issue of 2026–09–14
sixteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Harald Fadinger; Lei Li; Sophia Praetorius; Jan Schymik |
| Abstract: | We study how the U.S.–China trade war affected manufacturing activity in third countries using a novel plant-level dataset covering millions of establishments in 50 major economies, including affiliates of more than 200, 000 multinational enterprises (MNEs). Combining establishment-level data with detailed tariff information, we estimate the effects of U.S. and Chinese punitive bilateral output and input tariffs on sales, employment, and establishments across countries, industries, and stages of production. We find that third-country effects of the trade war are highly heterogeneous and largely offsetting, yielding moderately negative net effects overall. Most of the adjustment is driven by multinational enterprises reallocating activity across affiliate networks, while domestic firms respond much less. |
| Keywords: | Global value chains, firm location choice, multinational enterprise, trade policy, tariffs, tariff elasticity, upstreamness, downstreamness, output tariffs, input tariffs, third country effects of trade policy |
| JEL: | F13 F14 F23 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_776 |
| By: | Lucas Costa (Fondo Latinoamericano de Reservas - FLAR); Carlos Giraldo (Fondo Latinoamericano de Reservas - FLAR); Iader Giraldo-Salazar (Latin American Reserve Fund) |
| Abstract: | In this paper, a multidimensional index of geoeconomic fragmentation (geofragmentation) is developed, and its effects on international trade are examined. Using sixteen indicators spanning trade, finance, mobility, and political dimensions for 98 countries from 2000–2024, we estimate a bloc-restricted dynamic factor model that extracts a global fragmentation factor and four dimension-specific factors without imposing arbitrary weights. We then embed the index in a gravity model estimated via Poisson pseudomaximum likelihood on annual bilateral trade flows from 2000 to 2023, classifying countries into U.S.-aligned, China-aligned, and nonaligned blocs based on UN General Assembly voting patterns. We find that geofragmentation has increased steadily since the global financial crisis and is now approaching its post-September 11 peak. It significantly reduces bilateral trade, with interbloc flows contracting more than intrabloc flows do. However, nonaligned countries increase trade with both blocs during high-fragmentation episodes, likely acting as connectors that partially offset decoupling. These findings suggest that fragmentation is reconfiguring, rather than reversing, global economic integration. |
| Keywords: | Geoeconomic fragmentation; dynamic factor model; gravity model; geopolitical blocks |
| JEL: | F02 F51 F60 C33 F14 |
| Date: | 2026–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:col:000566:023576 |
| By: | Mary Amiti; Sebastian Heise; David E. Weinstein |
| Abstract: | Tariffs raise the prices of goods made at home, not just the imports they tax—an effect that standard pass-through estimates largely miss. Studying the 2025 U.S. tariffs, we find that about 26 percent of the tariff increase passes through to consumer prices. These estimates are measured relative to less-exposed goods and hold aggregate conditions fixed. The direct effect accounts for 64 percent of this increase, as tariffs raise the consumer prices of foreign varieties of a good. The remaining 36 percent arises indirectly—tariffs raise the cost of imported inputs used by U.S. producers, and domestic producers raise their markups because they face less competition from higher-priced imports. The direct effect passes through quickly, since tariffs raise import prices almost immediately, but the indirect effect takes nine to twelve months to work its way through supply chains. As a result, tariffs have a larger and more drawn-out impact on consumer prices than the direct effect alone would suggest. |
| Keywords: | tariffs; pass-through; inflation; consumer prices; import prices |
| JEL: | E31 F13 F14 |
| Date: | 2026–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:103701 |
| By: | Brandon Joel Tan |
| Abstract: | Whether exporters can take advantage of increases in foreign demand depends on the scalability of their input suppliers—that is, suppliers’ ability to expand production when demand rises. Using bilateral trade data linked to international input-output tables, I measure supplier scalability at the country-industry level and examine how it shapes downstream export growth. I find that supplier scalability varies sharply across industries within countries, that scalable suppliers tend to be connected to scalable suppliers themselves, and that downstream country-sectors exposed to more scalable suppliers respond more strongly to positive foreign demand shocks in sectors with relationship-sticky inputs. I rationalize these facts in a multicountry, multi-sector general-equilibrium trade model with input-output linkages, heterogeneous upward-sloping supplier supply curves, and gradually adjusting sourcing relationships. In the calibrated model, supplier bottlenecks substantially attenuate the export and welfare gains from a global demand expansion, while relationship stickiness determines where bottlenecks bind. Counterfactuals show that supplier upgrading and pre-arranged access to flexible sourcing networks are most valuable when targeted toward economically central, relationship-sticky, and bottleneck-exposed parts of the production network. |
| Keywords: | Scalability; trade; production networks |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/183 |
| By: | OECD |
| Abstract: | Capital goods (such as machines, equipment or infrastructure) and services (such as R&D, databases or software) are central to modern production systems. Yet, in conventional frameworks for the analysis of trade in value added (TiVA), capital is treated as an exogenous component of final demand and does not contribute to value added flows across countries. This simplification can lead to a distorted picture of international competitiveness and interdependence, as it fails to capture a fundamental channel through which countries participate in global value chains. This report develops an analytical framework to endogenise capital within inter-country input-output models and computes capital-augmented TiVA indicators. On average, the GVC participation of OECD Member countries is 11 percentage points higher when accounting for the role of capital inputs. The services content of manufacturing exports is also 9 percentage points higher, as intangible assets play an increasing role in manufacturing competitiveness. Finally, new measures of foreign capital exposure reveal hidden interdependencies across countries through capital. |
| Keywords: | Capital Endogenisation, Global Value Chains, Input-Output Analysis, Revealed Comparative Advantage |
| JEL: | C67 E22 F14 F62 |
| Date: | 2026–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:oec:traaab:303-en |
| By: | Jia, Ningyuan; Dhingra, Swati; Fry, Emily; Hale, Sophie |
| Abstract: | This paper examines the implications of the EU–UK Trade and Cooperation Agreement (TCA) using a dynamic spatial general equilibrium model. Unlike previous studies that primarily projected potential impacts of Brexit based on uncertain scenarios, this analysis introduces new estimates of tariffs and non-tariff measures specified by the TCA. The findings show that while the TCA will necessitate substantial adjustments for some sectors, Brexit will not fundamentally alter the overall structure of the UK economy. However, the main impacts will manifest as significant hits to real wages and productivity, exacerbating the long-standing economic challenges faced by the UK. |
| Keywords: | Brexit;EU-UK Trade and Cooperation Agreement (TCA);UK regions and sectors;non-tariff measures;spatial general equilibrium |
| JEL: | F15 F13 F16 C68 R23 |
| Date: | 2026–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140318 |
| By: | Poorya Kabir; Adrien Matray; Karsten Müller; Chenzi Xu |
| Abstract: | Trade financing through export credit agencies is a key tool of modern industrial policy. We provide a theory to evaluate its welfare effects, and we study its causal impact on trade, firm investment, and capital misallocation by using the effective shutdown of the US export credit agency from 2015 to 2019 as a natural experiment. First, we show that the US Export-Import Bank (EXIM) has large causal effects: comparing industries exposed and unexposed to the shutdown, we find that exposed industries experience a product-level export reduction of approximately $4.49 for each $1 lost in EXIM financing. EXIM-dependent firms also experience substantial contractions in revenues, investment, and employment. Second, shutting down EXIM increases capital misallocation because firms with high marginal revenue product of capital (MRPK) disproportionately contract while low-MRPK firms are largely unaffected. Terms-of-trade adjustments and freeing capital for domestic producers do not appear to offset these losses empirically. Our results indicate that even in advanced economies with developed financial markets, industrial policy that lowers financing constraints for exporters can raise output, improve capital allocation, and generate welfare gains. |
| Keywords: | export credit agencies; industrial policy; trade finance; capital misallocation; financing constraints; exports; firm investment |
| JEL: | L52 F13 F14 H81 D24 G28 E22 G32 |
| Date: | 2026–08–24 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:103700 |
| By: | Pardy, Martina; Hernández-Rodríguez, Eduardo |
| Abstract: | This paper analyses the link between global value chain participation and intra-regional income inequality across European regions from 2003 to 2010. It combines regional input–output data to construct different indicators of global value chain participation and income data for regions at NUTS-2 level. Using fixed effects and instrumental variable estimations, we show that it matters how regions participate in global value chains: forward participation is on average linked to higher inequality at the top of the income distribution, while backward participation, in contrast, is not significantly associated with inequality. This relationship varies across industries: sectors such as manufacturing, transport and communication, and business activities are among the main drivers of this relationship. Moreover, the effect of forward participation on top income inequality varies by development level and institutional quality, showing that it is more pronounced for less developed regions and regions with lower institutional quality. These findings offer a new perspective on the link between regional global value chain integration and increased top income inequality. |
| JEL: | F14 F16 D31 R12 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140359 |
| By: | Demir, Banu; Rappoport, Veronica |
| Abstract: | This article reviews recent evidence on how credit availability shapes exports. Advances in empirical strategies and the increasing availability of detailed firm- and transaction-level data shed light on mechanisms linking firms’ financial conditions to their entry, survival, and growth in export markets. Emerging work on the interaction between bank and trade credit highlights additional channels affecting export contracts. We conclude by outlining open questions and directions for future research. |
| Keywords: | trade finance;credit constraints;exports;letters of credit;trade credit;global value chains |
| JEL: | F14 F40 G21 |
| Date: | 2026–06–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138927 |
| By: | Kuusi, Tero; Lähdemäki, Sakari |
| Abstract: | Abstract We study Europe’s post-2008 productivity slowdown using novel total factor productivity (TFP) measures that follow production beyond individual industries in global value chains (GVCs). We collect a newset of stylized facts: (1) the slowdown is broad-based, with productivity growth weakening both in final-producer industries and in upstream industries; (2) the staggered entry into force of bilateral investment treaties with China is followed by higher value-chain TFP and greater business-intangible investment; while (3) the gains associated with technology intangibles are weak. We use these facts to discipline a stylized two-region general-equilibrium model with business capabilities, technology-related knowledge, and cross-border knowledge spillovers. The calibration supports a two-stage interpretation of Europe’s experience: (1) sizeable initial integration gains because accumulated business capabilities convert market access into productivity, and (2) later losses when technology improvements are converted into productivity more effectively elsewhere. |
| Keywords: | Global value chains, Intangibles, Productivity, Globalization |
| JEL: | F60 O47 L16 O14 E22 |
| Date: | 2026–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:rif:wpaper:146 |
| By: | Finck, David (Deutsche Bundesbank); Klein, Mathias (Research Department, Central Bank of Sweden); Tillmann, Peter (University of Giessen) |
| Abstract: | We compile a unique dataset linking micro price data underlying the official Swedish producer price index with administrative firm level data and provide new evidence on the inflationary effects of global supply chain shocks. For identification, we interact exogenous shocks to global supply chains, obtained through a VAR model, with firm specific import shares. Shocks to global supply chains lead to a signif icant and persistent increase in producer prices with a peak response after two years. Importantly, average responses mask heterogeneous responses across firms. Relatively larger firms, firms with lower labor costs and a higher market share raise prices more strongly. |
| Keywords: | Global supply chain shocks; producer prices; microdata; firm characteristics; price setting |
| JEL: | E31 F14 F61 |
| Date: | 2026–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0470 |
| By: | Yuting Chen |
| Abstract: | In this paper, I study to what extent countries differ in their preferences for quality and their technologies for improving quality. The paper also quantifies the contribution of those differences to the differences in gains from trade across countries. I adopt ANTONIADES, which allows endogenous quality choice of firms. This paper extends that framework into multi-country and multi-sector setting. The new feature is that bilateral trade liberalization yields spillover effects on the competitiveness of another country. This paper structurally estimates the model under multi-country and multi-sector framework. It is found that richer countries generally have stronger valuation for quality. The quantification demonstrates that variations in the strength of quality preferences and in the technology of improving quality across countries add to their heterogeneities in market competitiveness. Subsequently, I simulate a 5% increase in the trade barriers. If the quality channel is shut down, countries with stronger preferences for quality have larger degrees of underestimations in their losses from the trade barrier. Finally, gains from a universal rise in quality preference are unequal among countries, with larger economies generally gaining more than smaller economies. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.04409 |
| By: | Stephanie Schmitt-Grohé; Martín Uribe |
| Abstract: | This paper studies the joint behavior over time of the mean and dispersion of U.S. import tariff rates across goods at the HTS 6-digit level, as well as the macroeconomic consequences of the shocks that drive these two moments. We document that the cross-sectional mean and the cross-sectional dispersion of import tariffs move closely together over time. Using a state-space model, we find that both are driven primarily by common shocks, while mean- and dispersion-specific tariff shocks play a negligible role. Thus, effectively, there are no separate mean-tariff shocks or tariff-dispersion shocks; there are only mean-dispersion tariff shocks. These common shocks account for a sizable share of movements in imports and the trade balance but only a small fraction of movements in output. A positive transitory mean-dispersion tariff shock reduces the import-to-output ratio and improves the trade-balance-to-output ratio; a positive permanent mean-dispersion tariff shock also reduces the import-to-output ratio but has a muted effect on the trade-balance-to-output ratio. Positive transitory mean-dispersion tariff shocks are expansionary, whereas positive permanent mean-dispersion tariff shocks are contractionary in the short run and expansionary in the medium run. |
| JEL: | E31 E32 F13 F41 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35661 |
| By: | Brancati, Emanuele (Sapienza University of Rome); Nucci, Francesco (Sapienza University of Rome); Pietrovito, Filomena (University of Molise); Pozzolo, Alberto (Roma Tre University) |
| Abstract: | This paper explores the interplay between firms' credit constraints, innovation, and export decisions. Using survey data for Italian manufacturing firms, we document strong complementarity between the two activities: innovation raises export participation, while exporting stimulates R&D. Credit rationing significantly reduces both the probability and intensity of exporting and innovation, but its effects are heterogeneous. The negative impact of credit rationing on export participation is substantially attenuated by innovation, whereas exporting provides only limited protection against the effects of financing constraints on innovation. We interpret these findings through a stylized theoretical framework in which exporting and innovation are mutually reinforcing but operate through distinct channels: innovation directly enhances export profitability through cost reductions, whereas exporting stimulates innovation only indirectly by expanding market opportunities. Overall, our findings suggest that policies fostering innovation may generate a double dividend by promoting technological upgrading while simultaneously strengthening firms' ability to sustain export activity under financial constraints. |
| Keywords: | innovation, exporting, financial constraints |
| JEL: | F14 G21 O31 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18902 |
| By: | John Sturm Becko; Arnaud Costinot |
| Abstract: | We study international cooperation in a general environment with pecuniary and non-pecuniary externalities across countries. We derive two main theorems, each demonstrating that market-access commitments, a form of shallow integration, are sufficient to implement globally efficient policies. When all cross-border externalities are pecuniary, the first theorem provides a new and unifying perspective on a series of results by Bagwell and Staiger. When some cross-border externalities are non-pecuniary, the second theorem shows that market-access commitments, properly extended, still sustain global efficiency. These extended market-access commitments reinterpret cross-border externalities as additional goods that are traded and priced at their social values. We discuss the implications for international cooperation on climate change and geopolitics. |
| JEL: | F10 F11 F12 F13 F15 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35685 |
| By: | Enrique Martínez García; Ron Mau |
| Abstract: | Higher tariffs do not automatically show up one-for-one in consumer prices. Price effects depend on how firms respond. Foreign exporters may cut pre-tariff prices to preserve access to the U.S. market, while domestic importers or retailers may absorb part of the increase with lower margins. |
| Date: | 2026–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:fip:d00001:103683 |