Xuepeng Liu, Huimin Shi, 11 July 2019

The US-China trade war has continued for almost a year, but its effectiveness in preventing some Chinese origin products reaching the US may not be as great as it seems. This column shows how trade re-routing has been used in the past to circumvent antidumping duties in the context of trade tariffs. Firms may be able to avoid tariffs by sending their products to a third country, where the goods are reissued certificates of origin and then sent to the final destination country without being subject to the same tariffs.

Alvaro Espitia, Aaditya Mattoo, Mondher Mimouni, Xavier Pichot, Nadia Rocha, 10 July 2019

Preferential trade agreements cover more than half of world trade. This column argues that while the 280 preferential trade agreements in existence have substantially widened the scope of free trade and reduced average applied tariffs, they have struggled against traditional bastions of protection in poorer countries and have not been able to eliminate the high levels of protection for a handful of sensitive products. While preference margins offered to partners in such agreements seem large, their significance shrinks when competition from both preferential and non-preferential sources is considered.

Simon Evenett, Johannes Fritz, 01 July 2019

What is the practical and intellectual significance of the Sino-US tariff hikes of 2018? This column, taken from a recent Vox eBook, argues that the uncertainty engendered by the trade tensions is likely to have had a larger economic impact than the direct restrictive effect on international trade. The intellectual significance, meanwhile, lies in prompting the questions of what actions constitute a trade war and of whether trade policy analysts, in focusing on instances of brazen protectionism, have failed to spot more far-reaching commercial policy developments.

Michael Bordo, 07 June 2019

Growing international imbalances are widely understood to have led Nixon to end gold convertibility in 1971. This column argues that a key fundamental underlying these imbalances was the rising inflation in the US, in turn created by US macroeconomic policies. President Nixon blamed the rest of the world instead of correcting US monetary and fiscal policies. It also identifies similarities between the imbalances of the 1960s and 1970s and those of today, especially regarding fiscal policies and the use of tariff protection as a strategic tool.

Peter Egger, Katharina Erhardt, 03 May 2019

When economists model changes in tariffs, their models make assumptions about the impact of those changes. The column argues that those assumptions are often contradicted in the real world and proposes an approach that relaxes these restrictions. Estimates using this approach show that customary models may severely underestimate the impact of recent tariff increases.

David M. Higgins, Brian Varian, 27 April 2019

In the late 1920s and early 1930s, Britain tried to reorient its trade towards the Empire via an advertising campaign led by the Empire Marketing Board. As this column shows, in economic terms, the initiative was a complete failure, producing no increase in the Empire’s share of Britain’s imports. Imperial sentiment conflicted with economic reality: Britain was the biggest global importer of produce from the late 19th century to the interwar period, and the EMB’s activities were constrained by entrenched consumer preferences for non-Empire foodstuffs, such as Argentine beef and Danish butter.

Wilko Bolt, Kostas Mavromatis, Sweder Van Wijnbergen, 25 April 2019

Increasing protectionism will slow down world trade and may dampen global economic growth. This column examines the global macroeconomic consequences of a major trade conflict between the US and China, and shows that the two countries would be the biggest losers from a 10% ‘tit-for-tat’ trade war between them. As long as it does not get involved in the conflict, the euro area may temporally gain from trade diversion, as competitiveness improves and imports from regions whose exports are blocked elsewhere become cheaper.

Thiemo Fetzer, Carlo Schwarz, 23 April 2019

Tariff retaliation is widely believed to be politically motivated. This column presents evidence that retaliation against the Trump administration's tariff hikes seems to be systematically targeted against the Republican voter base. China appears to have been able to achieve a high degree of political targeting but likely harmed its own economy by targeting agricultural goods for which the US is a major supplier. The EU, on the other hand, appears to be more successful in navigating the trade-off. It also finds some evidence suggesting that Republican candidates fared worse in the mid-term elections in the US counties most exposed to retaliation.

Thilo Huning, Nikolaus Wolf, 12 April 2019

State borders can change due to both political and economic disputes. This column shows how the formation of the German state can be traced back to British political intervention at the end of the Napoleonic War. In preventing Russia from gaining territory westwards, Britain set in motion a series of events that gave Prussia strategic trade advantages. This led to the formation of Europe's first customs union (the Zollverein) and prepared the political unification of Germany.

Pablo Fajgelbaum, Pinelopi Goldberg, Patrick Kennedy, Amit Khandelwal, 12 April 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 $68.8 billion annual loss to US consumers and firms from higher import prices, with an aggregate annual loss of $7.8 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.

Bettina Peters, Mark Roberts, Van Anh Vuong, 30 March 2019

International markets can provide exporting firms with more opportunities to generate and introduce innovations and capitalise on their investments relative to purely domestic firms. Using German data, this column demonstrates that exporting firms introduce innovations more frequently than domestic firms and have higher economic gains from their innovations. Trade restrictions such as tariffs can affect a firm’s economic activities in foreign markets and also their R&D and innovation activities.

Rita Cappariello, Michele Mancini, Filippo Vergara Caffarelli, 22 March 2019

EU and the UK production networks are highly integrated, and Brexit poses a threat to supply and demand linkages between the two economies. This column describes how the effect of tariffs will be magnified due to back-and-forth trade across the Channel. This will increase production costs in the UK and, to a lesser extent, in the EU.

Jaime de Melo, Jean-Marc Solleder, 13 March 2019

Developing countries have not participated in the WTO-led negotiations aimed at bringing down barriers to trade in environmental goods. If negotiations conclude, would the win for trade and for the environment be extended to a win for developing countries? This column draws insights from a newly assembled comprehensive dataset on barriers to trade in environmental goods and provides evidence that tariffs and non-tariff barriers are still an impediment to trade while similar regulations stimulate it. A larger list of environmental goods would entice developing-country participation, but this will also require protecting developing countries from challenges at the WTO.

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.

Antoine Berthou, Caroline Jardet, Daniele Siena, Urszula Szczerbowicz, 08 February 2019

Escalating tensions between the US and its trading partners have made a global trade war more likely. In addition to the direct effect due to the increase in tariffs, a trade war may also affect GDP via indirect channels, such as a drop in productivity due to uncertainty and changes in the production environment. Using a multi-country model, this column shows that a global and generalised 10 percentage point increase in tariffs could reduce the level of global GDP by almost 2.0% on impact and up to 3.0% after two years, when all the additional indirect channels materialise. 

Steven Brakman, Harry Garretsen, Tristan Kohl, 01 December 2018

Massimiliano Calì, 16 October 2018

The US-China trade war has rapidly escalated, promising to disrupt trade flows between the two countries and beyond. This column provides the first estimates of trade and investment effects of the trade war on East Asia, one of the most exposed regions. By combining trade and tariff data, it provides some order of magnitude of the expected effects and identifies the possible winners and losers from the trade war in the region.

Menzie Chinn, 08 October 2018

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Events

  • 17 - 18 August 2019 / Peking University, Beijing / Chinese University of Hong Kong – Tsinghua University Joint Research Center for Chinese Economy, the Institute for Emerging Market Studies at Hong Kong University of Science and Technology, the Guanghua School of Management at Peking University, the Stanford Center on Global Poverty and Development at Stanford University, the School of Economics and Management at Tsinghua University, BREAD, NBER and CEPR
  • 19 - 20 August 2019 / Vienna, Palais Coburg / WU Research Institute for Capital Markets (ISK)
  • 29 - 30 August 2019 / Galatina, Italy /
  • 4 - 5 September 2019 / Roma Eventi, Congress Center, Pontificia Università Gregoriana Piazza della Pilotta, 4, Rome, Italy / European Center of Sustainable Development , CIT University
  • 9 - 14 September 2019 / Guildford, Surrey, UK / The University of Surrey

CEPR Policy Research