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on International Trade |
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Issue of 2026–09–07
ten 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 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12942 |
| By: | John Lewis (Bank of England) |
| Abstract: | Using a gravity framework with internal trade flows, I find that travel restrictions translated into large and economically meaningful increases in the cost of trading goods across borders. Travel restrictions operated like a classic border friction, with a full closure reducing bilateral trade by around 19% for a typical country pair and implying a hit to global trade of approximately 23% in 2020 Q2. The effects are highly heterogeneous with respect to distance and transport mode: geographically proximate trading partners experienced larger trade losses and trade flows by road and air were significantly disrupted, while seaborne and rail trade were not. The interaction between distance and transport exposure generates substantial cross-country variation in the overall trade impact of border closures, and explains why some countries were able to close their borders at a (much) lower cost to trade flows than others. There is no evidence of long run scarring effects from restrictions, rather trade rebounded strongly with a temporary ‘overshooting’ once restrictions were eased. |
| Keywords: | Trade;border frictions;transportation mode;Covid-19 |
| JEL: | F1 F14 F18 |
| Date: | 2026–06–18 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023311 |
| By: | Ufuk Can; Oguzhan Cepni; Emrah Ahi |
| Abstract: | Supply disruptions and input shortages have become a central policy concern, yet their effects on trade remain poorly understood. This paper examines how supply-driven shortage shocks affect U.S. exports and imports using monthly data from 1994 to June 2025. Shortage shocks are identified from a news-based shortage index and an alternative supply-stress measure, and their dynamic effects are estimated while controlling for macro-financial conditions and trade policy uncertainty. Three results stand out. First, worsening shortages reduce exports and imports immediately, but the contraction is mostly short-lived. Second, shortage easing supports a slower but more persistent recovery in trade, with stronger medium-term effects for exports. Third, the effects are state-dependent: import responses vary more across time and regimes, and shortages generate disproportionately large trade losses when trade conditions are already weak. These findings suggest that shortage shocks are not symmetric supply disturbances and that policy should focus not only on easing bottlenecks after they emerge, but also on preventing escalation through input diversification, inventory buffers, and supply-chain resilience measures. Overall, shortages are an important source of external-sector vulnerability and a relevant target for trade and macroeconomic policy. |
| Keywords: | Exports, Imports, Shortage shocks, Local projections, Quantile-on-quantile regression |
| JEL: | C32 E32 F14 F41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2615 |
| By: | Shania Bhalotia (London School of Economics); Sophie Piton (Bank of England); John Woods (Bank of England) |
| Abstract: | Barriers to trade in services remain poorly understood. This paper investigates how regulatory barriers affect cross-border lending and deposit-taking by banks. Using confidential bank-level data from the Bank of England, we find that UK-resident banks substantially reduced lending to and deposit-taking from European Economic Area (EEA) countries after Brexit, with some effects observed after the referendum itself. Banks that lost the ability to provide services across the EEA without additional authorisation reduced their stocks of loans to and deposits from EEA countries by about 45% more than banks that did not have such authorisation when UK was a part of EU, relative to their activities with non-EEA countries. Moreover, banks with higher pre-referendum exposure to the EEA had lower lending and deposit-taking with the EEA after the referendum. We find limited evidence of multinational banks successfully circumventing the new barriers by using foreign affiliates. These results demonstrate the critical role of regulatory access in shaping the pattern of banking across borders and trade in services. |
| Keywords: | Trade in services;trade barriers;banking services;Brexit. |
| JEL: | F14 F23 G21 |
| Date: | 2026–05–08 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023303 |
| By: | Fetzer, Thiemo; Lambert, Peter John |
| Abstract: | Policy debates on ‘critical minerals’ have multiplied faster than our empirical tools for identifying which products are system-critical. Most existing lists are expert-driven and static; they say little about how upstream raw materials and downstream technologies are knit together in global production networks, or about the asymmetric roles of large demand and supply hubs. This paper proposes a network index of criticality (NIC), built from trade data and a directed production network, that integrates (i) a product’s share in world trade, (ii) exporter and importer concentration, and (iii) its position in a product-input network. Criticality here refers to systemic exposure encoded in tradeable production networks; it is not a welfare metric and it is not a measure of physical scarcity. We show that NIC aligns with revealed policy attention in official critical-mineral lists. We then construct three families of counterfactuals that remove China, the United States, or the European Union from trade on either the export (supply) or import (demand) side. These scenarios yield product-level diagnostics of hub dependence and map directly to policy instrument choice (e.g. recycling standards, permitting and processing investment, strategic reserves, or trusted-partner agreements). |
| Keywords: | climate action;critical minerals;industrial policy;production networks;supply chain resilience;trade concentration |
| JEL: | F10 F40 F50 O30 L60 Q40 Q50 |
| Date: | 2026–08–04 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140668 |
| By: | Carsten Philipp Brockhaus; Julian Hinz; Charles Serfaty |
| Abstract: | Who bears the cost when a maritime chokepoint is disrupted? Combining ship-level AIS trajectories, port-call logs, freight indices, customs data and Turkish shipment-level data, we document the trade effects of the 2023 Red Sea crisis: seaborne trade between affected country pairs fell, rerouted around the Cape of Good Hope, and recovered within months as freight costs surged, while some exporters shifted persistently toward air freight. We build a quantitative trade model in which freight costs are endogenous to modal and route choice through congestion, a global shipping capacity constraint, and monopoly toll-setting by canal authorities. Calibrated to observed route choices and canal revenues, the model implies that a permanent Red Sea closure lowers global real income only mildly. Because the Suez Canal Authority, pricing to maximize revenue, already captures much of the route's surplus, the loss falls on the toll collector: Egypt forgoes 3.0 percent of real income, almost all of it canal rent, while the large trading economies each lose less than 0.02 percent. A transit fee on the Strait of Hormuz, a chokepoint without maritime substitutes, instead concentrates losses on the Gulf economies themselves. Whether a chokepoint has substitutes, and who prices it, jointly determine who pays for its disruption. |
| Keywords: | Shipping Routes; Chokepoint Disruptions; Red Sea Crisis; Endogenous Trade Costs; Monopoly Tolls |
| JEL: | F14 F17 R41 F62 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1057 |
| By: | Loukas Karabarbounis; Bruno Pellegrino; Juliana Salomao |
| Abstract: | We develop a general-equilibrium model of the global economy that integrates heterogeneous firms competing in product markets with countries that allocate capital around the world. Combining a hedonic demand system on the product side with a mean-variance portfolio system on the asset side, we obtain almost closed-form solutions for the equilibrium of the model. We use firm-level data on balance sheets, geographic breakdowns of revenue and employment, and business descriptions along with country-level data on bilateral equity holdings and trade costs to quantify the model to a cross section of roughly 23, 000 listed firms in 48 countries. We use the model to evaluate the reallocation and welfare effects of globalization. Both financial and trade liberalization concentrate activity among the largest firms and raise welfare, with gains being larger in emerging and mid-sized open economies respectively. Product- and capital-market frictions amplify each other, meaning that liberalizing one market reduces the gains from liberalizing the other. |
| Keywords: | global firms, product markets, capital markets, globalization |
| JEL: | D2 F36 F60 G11 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12952 |
| By: | David Atkin; Benjamin Faber |
| Abstract: | In recent decades, economists studying international trade have gained access to an unprecedented volume and variety of data. These data have provided new insights and a more granular understanding of the mechanics of trade. Analyzing a large corpus of papers, we document that the nature of research has also shifted. Previously, the typical trade paper was either purely theoretical or an empirical paper testing theoretical predictions. More recently, scholarship has shifted toward a more integrated approach, particularly quantitative modeling. This development is surprising. We might have expected the data revolution (and contemporaneous credibility revolution) to increase the share of primarily empirical papers—although the markers of these revolutions are clearly evident in the rise of causal inference within empirical work. This article reviews these developments, assessing the strengths and limitations of different modes of inquiry, and plotting a path forward to harness the growing richness of data within the field. |
| JEL: | F10 F60 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35657 |
| By: | Otaviano Canuto; Diogo Ramos Coelho; Bruno Saraiva |
| Abstract: | Global imbalances are back—and this time the risks look different. The 2008 financial crisis showed how persistent current-account deficits and surpluses between major economies can fuel financial instability and trigger sudden, severe reversals of capital flows. After almost two decades, many thought that episode had been resolved. It had not. New imbalances have built up, with a familiar cast: China, Germany, Japan, and oil exporters running large surpluses, and the United States absorbing the rest of the world's savings. But the underlying dynamics have shifted in ways that make the current situation harder to read and potentially harder to unwind. This paper traces those shifts and asks whether the world is better or worse placed to manage them this time around. The situation today is not simply the result of trade imbalances or unfair competition. It reflects the structural role of the U.S. as the world's balance-sheet absorber of last resort—a country with assets that everyone wants to hold, regardless of what tariffs or exchange rates do. That role comes with new vulnerabilities: persistent global demand for dollar-denominated safe assets, soaring public U.S. debt, equity markets concentrated in a handful of technology firms, and a financial system increasingly reliant on non-bank intermediaries. Fixing this would require coordinated action involving fiscal adjustment in the United States, stronger domestic demand in China, and deeper financial integration in Europe. What is missing is the political will to act, at a moment when geopolitical fragmentation and strategic rivalry make international cooperation harder than ever. The 2008 crisis was not the last word on global imbalances. It may have been the rehearsal. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ocp:rpaeco:pp15_26 |
| By: | Josh Kirk; Evgenia Passari; Hélène Rey |
| Abstract: | Trade networks underpinning the energy transition are endogenous economic objects, and their structure is a source of market power. Using bilateral trade data for thirteen electrification metals over 1995–2023, we show that trade in these materials has reorganised into a hub-and-spoke system centred on China, in sharp contrast to the diffuse, multilateral structure of fossil fuels. This centrality did not follow from resource endowments: China holds few of the underlying reserves. It was built through processing investment, industrial policy, and commodity-targeted development finance—an equilibrium outcome rather than a geographical accident. We formalise this in a stylised model in which a country chooses how central to become, and show that centrality maps into pricing power: the world price response to a strategic supply cut is stronger when the network is more concentrated and downstream demand and fringe supply are more inelastic. Constructing text-based, commodity-specific supply shocks and estimating local projections, we find that supply contractions in critical metals raise US and EU consumer prices by roughly twice as much as comparable fossil-fuel shocks, and more persistently. Centrality is therefore not merely descriptive: it creates leverage over global prices. The green transition reduces strategic dependence on hydrocarbon exporters but reconstitutes it around mineral supply chains. |
| JEL: | F49 F50 F60 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35497 |