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on International Trade |
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Issue of 2026–04–13
thirteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Jamel Saadaoui; Vanessa Strauss-Kahn; Jerome Creel |
| Abstract: | This paper investigates how geopolitical relationships shape Chinese exports, asking whether exporters systematically favor politically aligned countries - and whether that preference holds during periods of geopolitical turbulence. We leverage a unique high-frequency panel of over 17 million monthly firm-product-destination transactions from Chinese Customs (2000-2006), matched with the Political Relationship Index (𠑃𠑅ð ¼) developed by Tsinghua University, which captures monthly bilateral diplomatic relations from a Chinese perspective. Unlike most studies on geopolitics and trade, we move beyond the typical Western-centric lens of geopolitical risk and focus on export-side behavior. Our empirical strategy is robust: it combines rich fixed effects (firm-product, destination, time), sectorial tariff controls, and interactions with indicators of extreme positive and negative diplomatic events. Our results consistently show that stronger political alignment increases Chinese firms’ exports in both value and quantity. We also find evidence of non-linearity and asymmetric responses: exporters react more strongly to diplomatic improvements than to deteriorations. Using extreme geopolitical events, we show that positive events amplify the export response to political alignment, while negative events tend to dampen it. The patterns are strongest for foreign-invested firms and for differentiated products, suggesting that geopolitical alignment plays a critical role in global value chain dynamics. These findings contribute to understanding how firms incorporate political signals into trade decisions. In a world of growing political fragmentation, "friendtrading" is not just a policy discourse - it is reflected in the strategic behavior of exporters, even in the absence of formal sanctions. |
| Keywords: | international trade, firms' export, geopolitics, countries alignment |
| JEL: | F14 F13 F51 F23 D74 L25 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-22 |
| By: | Ece Fisgin; Johannes Fleck; Keith Richards |
| Abstract: | We show that the EU's 2018 retaliation against US steel and aluminum tariffs targeted goods with low US import dependence and high substitutability. For the majority of tariffed goods, the US share of EU imports declined notably and remained below pre-2018 levels even after the retaliatory tariffs were lifted, reflecting asymmetric effects of tariffs on trade diversion. Moreover, although the retaliatory tariffs were instantly and fully passed through to EU importers, the retaliation did not lead to domestic price pressures as we find no evidence for inflationary effects on consumer and producer prices. |
| Keywords: | Trade policy; International trade; Prices |
| JEL: | E31 F13 F14 F42 F62 |
| Date: | 2026–03–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:102987 |
| By: | Darracq Pariès, Matthieu; Jouvanceau, Valentin; Eyquem, Aurélien |
| Abstract: | We study how trade wars propagate to countries that are not directly targeted. We develop a three-country New Keynesian model with trade in final and intermediate goods, incomplete asset markets, and asymmetric monetary regimes, and quantify the spillovers of the 2025 U.S.-China tariff escalation to the euro area. A bilateral U.S.-China trade war generates large and asymmetric welfare losses for the U.S. and China, while the euro area benefits temporarily from trade diversion. Once tariffs extend to euro-area goods, third-country welfare flips into losses and the Chinese downturn deepens. Welfare-maximizing retaliatory tariffs by the euro area deliver only modest domestic improvements, at the cost of large additional losses for the U.S. and China. Overall, the global incidence of trade policy is intrinsically multilateral: third-country gains under bilateral protectionism are short-lived, reverse once protection broadens, and cannot be inferred from two-country analysis. JEL Classification: F30, F40, F41 |
| Keywords: | protectionism, third-country effects, trade wars |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263213 |
| By: | Luke Heeney; Christopher R. Knittel; Jasdeep Mandia |
| Abstract: | In many modern industries, firms compete in differentiated-product markets while relying on complex global value chains for intermediate inputs. In such settings, trade policies such as tariffs on vehicles and parts operate not only through consumer substitution and firm pricing, but also through firms’ cost structures and sourcing decisions. We develop a structural model of the U.S. automobile market that integrates random-coefficients demand, multiproduct firm pricing, and a flexible supply-side framework in which shocks to the cost of imported parts transmit imperfectly into manufacturers’ marginal costs. The model is disciplined by novel model-level data on imported-parts exposure and exploits exchange-rate variation to identify cost pass-through. Our counterfactual analysis quantifies the effects of alternative tariff policies on prices, profits, and welfare. First, tariffs on imported vehicles alone reallocate demand toward domestically assembled products and increase U.S. producer surplus, generating a gain of approximately $1 billion for U.S.-headquartered firms, while reducing consumer surplus by about $14 billion. Second, extending tariffs to imported intermediate inputs fundamentally alters these effects: consumer surplus losses roughly double, and producer surplus for U.S.-headquartered firms declines by about $2.6 billion. These aggregate effects mask substantial heterogeneity: firms with greater exposure to imported parts experience losses, whereas those relying more on domestic inputs are better able to increase profits. Overall, the results show that tariff incidence depends critically on firms’ exposure to global value chains and cannot be inferred from final assembly locations alone. |
| JEL: | F13 L13 L62 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35023 |
| By: | Wagner, Joachim (Leuphana University Lüneburg) |
| Abstract: | This short note looks at the link between churning of exporters and dynamics of exports using data from the World Bank Exporter Dynamics Database from 69 countries primarily for the period between 2003 and 2010. In line with Schumpetarian theory of creative destruction we report that a higher rate of turnover in export activity by entry and exit of firms in the year before is positively linked to export growth in the current year after controlling for unobserved time-invariant country effects and country-invariant time effects. Creative destruction is at work in exports. |
| Keywords: | Exporter Dynamics Database, creative destruction, export entry, export exit |
| JEL: | F14 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18497 |
| By: | Gaskin, Thomas; Demirel, Guven; Wolfram, Marie-Therese; Duncan, Andrew |
| Abstract: | Global trade is shaped by a complex mix of factors beyond supply and demand, including tangible variables like transport costs and tariffs, as well as less quantifiable influences such as political and economic relations. Traditionally, economists model trade using gravity models, which rely on explicit covariates that might struggle to capture these subtler drivers of trade. In this work, we employ optimal transport and a deep neural network to learn a time-dependent cost function from data, without imposing a specific functional form. This approach consistently outperforms traditional gravity models in accuracy and has similar performance to three-way gravity models, while providing natural uncertainty quantification. Applying our framework to global food and agricultural trade, we show that low income countries experienced disproportionately higher increases in trade costs due to the war in Ukraine’s impact on wheat markets. We also analyse the effects of free-trade agreements and trade disputes with China, as well as Brexit’s impact on British trade with Europe, uncovering hidden patterns that trade volumes alone cannot reveal. |
| Keywords: | REF fund 2025/2026 |
| JEL: | L81 |
| Date: | 2026–02–19 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137330 |
| By: | Wagner, Joachim (Leuphana University Lüneburg) |
| Abstract: | The use of advanced technologies like artificial intelligence, robotics, or smart devices will go hand in hand with higher productivity, higher product quality, and lower trade costs. Therefore, it can be expected to be positively related to export activities. This paper uses firm level data for manufacturing enterprises from the 27 member countries of the European Union collected in 2025 to shed further light on this issue by investigating the link between the use of advanced technologies and extensive margins of exports. Applying a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), which does not impose any restrictive assumptions for the functional form of the relation between margins of exports, use of advanced technologies, and any control variables, we find that firms which use more advanced technologies do more often export and do export to more different destinations. |
| Keywords: | advanced technologies, exports, firm level data, Flash Eurobarometer 559, kernel-regularized least squares (KRLS) |
| JEL: | D22 F14 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18496 |
| By: | Vanessa Alviarez; Cheng Chen; Nitya Pandalai-Nayar; Liliana Varela; Kei-Mu Yi; Hongyong Zhang |
| Abstract: | We study how multinational corporations (MNCs) shape firm-level and aggregate structural transformation. Using confidential microdata from Japan and exploiting a quasi-exogenous reform that expanded foreign investment opportunities in China, we assess empirically how this reform affected employment at firms in both the host country (China) and the home country (Japan). In liberalized industries, Japanese manufacturing affiliates in China expanded employment, while parent firms in Japan shifted out of manufacturing and into higher-value service activities, including R&D. To assess the broader relevance of this mechanism, we use microdata from several advanced and middle-income economies, and show that MNCs account for the majority of the middle-income countries' reallocation to manufacturing. |
| Keywords: | multinational firms; manufacturing employment; services employment; foreign direct investment liberalization |
| JEL: | F23 F60 |
| Date: | 2026–03–30 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:102970 |
| By: | Aguilar, Pablo; Darracq Pariès, Matthieu; Jouvanceau, Valentin; Meunier, Baptiste; Spital, Tajda |
| Abstract: | In April and in October 2025 China imposed export controls on rare earths amid escalating trade tensions with the United States. Although these measures were too short-lived to generate macroeconomic effects, they signalled China’s ability to draw on its dominant position in the rare earth supply chain. This paper provides a structured assessment of the potential macroeconomic consequences associated with rare earth supply disruptions. First, it documents that exposure to rare earth supply disruptions is concentrated in high-tech and security-sensitive sectors including automotive, electronics and defence-related industries. Second, drawing on earlier episodes of Chinese export restrictions on critical minerals (notably in 2010 and 2023), it highlights two key mitigating forces from the targeted countries’ perspective: practical and strategic constraints on China’s ability to implement strict export bans, and innovation-led substitution by targeted countries. Third, the paper quantifies the global macroeconomic implications of a hypothetical scenario of stringent but partial Chinese export restrictions on rare earths lasting for 18 months. To do so, the analysis combines, for the various segments of the transmission chain, a partial equilibrium setup, a closed-economy DSGE model, and the multi-country multi-sector dynamic model of Aguilar et al. (2026). The main results, across specifications, suggest estimated output losses for the United States ranging between 0.3% and 0.6%, with the largest impacts concentrated in automotive and electronics manufacturing. The results at the same time highlight the sensitivity of model-based estimates to assumptions on the substitutability of rare earths and the severity of restrictions. JEL Classification: F13, F17, C63, C68, Q37 |
| Keywords: | critical minerals, export ban, export restrictions, supply chain, trade modelling |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbops:2026384 |
| By: | Ken-ichi Hashimoto |
| Abstract: | We investigate the effect of trade liberalization in a stagnant economy characterized by firm-level productivity heterogeneity. By incorporating Melitz’s (2003) framework into a model of economic stagnation driven by insufficient aggregate demand, we examine how trade opening affects employment and consumption. The outcomes deviate significantly from those of conventional models that assume full employment. Under conditions of demand deficiency, the selection effect induced by trade—whereby high-productivity firms expand and less efficient firms exit—leads to a reduction in total employment. This deterioration in labor market conditions suppresses aggregate income and consumption, suggesting that trade liberalization may inadvertently worsen economic stagnation. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1310 |
| By: | Bottasso, Anna; Cerruti, Gianluca; Conti, Maurizio; Santagata, Marta |
| Abstract: | This study evaluates whether exposure of local areas to medieval Mediterranean trade with Africa and the Middle East still shapes Italian political attitudes. Such exchanges may have fostered cultural traits that eased interaction with people of different cultures, ethnicities, and religions. We show that individuals living near a medieval port are less likely to view migrants as a security threat or to report right-wing voting preferences; these areas also had fewer xenophobic attacks during the 2015 Syrian refugee surge. We also find that right-wing parties received fewer votes near medieval ports only when immigration was highly salient. Finally, we document a lower probability of Jewish deportations near medieval ports during the Nazi occupation, the only period when a minority group was explicitly targeted. This suggests that deep-rooted cultural traits can re-emerge when historical and political conditions make them relevant. |
| Keywords: | persistence studies; trade networks; political preferences; cultural persistence; immigration |
| JEL: | F22 D72 |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137817 |
| By: | Pierre-Olivier Gourinchas; Gene Kindberg-Hanlon; Manasa Patnam; Lorenzo Rotunno; Michele Ruta |
| Abstract: | Global imbalances denote the distribution of countries’ current account balances, identically equal to the difference between two forward-looking aggregate variables: national savings and domestic investment. Industrial and trade policies have traditionally not been considered important drivers of aggregate savings or investment, and therefore of current account balances. The former because most industrial policies are small in scope; the latter because permanent tariffs have no intertemporal effect in the textbook model, with an offsetting appreciation of the real exchange rate. The rapidly growing use of both industrial and trade policies in recent years calls for a reassessment. This paper presents a framework to think about the role of both policies. For industrial policy, we make the important distinction between the traditional sector-specific policies via subsidies or other targeted instruments (‘micro IP’) and broader policies (‘macro IP’) that aim to promote industrial developments and competitiveness through the deployment of more aggregate instruments such as financial repression, foreign reserve accumulation, or capital controls. A key finding is that ‘micro IP’ tends to increase external balances if it fails to raise aggregate productivity. By contrast, ‘macro IP’ can, under some conditions, boost the current account, forcing other countries to adjust. Yet, these policies often come at the cost of suppressed domestic consumption and possibly domestic welfare. Our analysis confirms that tariffs are a weak tool to improve current account balances. Finally, traditional macroeconomic drivers—such as fiscal policy, demographics or credit cycles—remain critical drivers of global imbalances, especially for the US and China. |
| Keywords: | Global Imbalances; Tariffs; Industrial Policy. |
| Date: | 2026–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/067 |
| By: | Francois de Soyres; Ece Fisgin; Mike Liu; Eva Van Leemput |
| Abstract: | China's trade surplus surged to a record $1.2 trillion in 2025, exceeding 6% of its GDP, marking a new milestone in its integration into, and dominance of, the global trading system. This development has attracted heightened attention from policymakers and analysts, not only because of the sheer size of the surplus, but also because of growing concerns about the distribution of global manufacturing, the persistence of global external imbalances, and the role of industrial policy interventions in shaping trade outcomes. |
| Date: | 2026–03–23 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:102993 |