Céline Carrère, Anja Grujovic, Frédéric Robert-Nicoud, 13 November 2019

Unemployment is absent from most quantitative trade models in the academic literature. Using a trade model that also includes unemployment and data between 2001 and 2008, this column shows that repealing NAFTA and the imposition of 20% bilateral tariffs between the US and Mexico in all sectors would reduce welfare by 0.31% in the US and by 6.6% in Mexico. An US increase of trade barriers on motor vehicles against imports from all countries bar Mexico and Canada would lead to a decrease in long-run welfare and employment in both Mexico and the US as well as in major car-producing countries. 

Chang Sun, Zhigang Tao, Hongjie Yuan, Hongyong Zhang, 03 November 2019

The trade war between the US and China has had impacts on other countries – including Japan, one of the most important trading partners of both countries. The column uses quarterly sales data and stock market returns to show that the operations in China of Japanese MNCs have been negatively affected by the trade war, especially when Chinese affiliates rely heavily on trade with North America. This has led to a reduction in their stock prices. 

Michael Bordo, Mickey Levy, 18 October 2019

The history of tariffs and immigration and capital barriers provides clear lessons of the potentially sizeable economic costs of anti-globalisation policies. This column describes how the US-China tariff war and policy-related uncertainties are harming economic performance, and are also distorting the Federal Reserve’s monetary policy and undermining its credibility and independence. Tariffs and discretionary monetary policy are a toxic mix, and the authors encourage a de-escalation of burdensome barriers to trade and urge the Fed to adopt a systematic, rules-based approach to monetary policy.

Stefania Garetto, Lindsay Oldenski, Natalia Ramondo, 08 October 2019

Multinational enterprises play an important role in coordinating production around the globe. This column presents a dynamic quantitative model of multinational enterprise expansion that can be used to analyse the effects of policies that affect the cost of the operations of such firms. It uses this model to estaimte the impact of potential implementations of Brexit.

Gene Grossman, Phillip McCalman, Robert Staiger, 23 September 2019

While tariffs have been reduced significantly in the last decades, other barriers to trade, such as differing regulations across countries, continue to pose obstacles. This column presents a new framework to analyse how different forms of trade agreements can address these non-tariff barriers. For various economic environments, it discusses whether and how these treaties can achieve global efficiency.

Luisa Kinzius, Alexander Sandkamp, Erdal Yalcin, 16 September 2019

Since the inauguration of Donald Trump as the president of the US, the world has observed an unprecedented rise in border tariffs. This column shows that trade protection had in fact started much earlier, in the form of non-tariff barriers. An empirical analysis reveals that the average trade dampening effect of such barriers is comparable to that of trade defence instruments such as anti-dumping duties. However, this negative effect can be mitigated by free trade agreements.

Gabriel Felbermayr, Feodora Teti, Erdal Yalcin, 10 September 2019

Rules of origin exist to avoid trade deflection, but they distort global value chains and are costly to abide by. This column shows empirically that in preferential trade agreements, trade deflection is unlikely to be profitable because tariffs are generally low, that countries in a common free trade agreement tend to have similar external tariff levels, and that when tariff levels differ, deflection is profitable at most for one country in the pair. Moreover, transportation costs create a natural counterforce. It appears that rules of origin are primarily used to limit trade, and hence represent an instrument for trade protection. 

Lucrezia Reichlin, 25 July 2019

Lucrezia Reichlin argues that in an increasingly globalised world, there is more need than ever for Europeans to work together in order to make our currencies robust, to cope with the refugee crisis, and to defend ourselves from the threat of protectionism.

Rafael Di Tella, Dani Rodrik, 01 July 2019

Economists have traditionally emphasised the benefits of openness to trade, but populists resist it. How generalised is the demand for trade protection? And how does it compare with other disruptions in the labour market? This column suggests that people often react by demanding trade protection when faced with shocks that generate unemployment, with the largest effects observed when it is caused by imports arriving from a poor country. 

Meredith A. Crowley, Ralph Ossa, Heiwai Tang, 20 June 2019

A new book from the CEPR argues that the current trade war is a long-term danger to all economies, not just those of the US and China. Editor Meredith Crowley of the University of Cambridge and two of the authors tell Tim Phillips why prospects for the world economy are 'grim'.

Meredith A. Crowley, 30 May 2019

As a trade war of unprecedented scope and magnitude engulfs the world’s two largest economies, this column introduces a new Vox eBook that seeks to shed light on the origins of the conflict, the current impacts on economic activity around the world, and the likely consequences for the future of globalisation. It concludes that the prospects for the future of the multilateral trading system look grim.  

Chad Bown, 10 May 2019

Who will be the biggest loser in this trade war? Chad Bown tells Tim Phillips why it could be the WTO's dispute resolution system, and why we should worry if this happens.

Jaime de Melo, Alessandro Nicita, 04 May 2019

Developing countries often struggle to access international markets. One reason is that trade regulatory frameworks are becoming more complex, and that contemporary economic integration strategies need to confront policy measures that are well beyond the scope of traditional trade policy. This column discusses those policy measures and options for integrating them into developing countries' strategies.

Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy, Amit Khandelwal, 07 November 2019

The 2018 tariff hikes reversed a decades-long push by the US for lower global trade barriers around the world. This column examines the impact of the resulting trade war on the US economy. It estimates a $51 billion annual loss to US consumers and firms from higher import prices, with an aggregate annual loss of $7.2 billion when producer gains and tariff revenues are factored in. It also argues that US tariffs protected politically competitive counties, whereas retaliations by other nations targeted strongly Republican counties.

Yasuyuki Todo, 27 February 2019

Davide Furceri, Swarnali Ahmed Hannan, Jonathan D. Ostry, Andrew Rose, 27 February 2019

It seems an appropriate time to study what, if any, have been the macroeconomic consequences of tariffs in practice. Using a straightforward methodology to estimate flexible impulse response functions, and data that span several decades and 151 countries, this column finds that tariff increases have, on average, engendered adverse macroeconomic and distributional consequences: a fall in output and labour productivity, higher unemployment, higher inequality, and negligible effects on the trade balance (likely owing to real exchange rate appreciation when tariffs rise). The aversion of the economics profession to the deadweight loss caused by protectionism seems warranted.

Raphael Auer, Barthélémy Bonadio, Andrei Levchenko, 07 February 2019

The tide has turned in international trade, with watershed political moments across the world showing the growing popularity of protectionist measures. This column analyses the relationship between the distributional effects of trade and voting patterns by modelling a scenario in which NAFTA is dismantled. It finds that the areas that voted most overwhelmingly for the Trump administration are the same as those that would experience the greatest wage decreases if NAFTA were to be revoked, due to the strong correlation in areas that face import competition from and export exposure to NAFTA partners.

Ufuk Akcigit, 23 November 2018

Firms like to be politically connected, because it makes it easier for them to do business. But is it good for the rest of us? Ufuk Akcigit of the University of Chicago tells Tim Phillips about the consequences of connecting to power.

Chad Bown, 30 October 2018

President Trump’s protectionism has a distinctive focus on disrupting US access to global supply chains. This column reveals that the major economies had in fact begun to impose additional trade protection on intermediate inputs even prior to 2016. New barriers targeting cross-border supply chains simply arose through policies aside from headline tariffs. Some of this new protection has also already spread beyond China’s trade and begun to cover exports from other countries. These results, combined with more recent policy actions, widen the possibility of a negative protectionist impact on the global sourcing of parts and components.

Menzie Chinn, 08 October 2018

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