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on International Trade |
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Issue of 2026–10–05
thirteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Pol Antràs; Adrian Kulesza; Andrea F. Presbitero |
| Abstract: | We study how the U.S.-China trade war has reshaped global trade patterns, creating significant spillovers to third countries. Using recent tariff policy changes and monthly international trade flow data, we document a redirection of Chinese exports away from the U.S. market and toward third countries. To interpret the impact of these reallocations on third countries, we introduce a taxonomy that separates four exposure margins - export competition, import competition, consumer gains, and sourcing gains - and construct theoretically-derived indices that map countries into these channels. Recent work often proxies such exposure with trade-basket similarity. We show why this can be problematic: similarity measures are symmetric and omit the size of product-specific shocks, Chinese market penetration, substitution elasticities, and incidence weights. Our model-based indices therefore generate country rankings that differ substantially from conventional similarity measures. |
| JEL: | F1 F2 F4 F6 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35785 |
| By: | Wei Li; Jie Ouyang; Bin Qiu; Zi Wang; Yuan Zi |
| Abstract: | Modern protectionism has increasingly taken the form of decentralized trade coercion rather than multilateral escalation. What tariffs prevail in such local trade wars? How are welfare consequences shared between participants and bystanders? And can targeted economies credibly deter unilateralism? Using a multi-country, multi-sector Armington model that distinguishes the elasticity of substitution between domestic and imported goods from that across foreign varieties, we show that bilateral tariffs generate substantial third-market leakage. Applied to recent U.S. trade policy, this leakage magnifies U.S. losses and bystander gains under Trump 1.0, with bilateral Nash tariffs that are lower but more costly than those implied by standard models with a uniform trade elasticity. Trump 2.0's Liberation Day tariffs reverse these patterns by largely shutting down third-market leakage through broad-based tariff escalation. In a dynamic setting, no individual trading partner can credibly deter U.S. unilateralism: bilateral retaliation is either too weak or too costly. Only a near-universal coalition, broadly resembling the WTO membership, can flip U.S. incentives. |
| Keywords: | local trade wars, third-market leakage, bilateral tariffs, unilateral protectionism, strategic deterrence |
| JEL: | F10 F13 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13002 |
| By: | Kiet Tuan Duong; Luu Duc Toan Huynh; Povilas Lastauskas; Nam T. Vu |
| Abstract: | Using firm-level panel data on cross-border sales for 27 African economies (2002-2022), we study how the African Continental Free Trade Area (AfCFTA) reshaped firms’ international trade. Guided by a heterogeneous-firm model with two short-run channels, export-network history and capital adjustment frictions, linked through goods-services input linkages, we document that the 2018 signing raised the ratio of international to total sales by 2.7 percentage points (pp) by 2022. The gains were uneven: firms with prior export experience outside Africa gained 2.8 pp, versus 1.2 pp for Africa-only exporters, and goods-producing firms and those facing lower adjustment frictions responded most. Network history and adjustment frictions thus shape who benefits from continental integration and how gains propagate across the goods-services linkage, so that an intra-continental agreement disproportionately rewards extra-continental traders. |
| Keywords: | adjustment costs; Africa; export experience; goods and services sectors; ownership structure; trade agreement |
| Date: | 2026–09–18 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/199 |
| By: | Gustaf Dillner; Rebecca Freeman; Kalina B. Manova; Thomas Sampson |
| Abstract: | How successful is European integration in removing non-tariff trade barriers? We study how Brexit affected UK firms' input sourcing and sales. The post-Brexit Trade and Cooperation Agreement (TCA) reduced sales and input expenditure at firms with higher pre-Brexit EU trade exposure. It also caused firms to switch towards domestic and non-EU inputs. Through the lens of a trade model, the switch in input sourcing implies the TCA increased trade costs on EU imports by 21% and raised unit production costs by 3.1% for the average UK importer. Our results indicate EU membership secures large reductions in trade costs. |
| Keywords: | trade policy, non-tariff barriers, Brexit |
| JEL: | F13 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13007 |
| By: | Chansik Yoon (Adelaide University) |
| Abstract: | I study the aggregate implications of trade credit constraints faced by exporting firms in a small open economy general equilibrium model with heterogeneous producers. Exporters must finance fixed export costs with external credit, but borrowing capacity is limited by domestic financial development. Quantitative results show that, despite sizable firm-level distortions, trade credit constraints can have muted aggregate effects. Two general equilibrium mechanisms account for this result: tighter constraints reduce export participation but raise average exporter productivity through selection, and endogenous wage adjustment dampens the transmission of shocks to profits and export activity. The aggregate relevance of trade credit constraints increases when firm productivity is less dispersed and when labor supply is more elastic. Overall, the analysis clarifies how firm-level financial frictions interact with general equilibrium forces in shaping aggregate outcomes. |
| Keywords: | Trade credit;Business cycles;Credit constraints;Aggregate dynamics |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:adl:wpaper:2026-04 |
| By: | Benedikt Heid (Universitat Jaume I); Kumuthini Sivathas (The University of Adelaide) |
| Abstract: | In the coming decades, Europe’s and China’s population will shrink, whereas other world regions will experience continuing population growth. Similarly, productivity growth will differ across developing and developed economies, leading to changes in future market sizes across countries. These changes will reshape countries’ attractiveness as partners in free trade agreements (FTAs), impacting the geopolitical influence of economies like the European Union (EU) and China. Standard methods for evaluating FTAs abstract from these changes in market sizes. We use population and productivity projections to evaluate the welfare effects of future trade agreements as a function of market size. We apply our method to a potential EU-China FTA. For the EU, we find that as the EU’s market size grows by 7.46% between 2025 and 2050, the welfare effect of a potential EU-China FTA increases by 23.8%. For China, a projected market size increase of 32.53% leads to a 13.3% decrease in the welfare effects of the FTA. We show that total factor productivity growth is a more relevant driver of welfare changes than population dynamics, suggesting that policy makers should prioritize future productivity growth when evaluating future trade agreements. |
| Keywords: | quantitative trade theory, trade predictions, population growth, productivity growth, EU-China trade. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:adl:wpaper:2024-04 |
| By: | Pablo Aguilar (European Central Bank); Matthieu Darracq Pariès (European Central Bank); Alistair Dieppe (European Central Bank); Rubén Domínguez-Díaz (Banco de España); Antonio Eugenelo (University of Oxford); José-Elías Gallegos (Banco de España); Javier Quintana (Banco de España) |
| Abstract: | We study the short-run macroeconomic transmission of a US-China tariff war in an open economy multi-sector New Keynesian model with input-output linkages, sectoral nominal rigidities and heterogeneous currency invoicing. A reciprocal 10 percentage point tariff increase generates asymmetric incidence: the tariff-imposing country bears more of the inflationary burden, while the targeted country experiences the larger output contraction. Production networks amplify this contraction by propagating the shock beyond the directly tariffed bilateral margin. Currency invoicing further shapes transmission. Under heterogeneous invoicing, dollar-denominated border prices weaken the expenditure-switching role of exchange rates, deepening the contraction in China relative to producer-currency pricing and altering third-country spillovers. The euro area response is small in the aggregate, but only because positive trade-diversion margins are offset by weaker demand from China and multilateral adjustments. We then exploit the model’s sectoral structure by imposing tariffs on one Chinese sector at a time. Sectoral incidence is highly concentrated, but aggregate effects cannot be inferred from the directly tariffed sector alone: domestic propagation offsets own-sector gains in the United States, reinforces own-sector losses in China and leaves the euro area as a net object shaped by opposing trade margins. The results show that tariff incidence depends jointly on where the tariff lands, how the shock propagates through production networks and how invoicing governs border-price adjustment. A framework that combines these margins delivers a materially different assessment from one built on bilateral trade shares alone. |
| Keywords: | tariffs, trade, dynamic stochastic general equilibrium, multicountry, networks, dominant currency pricing |
| JEL: | E31 E32 E52 F13 F41 F42 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2632e |
| By: | Paz, Lourenco (Baylor University) |
| Abstract: | This survey examines how labor provisions in preferential trade agreements affect trade, worker outcomes, and the governance of global production, organizing the literature around three generations of work. An earlier generation debated whether labor clauses were social protection or disguised protectionism. A second, using improved coding and structural gravity methods, finds no systematic trade-reducing effect: results are neutral or conditionally positive, though robustness to staggered-treatment methods remains untested. A third turns to implementation, arguing that provisions matter most when monitoring bodies, complaint systems, and due-diligence obligations change incentives for governments, firms, and suppliers. Across the literature, the most consistent evidence concerns legal commitments, institutional capacity, and enforcement credibility rather than broad wage gains. The survey's contribution is to read these findings as vantage points on a single transformation: labor provisions are no longer peripheral clauses inside trade agreements but components of a wider system linking states, firms, workers, and supply chains, whose effects remain only partially measured and only partially identified. |
| Keywords: | due diligence, enforcement and compliance, global value chains, labor provisions, preferential trade agreements, trade and labor standards |
| JEL: | J83 F16 F55 K33 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18937 |
| By: | Wagner, Joachim (Leuphana University Lüneburg) |
| Abstract: | The use of artificial intelligence (AI) goes 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 from 12 member countries of the Euro Area collected in 2025 to shed further light on this issue by investigating the link between the intensity of use of AI and the intensive margins of exports measured as the percentage share of exports in total sales. 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 margin of exports, the intensity of use of AI and any control variables, we find that firms which use AI more intensively do export a higher share of total sales. AI intensity and export intensity are positively related. |
| Keywords: | artificial intelligence, exports, firm level data, SAFE Data, kernel-regularized least squares (KRLS) |
| JEL: | D22 F14 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18939 |
| By: | Ryan Abman (San Diego State University); Leah Lakdawala (Wake Forest University); Clark Lundberg (San Diego State University and Center for Effective Global Action); Eduardo Nakasone (Food and Agriculture Organization of the United Nations) |
| Abstract: | Trade liberalization can increase schooling while reducing what children learn. We study this tension in Peru, where large unilateral tariff reductions between 2007 and 2016 generated substantial local variation in import competition. Combining household surveys with administrative records of test performance, we examine effects on children's schooling, work, learning, and later outcomes. We document a trade-off between schooling quantity and learning quality: greater exposure increased attendance but reduced relative gains in math achievement. This pattern extends from primary into secondary school, where exposed districts saw even larger participation gains, yet the relative math learning gap continued to widen as affected cohorts aged. We trace these effects to countervailing income and substitution channels. Declining protected-sector opportunities lowered the opportunity cost of schooling, while negative income shocks led more children to work while in school and shifted students from private to public schools, where teachers per student fell. In the longer run, affected cohorts were more likely to complete secondary school but shifted away from university and toward technical and professional programs, and by young adulthood were less likely to be employed and earned lower wages. Trade reforms can thus expand school access while weakening skill formation, revealing human-capital costs that enrollment metrics may miss |
| Keywords: | trade liberalization; import competition; human capital; schooling; learning; child labor; Peru |
| JEL: | F16 F13 I21 I25 J22 O15 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ris:wfuewp:023632 |
| By: | Hartmut Egger; Peter Egger; Katharina Erhardt; Leandro Navarro |
| Abstract: | This paper studies how international firms hedge against trade-cost uncertainty. We analyze two margins of adjustment: foreign market entry (exporting versus foreign investment) and invoicing in free-on-board (FOB) or cost-insurance-freight-inclusive (CIF) prices. Under oligopolistic competition and price rigidity, trade-cost volatility jointly shapes entry and invoicing choices. Firms with small market shares prefer exporting and FOB-price invoicing, while firms with large market shares favor foreign investment and CIF-price invoicing. Using a novel measure of trade-cost volatility constructed from French customs data, we provide empirical support for these mechanisms and document the joint determination of entry and invoicing decisions. Counterfactual analyses based on the structurally estimated and calibrated model indicate that trade-cost uncertainty has sizable effects on these decisions. |
| Keywords: | trade-cost uncertainty, Oligopoly, Invoicing, Foreign market entry |
| JEL: | F12 F23 F31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13009 |
| By: | Xiwen Bai; Jesús Fernández-Villaverde; Ricardo Marto; Yiliang Li; Francesco Zanetti |
| Abstract: | We study the macroeconomic and trade-policy implications of disruptions to U.S.-bound shipping routes. Standard models treat them as iceberg-cost shocks, conflating the shock with the response to it. Using satellite vessel-tracking data, we construct route-level measures of potential and effective capacity for all U.S.-bound container ships from 2016 to 2025. Uti-lization losses in recent disruptions ran 20 to 40 percentage points, and began months before port congestion became visible. We embed these measures in a general equilibrium model in which firms reallocate a common fleet without internalizing the congestion they create and price above marginal cost, while importers’ sourcing responds to route profitability. The reallocation triggered by a disruption then has first-order welfare effects, and the route’s Do-mar weight is not a sufficient statistic for its welfare cost. The 2021 West Coast crisis and the 2023–2024 Red Sea attacks cost 0.69% and 0.35% of output. Naval protection of Red Sea shipping generated benefits of 0.04–0.08% of output at a fiscal cost of 0.02%. Tariffs decongest the routes they tax, offsetting or even reversing their conventional welfare cost. |
| Keywords: | AIS, shipping disruptions, shipping capacity, maritime transportation, general equilibrium, supply chains, trade policy |
| JEL: | E23 F12 L91 R40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12998 |
| By: | Peter H. Egger; Ting Ji; Yulong Wang |
| Abstract: | The Poisson pseudo-maximum likelihood (PPML) estimator is widely used for estimating bilateral gravity equations. Its consistency requires only a correctly specified conditional mean. Conventional inference, however, also requires finite-variance scores and Gaussian limits. We show that these conditions fail: bilateral flows are Pareto-tailed, PPML scores have a stable limit under a structural gravity data-generating process, and sandwich confidence intervals are too narrow. We retain PPML for point estimation but replace sandwich inference with an m-out-of-n bootstrap robust to heavy tails. Across three bilateral data settings, the correction is large and overturns conventionally significant gravity coefficients. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.18750 |