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on International Trade |
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Issue of 2026–10–12
thirteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Mariam Camarero (INTECO & Department of Economics, Universitat Jaume I, Castellón, Spain); Joan Crespo (INTECO and Department of Economic Structure, Universidad de Valencia, Spain); Cecilio Tamarit (Department of Applied Economics II, University of Valencia, Spain) |
| Abstract: | This paper examines the role of Foreign Direct Investment (FDI) in shaping comparative advantage within global production networks, conceptualizing FDI as a vector for cross-border capability transfer. Using a bilateral dataset for 138 countries over 2001–2021, we combine static and dynamic empirical approaches. The static analysis shows that country pairs with larger bilateral FDI stocks exhibit greater similarity in export structures. The dynamic analysis shows that complementarities between a host economy’s FDI partners and its own productive base raise the probability of entering new product specializations. This effect is conditional: it requires adequate domestic capabilities, is stronger in more developed economies, and exhibits substitution between direct and related forms of complementarity. Crucially, FDI linkages do not extend the host’s reach into the most complex goods, where domestic relatedness dominates. FDI thus supports diversification into standard products, but cannot substitute for domèstic capability-building in the most demanding segments of the product space. |
| Keywords: | FDI, Export similarity, Comparative advantage, Gravity model, Economic complexity. |
| JEL: | F14 F21 C23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2026/11 |
| By: | Anton Cheremukhin; Paulina Restrepo-Echavarria |
| Abstract: | We develop a search model of international trade where buyers allocate costly cognitive attention across suppliers. Suppliers exploit the cost of shifting attention to extract markups, giving dominant firms the cushion to absorb cost shocks while marginal suppliers pass them on. Validating this mechanism with U.S. tariff data, we estimate a highly concentrated U.S. domestic market. Consequently, while targeted tariffs spur offshore substitution, blanket tariffs force buyers toward captive domestic monopolies. Incumbents’ growing market power raises markups and halves the aggregate macro elasticity relative to micro estimates. Integrating endogenous market-power-dependent elasticity along the path to autarky more than doubles the U.S. gains from trade compared with standard constant-elasticity predictions. |
| Keywords: | trade elasticity; targeted search; rational inattention; gravity; market power; pass-through; gains from trade |
| JEL: | F10 F11 F13 D83 L13 |
| Date: | 2026–09–21 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:103847 |
| By: | Christian Bustamante; Xing Guo; Lu Han; Soyoung Lee; Gaelan MacKenzie; Mariel Yacolca Maguiña; Jacob Short |
| Abstract: | By how much do import tariffs raise aggregate prices? We develop a simple decomposition that separates the aggregate price effect of a tariff into three channels—cost pass-through, markup adjustments, and consumer substitution across varieties—and calibrate an oligopolistic competition model with endogenous markups to firm-level market shares for Canadian domestic producers, U.S. exporters, and rest-of-world suppliers. A 25% counter-tariff on U.S. imports raises Canada's aggregate price index by 0.66—well below the 1.25% that direct cost pass-through alone would predict. The dominant offsetting force is consumer substitution toward non-U.S. varieties, which reduces the price effect by 0.47 percentage points; markup adjustments, holding fixed pre-tariff market shares, contribute a further 0.26 percentage point decrease. The gap between cost pass-through and the true price effect widens sharply with the tariff rate: at a 50% tariff, cost pass-through alone predicts more than twice the true price effect. |
| Keywords: | Monetary policy; Inflation dynamics and pressures; Structural challenges; International trade, finance and competitiveness |
| JEL: | E E3 E31 F F1 F13 F14 L L1 L11 L16 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-36 |
| By: | Pinelopi Goldberg; Reka Juhasz; Giulia Lo Forte; Jeff Thurk |
| Abstract: | We show that cross-border learning is an important feature of modern semiconductor manufacturing and that several important channels – such as knowledge sharing along global supply chains, the movement of engineers within multinational firms, and foreign direct investment – operate through market mechanisms rather than anonymous technological spillovers. These findings have significant policy implications. When cross-border learning is mediated by purposeful economic relationships, access to frontier knowledge is neither automatic nor guaranteed. Firms and governments can facilitate – or restrict – the international diffusion of technology, implying that policies to foster domestic technological upgrading are likely to be most effective when coupled with continued access to global sources of frontier knowledge. |
| Keywords: | semiconductors, international knowledge diffusion, learning-by-doing, cross-border learning |
| JEL: | F50 F61 L63 N60 O30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13029 |
| By: | Jonathan Becker; Corina Boar; Virgiliu Midrigan |
| Abstract: | Importers are few and large, have higher labor productivity and pass through cost changes to prices incompletely. We study optimal tariffs in a model consistent with these facts. Firms pay a fixed cost to import and charge markups that increase with size. Market power implies that importers are too few and too small relative to the efficient allocations. Tariffs amplify this distortion. We derive a formula that relates the optimal tariff not only to the foreign export supply elasticity but also to how much distortions amplify the effect of trade costs on welfare. In our calibrated economy the optimal tariff is negative and decreases with country size. |
| JEL: | E10 F12 F13 L11 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35829 |
| By: | Artuc, Erhan; Constantinescu Neagu, Ileana Cristina; Taglioni, Daria |
| Abstract: | How can middle-income economies convert trade openness and productivity-enhancing reforms into higher real income and welfare? This paper develops a quantitative trade model with input-output linkages and labor market frictions to assess the impact of trade and productivity reforms on real income, wages, trade, and production. Thailand and ASEAN provide a useful case because the region spans economies with very different approaches to growth: some deeply embedded in Asian manufacturing value chains, others focused on commodities, export-led industrializers, and countries pursuing more selective integration. This variation allows assessing when openness yields large welfare gains, when productivity reforms matter more, and when the two are complementary. The results show that openness gains depend on domestic capabilities, while productivity gains depend on access to inputs and markets. The policy implication is a twin agenda: reduce trade frictions in connectivity, customs, logistics, standards, certification, and regulatory recognition, while strengthening firm productivity, supplier capabilities, and manufacturing-related services in high-growth sectors and global value chains. |
| Date: | 2026–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11440 |
| By: | Fukuzawa, Daisuke; Islamaj, Ergys; Le, Duong Trung; Mattoo, Aaditya; Samano Penaloza, Agustin |
| Abstract: | This paper analyses how China’s rapid expansion has affected growth in other developing economies through the trade channel. The empirical strategy is a shift-share design that exploits pre-determined variation across countries in the exposure of their exports to China’s import demand and export supply in global markets, well before China became a dominant trader. The paper shows that China’s rising demand for commodities and intermediate goods has had a favorable impact on other developing countries’ growth, while intensified competition from its manufacturing exports has had an adverse effect. The former effect is stronger and therefore the net effect has been positive for most countries. The positive impact is, however, becoming weaker as China’s growth slows down, and developing countries’ longer term growth may also be influenced by the changes in their economic structures induced by China’s trade expansion. |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11467 |
| By: | Pisch, Frank; Huang, Hanwei; Manova, Kalina; Perello, Oscar |
| Abstract: | How do production networks and market structure interact to shape the effects of trade and competition policy? We develop a model with two-sided firm heterogeneity, matching frictions, and imperfect supplier competition. More productive buyers match with more suppliers, inducing tougher supplier competition, lower input costs, and higher profits. Entry upstream thus benefits high-productivity buyers, while lower trade or matching costs favor mid-productivity buyers. Empirical evidence confirms that larger French and Chilean firms import higher quantities at lower prices as more Chinese suppliers enter, and that suppliers charge diversified buyers lower markups. We adapt methods for combinatorial, discrete-choice problems to estimate the model and perform counterfactuals. The interaction of endogenous networks and markups significantly amplifies the gains from policies that facilitate supplier entry or firm matching, and from deep trade agreements that combine tariff cuts with such policies. Fixed networks dampen while fixed markups amplify the gains from traditional tariff liberalization. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:162612 |
| By: | Barattieri, Alessandro; Mattoo, Aaditya |
| Abstract: | China’s growing dominance in manufacturing exports is attracting widespread attention. However, existing explanations of China’s export exceptionalism and its consequences for developing countries suffer from three shortcomings. First, attributing China’s large and increasing share in manufacturing exports primarily to its industrial policy obscures more fundamental factors: the scale of its economy, the diversity of its provincial endowments, and the pace of its automation. Second, focusing on the low-skilled export dimension of China’s economic expansion overlooks its positive impact on growth and its heterogeneous effects on structural transformation in developing countries. Finally, blaming foreign industrial policies distracts attention from the often more damaging trade and investment restrictions imposed by developing countries themselves, many of which could be reformed unilaterally. |
| Date: | 2026–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11470 |
| By: | Christian Bustamante; Xing Guo; Lu Han; Soyoung Lee; Gaelan MacKenzie; Mariel Yacolca Maguiña; Jacob Short |
| Abstract: | We develop a framework to quantify how tariff changes on imported goods affect sectoral and aggregate consumption prices through direct and production-network channels. Using Canada's input-output matrix and administrative firm-good import data for the universe of Canadian firms, we estimate price elasticities for tariffs on U.S.-imported goods. Tariffs on machinery and equipment and transport equipment generate the largest effects on final prices, reflecting their widespread use as intermediate inputs. On average, two-thirds of the total price response stems from higher intermediate input costs passing through domestic supply chains. Applying the framework to Canada's 2025 counter-tariffs, we estimate consumption price increases of 1.56 and 0.72 percentage points for the pre- and post-September 2025 phases, respectively; alternative packages of equal import value could reduce aggregate price effects by three to seven times. A hypothetical CUSMA breakdown reverting to MFN tariffs would raise final-good prices by 0.64 percentage points. |
| Keywords: | Monetary policy; Inflation dynamics and pressures; Structural challenges; International trade, finance and competitiveness |
| JEL: | D D5 D57 E E3 E31 F F1 F13 F14 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-35 |
| By: | Ngov, Meng Yu; Vézina, Pierre-Louis; Tran, Trang Thu; Nayyar, Gaurav |
| Abstract: | This paper documents how foreign firms, inputs, and subsidies have shaped the development of Viet Nam’s solar panel industry. The analysis uses firmto-firm transaction data from Panjiva as well as firm-level data from the Viet Nam’s Enterprise Survey to trace solar panel value chains. It uncovers three key findings. First, parts and components from subsidizing countries are 30 percent cheaper than alternatives. Those from China, which provides the majority of solar inputs to Vietnamese producers, are cheapest. Foreign green subsidies may thus spill over across countries via value chains. Second, Chinese FDI firms dominate Viet Nam’s solar industry, accounting for 75% of exports and 50 percent of jobs, and they export solar panels that are 38 percent cheaper than those of other producers in Viet Nam. Third, local firms supplying parts and components to these Chinese FDI firms experience positive productivity gains. The findings show how Viet Nam’s solar boom emerged through deep integration into China’s subsidized supply chains. |
| Date: | 2026–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11478 |
| By: | Mary Amiti; Sebastian Heise; David E. Weinstein |
| Abstract: | There has been a lot of interest in how tariffs affect consumer prices (for example, Cavallo et al. 2021, 2025). In this post, we present results from our new research paper that estimates the effects of the 2025-26 tariffs on retail consumer prices. We find that for every percentage point increase in average tariffs, consumer goods prices increase by about a quarter of a percent after one year. Roughly two-thirds of the effect arises because tariffs raise the prices of imported consumer goods. The remaining third arises indirectly: tariffs increase the prices of goods made in the U.S. because producers pay more for imported parts and materials, and because producers raise their markups when competing imports cost more. The effects differ in their timing. Prices of imported goods respond quickly to tariffs, while prices of U.S.-made goods adjust over six to twelve months as higher costs move through the supply chain. |
| Keywords: | tariffs; pass-through; inflation; consumer prices; import prices |
| JEL: | E31 F13 F14 |
| Date: | 2026–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:103890 |
| By: | Francesco Filippucci; Peter Gal; Katharina Laengle; Matthias Schief; Muhammed A. Yildirim (Center for International Development at Harvard University) |
| Abstract: | This paper provides estimates of expected per capita real income gains from AI over the next decade in OECD and G20 economies. It relies on a multi-country, multi-sector general equilibrium model to incorporate the role of international trade and considers different scenarios regarding AI adoption paths and AI capabilities. In our central scenario, AI-driven productivity gains vary widely across countries and are expected to raise per capita real income growth by 0.1–0.95 percentage points annually. The model’s dynamics reveal a key insight: while countries lagging in AI adoption can gain from cheaper, AI-intensive imports generated by global diffusion, maintaining competitiveness – especially in highly AI-exposed sectors – ultimately requires strong domestic AI adoption. As a further channel, the paper quantifies the welfare effects generated by international knowledge spillovers boosting AI adoption of countries with relatively lower AI adoption. |
| Keywords: | Artificial Intelligence, International trade, Productivity, Technology adoption |
| JEL: | C6 E1 F1 O3 O4 O5 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:glh:wpfacu:272 |