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on International Trade |
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Issue of 2025–11–17
eleven papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Moder, Isabella; Spital, Tajda |
| Abstract: | Motivated by current events, this paper assesses the impact of tariff increases on bilateral greenfield foreign direct investment (FDI) over the period 2016-2023. Leveraging a comprehensive dataset of announced greenfield investment projects, official FDI statistics, and bilateral product-level tariff data, we estimate a series of gravity equations to uncover key relationships. Our results show that, at an aggregate level, tariff increases are associated with a rise in greenfield FDI, consistent with the tariff-jumping hypothesis. However, this positive effect reverses for greenfield manufacturing FDI, where high-intensity tariff increases significantly deter investment. A sectoral analysis reveals substantial heterogeneity: consumer-facing industries tend to attract more investment following tariff hikes, while input-intensive sectors experience declines. Overall, our findings suggest that using tariffs to stimulate foreign manufacturing investment is a risky strategy. JEL Classification: F13, F21, F23, F68 |
| Keywords: | gravity model, greenfield FDI, protectionism, tariffs, trade policy |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253144 |
| By: | Alfred V Guender; Onur A. Koska |
| Abstract: | In the face of multiplicative uncertainty about the effects of a tariff on the trade balance, policymakers should err on the side of caution and use tariffs less aggressively. This important insight is illustrated in two separate cases, one where multiplicative uncertainty arises only in the pass-through from the tariff to import prices, and the other where multiplicative uncertainty is present in both the pass-through to import prices and the elasticity of the trade balance with respect to import prices. |
| Keywords: | trade balance, tariff policy, uncertainty, pass-through, elasticity |
| JEL: | F13 F5 F6 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-59 |
| By: | Bekkers, Eddy; Yilmaz, Ayse Nihal; Métivier, Jeanne; Tresa, Enxhi; Iunius, Lory; Xu, Ankai |
| Abstract: | In this paper we explore the impact of decarbonization on international trade and development employing a recursive dynamic Computable General Equilibrium (CGE). We develop three long run stylized climate change scenarios: (i) Global Inaction (GI); (ii) Divided World (DW); and (iii) Cooperation towards Net Zero (CNZ). The CNZ scenario encompasses comprehensive measures resulting in a significant reduction in emissions to approximately 10 billion tons by 2050, contrasting with escalating emissions under GI and stagnation under DW. The analysis shows that the share of energy trade in total trade would fall substantially in CNZ, from 11% to 3%. Furthermore, the share of energy exported falls drastically since electricity is less tradable than fossil fuels. Exports of fossil fuel dependent countries will shift from fossil fuels to emission intensive trade exposed sectors and sophisticated manufacturing. |
| Keywords: | decarbonisation policies, net zero, energy trade, diversification |
| JEL: | F13 F18 F64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wtowps:330671 |
| By: | Martin Wolf; Luca Fornaro |
| Abstract: | We provide a theory connecting trade policies to innovation and technological hegemony, based on the notion that high-tech clusters generate technological rents for the countries hosting them. We show that tariffs on high-tech imports may be used to steal technological rents from the rest of the world, by redirecting innovation activities from foreign to domestic firms. This strategy may lead to welfare gains, which however come at the expense of even larger welfare losses in the rest of the world. Tariffs may backfire even for the country imposing them if they are not well designed, or if the rest of the world retaliates. |
| Keywords: | endogenous growth, high-tech, innovation, intangibles, international trade, tariffs |
| JEL: | E22 F12 F13 F42 F43 O24 O33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1530 |
| By: | Andrea Ariu; Giulia Rivolta (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore) |
| Abstract: | This paper quantifies the micro- and macro-level consequences of the sudden appreciation of the Swiss franc in 2015, one of the sharpest and most persistent currency movements in recent decades. Using detailed firm-level data on French imports and exports, we show that the Swiss franc appreciation led to a rise in exports, driven mainly by the entry of new firms and new products, while imports increased only briefly due to a spike in prices among continuing firm–product pairs. These dynamics mirror a textbook J-curve adjustment and reveal the firm-level mechanisms underlying this aggregate response. On the macro side, we trace how the shock propagated through supply chains, capturing both direct and indirect exposures through input–output linkages. This network-based perspective uncovers a small but negative overall impact on French GDP, driven by the stronger hit to importers, more reliant on non-euro currencies and more central within domestic production networks, who acted as key conduits transmitting the negative side of the shock across the economy. |
| Keywords: | Exchange rate shocks, international trade, production network. |
| JEL: | F14 F31 F44 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:ctc:serie1:def146 |
| By: | Kee, Hiau Looi; Xie, Enze |
| Abstract: | Nickel is essential for producing iron and steel. Endowed with the world's largest reserve, Indonesia banned nickel exports in 2014 to promote industrialization. This paper studies the impacts of the export ban on downstream steel-using industries. A three-sector model shows that, while the export ban could raise the domestic value-added ratio (DVAR) in exports, the entry of smaller, inefficient firms led to aggregate efficiency losses downstream. Firm-level evidence confirms higher DVAR, smaller firm size, and larger entrant shares in downstream industries post the export ban. A field mission validated these results, while noting the continued heavy reliance on imported steel. |
| Date: | 2025–11–10 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11249 |
| By: | Mo, Zhexun; Kaeppel, Katharina; Schröder, Carsten; Yang, Li |
| Abstract: | This paper investigates how the German public perceives Chinese Foreign Direct Investment (FDI) amid escalating geopolitical tensions and deepening China–EU economic interdependence, complemented by evidence on Chinese perceptions of German FDI. We combine data from a large-scale survey experiment embedded in the 2023 German Socio-Economic Panel Innovation Sample (N = 2, 365) with a descriptive survey in China (N = 2, 000). German respondents substantially overestimate the scale of Chinese investment—believing it accounts for about 30% of total inward FDI, compared to an actual share of roughly 1%—and evaluate it significantly less favorably than investment from other EU countries or the United States. In contrast, Chinese respondents express consistently positive views of German FDI, revealing a pronounced asymmetry in mutual perceptions. To probe the origins and malleability of these views, we implement three randomized interventions in Germany: a factual correction of actual FDI shares and two narrative framings emphasizing either positive or negative aspects of Chinese investment. While factual information modestly improves perceptions of FDI’s economic benefits, none of the treatments meaningfully shift deeper, ideologically anchored attitudes toward Chinese investment. Quantile treatment effect analyses indicate, however, that these interventions reduce anti-China biases among respondents who are initially more receptive to Chinese FDI. Taken together, the results—consistent across direct evaluations, conjoint choice experiments, and Willingness-to-Accept (WTA) measures—underscore the limits of informational interventions in reshaping entrenched geopolitical or identity-based biases toward foreign investment. (Stone Center on Socio-Economic Inequality Working Paper) |
| Date: | 2025–10–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:74k3v_v1 |
| By: | Bekkers, Eddy; Humphreys, Lee; Kalachyhin, Hryhorii; Wilczynska, Karolina; Zhao, Danchen |
| Abstract: | This paper studies the macroeconomic impacts of artificial intelligence (AI) using a quantitative trade model with multiple sectors, multiple factors of production, and intermediate linkages. The reallocation of tasks from labour to AI services will generate productivity gains in the model, and AI will reduce operational trade costs. We build four scenarios that differ in how far less-prepared economies catch up. The simulations yield three main findings. First, AI adoption is projected to substantially boost global trade flows and eco-nomic growth: in the most favourable scenario, the diffusion of AI raises global GDP by an additional 13.2% over the next 15 years compared to the baseline. Global trade volumes are projected to be 35% larger than without AI. Second, low- and middle-income economies can capture more of these gains if they improve their digital infrastructure and ensure adequate AI deployment across the economy. Third, AI is projected to change the withincountry income distribution. While all factors gain in real terms, returns shift toward capital and the skill premium declines. The magnitude of these distributional effects depends on the long-run growth rate of AI and the degree of complementarity between production factors. |
| Keywords: | Artificial Intelligence, Computational general equilibrium, Productivity, Technology adoption, Trade Cost |
| JEL: | C68 E13 O33 O41 F17 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wtowps:330670 |
| By: | Bertermann, Alexander (LMU Munich); Dauth, Wolfgang (Institut für Arbeitsmarkt- und Berufsforschung); Suedekum, Jens (Heinrich Heine University Düsseldorf); Woessmann, Ludger (University of Munich) |
| Abstract: | How do firms and workers adjust to trade and technology shocks? We analyze two mechanisms that have received little attention: training that upgrades skills and early retirement that shifts adjustment costs to public pension systems. We combine novel data on training participation and early retirement in German local labor markets with established measures of exposure to trade competition and robot adoption. Results indicate that negative trade shocks reduce training—particularly in manufacturing—while robot exposure increases training—particularly in indirectly affected services. Both shocks raise early retirement among manufacturing workers. Structural change thus induces both productivity-enhancing and productivity-reducing responses, challenging simple narratives of labor market adaptation and highlighting the scope for policy to promote adjustment mechanisms conducive to aggregate productivity. |
| Keywords: | workers, firms, robots, automation, technological change, trade, retirement, training, labor market |
| JEL: | J24 J26 O33 F16 R11 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18247 |
| By: | Emediegwu, Lotanna E.; Rogna, Marco |
| Abstract: | The transmission of commodities prices from the international to local markets is an interesting and deeply investigated topic. A fast and strong link between the two levels of the market is seen by economists as a sign of local market efficiency, allowing actors to respond fast to signals coming from the international market. However, the empirical evidence on the topic is very mixed, ranging from a very weak linkage between the two market prices to a high-speed and almost complete transmission. The present paper aims to advance the knowledge on the topic by focusing on the price transmission of four main cereals – maize, rice, sorghum, and wheat – in 23 developing and fragile economies. Employing a recent World Bank dataset with prices for several local markets in select countries, we estimate panel vector autoregressions (PVAR) to analyze the pass-through effects of international price shocks on local food prices. We find evidence for a relatively strong price transmission elasticity for all commodities except sorghum. Furthermore, the observed transmission of shocks is almost immediate. We present the policy implications for these findings. |
| Keywords: | Demand and Price Analysis, International Relations/Trade |
| URL: | https://d.repec.org/n?u=RePEc:ags:aes024:355335 |
| By: | Nicholas Bloom; Philip Bunn; Paul Mizen; Pawel Smietanka; Gregory Thwaites |
| Abstract: | This paper examines the impact of the UK's decision to leave the European Union (Brexit) in 2016. Using almost a decade of data since the referendum, we combine simulations based on macro data with estimates derived from micro data collected through our Decision Maker Panel survey. These estimates suggest that by 2025, Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time. We estimate that investment was reduced by between 12% and 18%, employment by 3% to 4% and productivity by 3% to 4%. These large negative impacts reflect a combination of elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process. Comparing these with contemporary forecasts – providing a rare macro example to complement the burgeoning micro-literature of social science predictions – shows that these forecasts were accurate over a 5-year horizon, but they underestimated the impact over a decade. |
| JEL: | E0 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34459 |