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on International Trade |
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Issue of 2026–05–11
ten papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Hale Utar; Alfonso Cebreros Zurita; Luis Torres |
| Abstract: | Using confidential longitudinal firm-level trade data from Mexico (2015-2021), we examine whether the 2018-19 US-China trade war triggered adjustments in Global Value Chains (GVCs) and nearshoring to Mexico. Leveraging the abrupt US trade policy shift as a natural experiment, we construct firm-level trade policy exposures based on pre-shock product portfolios and find that US tariff hikes on China significantly increased Mexican firms' exports to the US, imports from Asia and the US, and net exports overall. By distinguishing firms in GVCs and identifying their parent countries, we show that foreign Multinational Enterprises (MNEs) in technology-intensive industries were the primary drivers of this adjustment. The trade war also reshaped sourcing patterns, boosting the use of firm-specific duty permits. Heterogeneous responses between US and non-US MNEs highlight nearshoring dynamics and GVC reorganization toward Mexico. Our findings provide firm-level evidence of the transformative impact of trade policy on GVCs and the role of MNEs in channeling trade policy spillovers to third countries. |
| Keywords: | Trade War, GVCs, Supply Chain Adjustment, MNEs, Nearshoring, Mexico, US, China |
| JEL: | F13 F14 F23 F61 F68 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2546 |
| By: | Francesco Paolo Conteduca; Marco Errico; Fabrizio Leone; Ludovic Panon; Giacomo Romanini |
| Abstract: | Bilateral trade shocks affect firms in third countries by redirecting demand and reallocating competition across markets, creating winners and losers. We propose a tractable trade model with heterogeneous firms to decompose firm-level export responses as a function of destination-specific changes in demand, own-price and cross-price elasticities, and external economies of scale. Using the 2018–2019 US-China trade war as a source of exogenous variation and data on the universe of Italian firms, we show how bilateral trade shocks occurring elsewhere identify these primitives for third countries. On average, the US-China trade war created a 2.5% export gain, albeit with substantial heterogeneity across firms. The external economies of scale channel accounts for three-quarters of changes in export performance. |
| Keywords: | firm heterogeneity, reallocation, scale economies, trade wars |
| JEL: | D21 D22 E65 F13 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12629 |
| By: | Devaki Ghose; Eduardo Fraga; Ana Margarida Fernandes |
| Abstract: | This paper leverages Sri Lanka's 2021 chemical fertilizer import ban to quantify the costs of restricted fertilizer access for agriculture, trade, and welfare. Leveraging trade and production data, satellite-based yield estimates, and event studies, we document sharp declines in fertilizer imports, agricultural output, and exports. A quantitative spatial model of trade and agriculture estimates the ban's average welfare cost at 7.3%, with farmers, estate workers, and fertilizer-intensive regions bearing disproportionate losses. Model-implied partial-equilibrium elasticities line up with the experimental evidence, but once we account for general-equilibrium price and wage adjustments, the elasticities are much smaller—implying that using partial equilibrium estimates to assess large, economy-wide fertilizer shocks (like those seen during recent conflicts) would substantially overstate their effects. Domestic and trade policy interact: by curtailing fertilizer use, the import ban effectively contracted the country's fertilizer subsidy program and its implicit transfers from mobile workers to farmers, thereby mitigating the former's welfare losses. |
| Keywords: | trade, industrial policy, import ban, non-tariff measures, fertilizer, and agriculture |
| JEL: | D58 F13 F14 O13 Q17 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12623 |
| By: | Ernst, Christoph,; Michelena, Gabriel,; Bertin, Pablo, |
| Abstract: | Foreign direct investment and the activities of multinational enterprises play an essential role in shaping employment outcomes, particularly in developing and emerging economies. With globalization and the expansion of global value chains, understanding how FDI influences labour markets has become increasingly relevant. This paper quantifies the global employment supported by foreign affiliates, examining both direct and indirect effects across regions and sectors. Our estimates suggest that foreign MNEs supported around 125 million jobs worldwide by 2021, a significant increase from earlier baselines. Employment is geographically concentrated in the European Union, China, North America, and East Asia, with services accounting for over 40 per cent of total MNE-supported jobs, though manufacturing remains key in China. Poorer countries are further marginalized. The contribution of this paper lies in two main areas. First, it provides a consistent global estimate of employment associated with MNEs by combining firm-level datasets with ILO labour statistics. Second, it provides evidence about the heterogeneity of employment effects across regions and sectors: while the European Union, China, North America, and East Asia account for the largest employment shares, a shift towards services in productive activities and employment has been observed, but manufacturing still remains central in countries such as China. |
| Keywords: | foreign investment, value chains., labour market, multinational enterprise |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ilo:ilowps:995691071902676 |
| By: | Hunter L. Clark; Greg Simitian |
| Abstract: | Over the past year, U.S. trade policy with China has undergone enormous changes, but with surprisingly little effect on overall trade balances. In fact, the U.S.’s twelve-month trade deficit, while highly volatile due to import front-running early in the year, ended 2025 at $1.2 trillion, almost unchanged from 2024. At the same time, China’s trade surplus with the world actually increased from $1 trillion to $1.2 trillion. However, when looking at changes between individual countries, one sees large shifts in bilateral balances. In this post, we will focus on changing trade flows between the U.S., China, and southeast Asia. |
| Keywords: | China; trade; tariffs |
| JEL: | F00 |
| Date: | 2026–05–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:103171 |
| By: | Frédéric Docquier; Stefano Iandolo; Hillel Rapoport; Riccardo Turati; Gonzague Vannoorenberghe |
| Abstract: | We propose new ways to measure populism, using the Manifesto Project Database (1960-2019) as main source of data. We characterize the evolution of populism over 60 years and show empirically that it is significantly impacted by the skill-content of globalization. Specifically, imports of goods which are intensive in low-skill labor generate more right-wing populism, and low-skill immigration shifts the distribution of votes to the right, with more votes for right-wing populist parties and less for left-wing populist parties. In contrast, imports of high-skill labor intensive goods, as well as high-skill immigration flows, tend to reduce the volume of populism. |
| Keywords: | Globalization, Populism, Immigration, Trade |
| JEL: | D72 F22 F52 J61 P00 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2550 |
| By: | Johannes Boehm; Thomas Chaney |
| Abstract: | What was the role of trade, and how did economic activity evolve at the End of Antiquity, when political power shifts away from the Mediterranean towards northern Europe and the Middle East? To answer those questions, we assemble a database of hundreds of thousands of ancient coins from the fourth to the tenth century, estimate a dynamic model of trade and money where coins gradually diffuse along trade routes, and recover granular regional trade and real consumption time series. Our estimates suggest that: Mediterranean trade was disrupted by the newly formed border between Islam and Christianity; economic activity shifts away from the Mediterranean starting in the fifth century; real consumption peaks in the Middle East in the eighth century; and by the end of the ninth century, Atlantic regions from Islamic Spain to Frankish northwestern Europe have become the wealthiest regions of the ancient western world. |
| JEL: | F01 N73 O1 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35156 |
| By: | Saadaoui, Jamel (University Paris 8, IEE, LED, Saint-Denis, Franc); Smyth, Russell (Department of Economics, Monash University, Clayton, Australia); Vespignani, Joaquin (Tasmanian School of Business & Economics, University of Tasmania); Wang, Yitian (Department of Economics, Monash University, Clayton, Australia) |
| Abstract: | Geopolitical tensions between the United States and China pose significant risks to global critical-mineral supply chains, particularly because refining capacity for most critical minerals, including aluminium, copper, nickel, tin and zinc, is overwhelmingly concentrated in China. Using monthly data from 1995–2025 and a structural VAR-local projection framework, we estimate the dynamic effects of exogenous shocks to the US-China Political Relations Index (PRI) on mineral markets. We find that geopolitical deterioration systematically induces significant precautionary stockpiling. We then construct a multidimensional friend-shoring index incorporating reserves, alignment, regime type and distance, showing that only a narrow set of United States partners, primarily Australia and Canada, offer feasible pathways for refining diversification. The policy recommendation stemming from our findings is that the United States should make strategic stockpiling of refined critical minerals, rather than raw ores, the centerpiece of its strategy to build supply chain resilience, while negotiating long-term bilateral packages for the supply of refined critical minerals with Australia and Canada. |
| Keywords: | Geopolitics; Critical Minerals; Macroeconomics; economics; geopolitical risk; friend-shoring; |
| JEL: | Q34 Q37 F51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tas:wpaper:30907385 |
| By: | George Cui; Xiaosheng Guo; Leticia Juarez |
| Abstract: | This paper examines the impact of trade credit and bank loans on firms’ exchange rate passthrough. Using a comprehensive dataset combining customs transaction records and balance sheet data for Chinese exporters during 2000–2011, we document that firms that more intensively extend trade credit to their buyers exhibit more complete exchange rate pass-through. Further empirical investigation sheds light on the underlying mechanism. First, the use of trade credit is positively correlated with exporters’ dependence on bank loans. Second, firm-level bank loan interest rates decline following home currency depreciation. Motivated by these findings, we develop a theoretical model in which exporters constrained by working capital simultaneously extend trade credit to buyers and rely on bank borrowing. The model shows that home currency depreciation improves exporters’ profitability, lowers default risk, and reduces borrowing costs, ultimately enhancing exchange rate pass-through. By endogenizing the interest rate through firm-level default risk, the model reveals a novel channel through which firms’ financial activities shape the dynamics of exchange rate pass-through. |
| Keywords: | Exchange rate pass-through; Trade credit; Financial constraints |
| Date: | 2026–04–24 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/084 |
| By: | Morales Meoqui, Jorge |
| Abstract: | The law of comparative advantage cannot be attributed to David Ricardo, James Mill, Robert Torrens or John Stuart Mill. Their writings, much like those of Adam Smith, strictly adhere to the classical rule for specialization, which asserts that one should acquire commodities abroad whenever offered cheaper than it would cost to produce them locally. They all viewed the cheaper price of foreign commodities as the logical starting point and condicio sine qua non of most exchanges between countries. Furthermore, the popular narrative about Ricardo’s alleged formulation of an alternative rule for specialization – the law or principle of comparative advantage – results from a misinterpretation of the well-known numerical example presented in Chapter 7 of his Principles of Political Economy and Taxation. John Stuart Mill is largely responsible for this misinterpretation; he obviously deserves no recognition or praise for that. |
| Date: | 2026–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:4h5ks_v1 |