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on International Trade |
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Issue of 2025–06–16
eighteen papers chosen by Nicola Daniele Coniglio, Università degli Studi di Bari “Aldo Moro” |
| By: | Holger Breinlich; Jun Du; Oleksandr Shepotylo |
| Abstract: | This paper examines the impact of protectionist policies on exports within global value chains (GVCs), using the COVID-19 pandemic as a natural experiment. Leveraging UK customs data (2017–2020) and a shift-share identification strategy, we estimate an elasticity of exports with respect to intermediate imports of 0.4. A one standard-deviation increase in COVID restrictions in sourcing countries led to a 3.7% decline in intermediate exports. These findings reveal a paradox: policies aimed at self-sufficiency can harm export performance by disrupting supply chains. The study highlights the vulnerabilities of GVCs and the unintended consequences of protectionist trade policies, offering insights into the trade-offs between resilience and open trade networks. |
| Keywords: | Covid-19, mercantilism, exports, shift-share |
| JEL: | F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11891 |
| By: | Laura Alfaro; Paola Conconi; Fariha Kamal; Zachary Kroff |
| Abstract: | We leverage newly linked data from the U.S. Census Bureau and the U.S. Bureau of Economic Analysis to study transactions within U.S. multinational enterprises (MNEs). We show that using administrative data on intrafirm trade allows us to correct for measurement error in survey data and to identify the positive relationship between input-output (IO) linkages and the probability of trade between U.S. parents and their foreign affiliates. We also document the prevalence of intrafirm trade: more than half (three-quarters) of affiliates worldwide (in North America) export to or import from their U.S. parent. Our findings provide strong empirical support for traditional theories of firm boundaries that predict trade between vertically linked units of the same firm, and underscore the importance of accounting for the trade frictions that shape MNEs’ regional supply chains. |
| JEL: | D23 F14 F23 F4 L20 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33887 |
| By: | O'Grady, Michael (Central Bank of Ireland) |
| Abstract: | Employing an augmented version of the synthetic control method, we estimate the effects of the Brexit vote shock and Irish border guarantees on trade patterns between Ireland and the UK, relative to other euro area economies. We let a matching algorithm determine a combination of comparison economies that best resembles the path of Irish bilateral trade with the UK before (i) the Brexit referendum and (ii) guarantees from both the UK and the EU to deliver a “no-border solution” to the island of Ireland. The differences between imports and exports for Ireland and its synthetic doppelganger represent this commitment to a “no-border solution” between Northern Ireland and the Irish Republic, mitigating the negative effects of the Brexit vote shock on bilateral Irish-UK trade. We show that, contrary to the prevailing narrative, Irish imports and exports did not respond to the uncertainty surrounding the Brexit vote to the same extent as other euro area member countries |
| Keywords: | Brexit, European Union, Synthetic Control Methods, Trade Policy Uncertainty, Globalization. |
| JEL: | E65 F13 F42 F68 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:2/rt/25 |
| By: | Mr. Serkan Arslanalp; Seung Mo Choi; Parisa Kamali; Mr. Robin Koepke; Matthew McKetty; Michele Ruta; Mario Saraiva; Alessandra Sozzi; Jasper Verschuur |
| Abstract: | We introduce a nowcasting model of global maritime trade, leveraging satellite-based big data on vessel movements. This provides a timely indicator of global trade as shipping accounts for about 80 percent of worldwide merchandise trade by volume. Our approach mimics key features of the way statisticians compile trade data—measuring the customs value of imported and exported goods first, forming import and export price deflators, and then estimating import and export volumes. We show how global and regional nowcasts can be obtained using port-level data from IMF PortWatch and highlight important enhancements to the platform since its beta launch in November 2023. Finally, we demonstrate how the monthly nowcasts can be used to monitor fragmentation and regionalization in global maritime trade. |
| Keywords: | Nowcasting; maritime trade; big data |
| Date: | 2025–05–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/093 |
| By: | Krantz, Sebastian |
| Abstract: | Using detailed global trade and novel Multi-Region Input–Output data, this paper examines the East African Community’s (EAC) global and regional integration through trade, global, and regional value chains (GVCs and RVCs). With surgical attention to detail, the first part of the paper dissects key patterns and trends of EAC members’ participation in global and regional trade and production networks at the aggregate, bilateral, sectoral, and bilateral-sectoral levels. The second part then provides causal reduced-form evidence for the economic benefits of EAC integration through trade, GVCs, and RVCs at the sector level. Findings imply that the region is moderately integrated into GVCs and RCVs but shows no overall trend towards greater integration. Regional integration is advancing in agriculture and food processing, and Kenya is becoming a more dominant regional supplier of manufactures. Integration through trade and GVCs positively affects economic development in the region, particularly deeper forward GVC linkages in manufacturing. Deepening regional trade and forward linkages yields additional economic benefits vis-a-vis global linkages. |
| Keywords: | GVCs, RVCs, EAC, Trade, Regional integration, Economic development |
| JEL: | F14 F15 O11 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:318395 |
| By: | Freeman, Rebecca; Larch, Mario; Theodorakopoulos, Angelos; Yotov, Yoto V. |
| Abstract: | We propose new methods to identify the impact of country‐specific characteristics, policies, and trade costs on bilateral trade flows within the structural gravity framework. We complement theory with a simple two‐stage estimating procedure and offer proof of concept by quantifying the impact of country‐specific research and development (R&D) expenditure on trade. Our results suggest a positive relationship overall but a larger impact of R&D on international (versus domestic) trade. Importantly, our methods deliver trade elasticity estimates without the need for price or tariff data, and we highlight this feature by obtaining aggregate and sectoral trade elasticity estimates, including for services. |
| Keywords: | country-specific trade costs; elasticity of substitution; R&D and trade; services; structural gravity; trade elasticity |
| JEL: | F10 F14 F16 |
| Date: | 2025–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128233 |
| By: | Anna Ignatenko; Ahmad Lashkaripour; Luca Macedoni; Ina Simonovska |
| Abstract: | On April 2, 2025, President Trump declared "Liberation Day", announcing broad tariffs to reduce trade deficits and revive U.S. industry. We analyze the long-term economic impacts of these tariffs through the lens of a trade model that features flexible tariff passthrough and endogenous trade deficits, calibrated to trade and income data from 194 countries. If trading partners do not retaliate, the tariffs could decrease the U.S. trade deficit and improve its terms of trade, yielding modest welfare gains when tariff revenues reduce the income tax burden for American workers. However, reciprocal retaliation results in net welfare losses for the U.S. economy. We derive the unilaterally optimal tariff within our model and show that the USTR tariffs, based on bilateral deficits, differ markedly from this theoretical benchmark. Our calibrated model implies a unilaterally optimal tariff for the U.S. of 19 percent, uniformly applied across all trading partners, and linked to the overall trade deficit rather than bilateral imbalances. Under optimal foreign retaliation to the USTR tariffs, the calibrated model predicts a decline in U.S. welfare by up to 3.8 percent when accounting for input-output linkages, and a contraction in global employment by 1.1 percent. |
| Keywords: | tariff, tariff war, deficit, welfare, trade, Trump, Liberation Day, China |
| JEL: | F1 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11890 |
| By: | Lucien Chaffa; Martin Trépanier; Thierry Warin |
| Abstract: | This study investigates the potential of machine learning (ML) methods to enhance the estimation of the gravity model, a cornerstone of international trade analysis that explains trade flows based on economic size and distance. Traditionally estimated using methods such as the Poisson Pseudo Maximum Likelihood (PPML) approach, gravity models often struggle to fully capture nonlinear relationships and intricate interactions among variables. Leveraging data from Canada and the US, one of the largest bilateral trading relationships in the world, this paper conducts a comparative analysis of traditional and ML approaches. The findings reveal that ML methods can significantly outperform traditional approaches in predicting trade flows, offering a robust alternative for capturing the complexities of global trade dynamics. These results underscore the value of integrating ML techniques into trade policy analysis, providing policymakers and economists with improved tools for decision-making. Cette étude examine le potentiel des méthodes d'apprentissage automatique (ML) pour améliorer l'estimation du modèle de gravité, une méthode clé de l'analyse du commerce international qui explique les flux commerciaux en fonction de la taille de l'économie et de la distance. Traditionnellement estimés à l'aide de méthodes telles que l'approche du pseudo-maximum de vraisemblance de Poisson (PPML), les modèles de gravité ont souvent du mal à saisir pleinement les relations non linéaires et les interactions complexes entre les variables. En s'appuyant sur les données du Canada et des États-Unis, l'une des relations commerciales bilatérales les plus importantes au monde, cet article effectue une analyse comparative des approches traditionnelles et des approches par apprentissage automatique. Les résultats révèlent que les méthodes de ML peuvent être nettement plus performantes que les approches traditionnelles pour prédire les flux commerciaux, offrant ainsi une alternative robuste pour saisir les complexités de la dynamique du commerce mondial. Ces résultats soulignent la valeur de l'intégration des techniques de ML dans l'analyse de la politique commerciale, fournissant aux décideurs politiques et aux économistes des outils améliorés pour la prise de décision. |
| Keywords: | Gravity Model, PPML Machine Learning, International Trade, Trade Policy Analysis, Modèle de gravité, PPML, apprentissage automatique, commerce international, analyse de la politique commerciale |
| JEL: | F10 F14 C13 C45 |
| Date: | 2025–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:cir:cirwor:2025s-14 |
| By: | Bosker, M.; Haasbroek, M. |
| Abstract: | We use detailed historical data on India’s domestic infrastructure to show how its high domestic transport costs have conditioned the local labour market consequences of its drastic import tariff liberalization in the early 1990s. We find that districts located farther away from the country’s main international gateways are better shielded from the resulting increased foreign import competition: their non-agricultural employment falls less than in otherwise similarly exposed districts located closer to India’s major ports. At the same time, they also benefit less from improved access to foreign intermediates: non-agricultural employment increases less than in districts with a similar input-output structure but located closer to the country’s main ports. These employment responses also vary across firms of different sizes: employment in small to medium sized firms is hit hardest by increased import competition, whereas employment in medium to large firms benefits most from better access to foreign intermediates. This difference between small and large firms is also most pronounced in districts best-connected to India’s major ports. |
| Keywords: | Words Gains from Trade, Domestic Infrastructure, Local Labour Demand, India |
| JEL: | F14 F15 R11 |
| Date: | 2025–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2529 |
| By: | Stéphane Becuwe; Bertrand Blancheton; Christopher M. Meissner |
| Abstract: | We explore changes in product quality during France’s major liberalization episode of the mid-nineteenth century. Using new data and existing techniques from the international trade literature, we investigate the relative quality of French products versus those of international competitors, within industry changes in quality, and within product quality changes. France produced relatively high quality/high unit value products in the traded sector throughout the period. Liberalization was associated with an overall decline in the quality of French exports. However, some of the best-selling exports experienced an apparent rise in quality around the time of liberalization. As for imports, while French spending may have switched to lower quality products due to liberalization, lower tariffs were associated with rising within product quality. |
| JEL: | F14 N74 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33902 |
| By: | Laura Alfaro; Harald Fadinger; Jan S. Schymik; Gede Virananda |
| Abstract: | Trade and industrial policies, while primarily intended to support domestic industries, may unintentionally stimulate technological progress abroad. We document this mechanism in the case of rare earth elements (REEs) – critical inputs for manufacturing at the knowledge frontier, with low elasticity of substitution, inelastic supply, and high production and processing concentration. To assess the importance of REEs across industries, we construct an input-output table that includes disaggregated REE inputs. Using REE-related patents categorized by a large language model, sectoral TFP data, trade data, and physical and chemical substitution properties of REEs, we show that the introduction of REE export restrictions by China led to a global surge in innovation and exports in REE-intensive downstream sectors outside of China. To rationalize these findings and quantify the global impact of the adverse REE supply shock, we develop a quantitative general equilibrium model of trade and directed technological change. We also propose a structural method to estimate sectoral input substitution elasticities for REEs from patent data and find REEs to be complementary inputs. Under endogenous technologies and with complementary inputs, input supply restrictions on REEs induce a surge in REE-enhancing innovation and lead to an expansion of REE-intensive downstream sectors. |
| JEL: | E0 E6 F02 F13 F14 F42 F6 O1 O33 O47 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33877 |
| By: | Eduardo Dávila; Andrés Rodríguez-Clare; Andreas Schaab; Stacy Tan |
| Abstract: | The classic tariff formula states that the optimal unilateral tariff equals the inverse of the foreign export supply elasticity. We generalize this result and show that an intertemporal tariff formula characterizes the efficient tariff in a large class of dynamic heterogeneous agent (HA) economies with multiple goods. Intertemporal export supply elasticities and relative tariff revenue weights are sufficient statistics for the optimal tariff that decentralizes the efficient allocation. We also develop a general theory of second-best optimal tariffs. In dynamic HA incomplete markets economies, Ramsey optimal tariffs trade off intertemporal terms of trade manipulation against production efficiency, risk-sharing, and redistribution. Intertemporal export supply elasticities and relative tariff revenue weights remain sufficient statistics for the intertemporal terms of trade manipulation motive of second-best optimal tariffs. We apply our results to a quantitative heterogeneous agent New Keynesian (HANK) model with trade. |
| JEL: | F13 F41 H21 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33898 |
| By: | George A. Alessandria; Jiaxiaomei Ding; Shafaat Y. Khan; Carter B. Mix |
| Abstract: | We evaluate the aggregate effects of a change in tariffs on the US and world economies when tariff revenue is used to enact fiscal reform. Our model combines a standard international model of fiscal policy with taxes and a dynamic model of trade participation and tariffs that allows for uncertainty and transitions. We consider effects of permanent and temporary tariffs–with and without retaliation–when tariff revenue is used to reduce taxes on capital or labor or to subsidize investment. Compared to a lump sum redistribution, using tariff revenue for these reforms always boosts economic activity. Key to our analysis is the effect of trade dynamics on import substitution, such that tariff revenue after an increase in tariffs is higher in the short run than in the long run. When increasing the tariff by 20 percentage points, the revenue raised is largest when tariffs are temporary, unilateral, and used to subsidize investment, increasing by about 2 percent of GDP. This case also yields a large temporary increase in the trade balance. We find the welfare-maximizing unilateral tariff is close to 18 percent when tariff revenue is used to subsidize investment compared to 0 percent under a lump sum redistribution. We also find cutting capital taxes does not generate as much growth as introducing an investment subsidy since tariffs raise the price of investment substantially. |
| JEL: | E6 F10 F4 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33784 |
| By: | Suga, Nobuhito; Tawada, Makoto; Yanase, Akihiko |
| Keywords: | Government, Trade, Comparative advantage, Nash equilibrium, Symmetry-breaking, |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:hok:dpaper:382 |
| By: | Ruiming Min |
| Abstract: | This study examines whether Donald Trump's tariff policies, particularly the US-China trade war initiated in 2018, delivered on promises to revitalize American manufacturing and create jobs. Using county-level business application data from 2018-2025, we analyze the relationship between tariff implementation and new business formation through linear regression analysis. Our findings reveal a statistically significant positive association between US tariffs on China and American business applications. However, when Chinese retaliatory tariffs are included in the analysis, their negative coefficient substantially exceeds the positive US tariff effect, suggesting that retaliatory measures largely offset the benefits of protectionist policies. Control variables including inflation rate, federal funds rate, and government spending show significant positive effects on business formation. These results indicate that while protectionist trade policies may stimulate domestic business formation, their effectiveness is significantly diminished by retaliatory responses from trading partners. The study provides evidence that unilateral tariff measures without diplomatic coordination produce limited net benefits, confirming that trade wars create scenarios where potential gains are neutralized by counteractions. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.00999 |
| By: | Ilhyock Shim; Torsten Ehlers; Fredy Gamboa; Han Qiu |
| Abstract: | Regional integration among emerging market economies complements global integration rather than substituting for it, which implies that strong regional ties act as buffers against global fragmentation.Emerging Asia is more integrated than other emerging market regions due to a higher share of manufacturing with complex supply chains and the presence of regional financial centres in Hong Kong SAR and Singapore.Trade and banking integration reinforce each other, and regional payment system integration has positive externalities by reducing the transaction costs of trade and enabling cross-border banking services.Tapping the significant potential for further regional integration requires concerted efforts on cross-border cooperation and the implementation of targeted trade and banking sector liberalisation policies. |
| Date: | 2025–06–05 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:102 |
| By: | Anastasiia Antonova; Luis Huxel; Mykhailo Matvieiev; Gernot J. Muller; Gernot Müller |
| Abstract: | Imports feature at all stages of production as well as in final consumption, and this is key to how tariff shocks play out. If imposed on imports in upstream sectors, import tariffs lower domestic output in downstream sectors; if imposed downstream, they raise upstream production. The aggregate effect of tariffs can be recessionary or expansionary—depending on the strength of upstream and downstream effects. Tariffs raise inflation no matter what, but how persistently they do so also depends on the network structure. We establish these results in a New Keynesian small open-economy model with an input-output network and provide supporting evidence based on US import tariffs. Simulating the "Liberation Day" tariff package, we find it highly stagflationary. |
| Keywords: | tariffs shocks, business cycle, upstream sectors, downstream sector, input-output network, monetary policy, inflation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11917 |
| By: | Jaison R. Abel; Richard Deitz; Sebastian Heise; Benjamin Hyman; Nick Montalbano |
| Abstract: | U.S. import tariffs increased to historically high rates in recent months, raising the costs of many imported inputs businesses use. Businesses subject to these higher costs have been faced with difficult and complex decisions about whether to absorb the tariffs through lower profits, raise their prices to recover the higher costs, or some combination of both. These decisions are influenced by the degree of competition in the marketplace, potential customer reactions, and the ability to maintain profit margins, among other factors. Our May survey of businesses in the New York–Northern New Jersey region asked firms about the tariffs they faced, recent changes in the cost of imported goods, and whether they were passing on tariff-induced cost increases to their customers. Results indicate most businesses passed on at least some of the higher tariffs to their customers, with nearly a third of manufacturers and about 45 percent of service firms fully passing along all tariff-induced cost increases by raising their prices. |
| Keywords: | tariffs; pass-through; prices; costs; imports; uncertainty |
| JEL: | F0 E3 |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:100082 |