Trading Costs
Tariffs, Manufacturing Employment, and Supply Chains
Joseph Steinberg
NBER Working Paper, September 2025
Abstract:
I use a dynamic general-equilibrium model with supply-chain adjustment frictions to study the effects of tariffs on manufacturing employment. The model has four distinct manufacturing sectors: upstream goods with high trade elasticities (“oil”); upstream goods with low trade elasticities (“steel”); downstream goods with high trade elasticities (“toys”); and downstream goods with low trade elasticities (“cars”). I find that tariffs can increase overall manufacturing employment in the long run, but are likely to reduce it in the short run, and cause more reallocation of workers across these individual sectors than overall employment growth.
Did the 2018 trade war improve job opportunities for US workers?
Beata Javorcik et al.
Journal of International Economics, forthcoming
Abstract:
This paper uses data on the near universe of job adverts posted online in the US to study the impact of the 2018 trade war on US job opportunities. We develop measures of labor market exposure to three key channels of impact from the trade war: import protection for US producers, the higher cost of imported inputs for US producers, and exposure of US exporters to retaliatory tariffs. We find evidence that both tariffs on imported inputs and retaliatory tariffs led to a relative decline in online job postings in affected commuting zones. The effects of imported input tariffs were stronger for lower skilled postings than for higher skill postings and for part-time than full-time jobs. By contrast, we do not find any evidence of positive impacts of import protection on job openings. We estimate that the tariffs led to a combined effect of 162,019 fewer job postings in 2018, or 0.6 percent of the US total.
Bureaucratic Constraints on Supporting International Integration: Evidence from Trade Adjustment Assistance
Carlos Felipe Balcazar & KyuWon Lee
University of Southern California Working Paper, August 2025
Abstract:
Scholars have long argued that international integration can be sustained by providing sufficient government compensation to workers harmed by import competition. We argue that the success of such compensation also depends on the bureaucracies tasked with implementing it. Specifically, bureaucratic delays in delivering benefits to affected workers can erode trust in the government's capacity to mitigate the adverse effects of import competition, thereby weakening public support for international integration. We test this theory using the U.S. Trade Adjustment Assistance (TAA) program. Leveraging quasi-random assignment of TAA petitions to individual bureaucrats, we find that bureaucrat-driven delays in processing petitions shift voting behavior and public attitudes in the affected communities against international integration and the government. The effects are stronger where information about TAA delays is more likely to reach citizens. Our findings highlight broader political consequences of bureaucratic performance than previously considered.
Globalization and the Ladder of Development: Pushed to the Top or Held at the Bottom?
David Atkin, Arnaud Costinot & Masao Fukui
Review of Economic Studies, forthcoming
Abstract:
We study the relationship between international trade and development in a model where countries differ in their capability, goods differ in their complexity, and capability growth is a function of a country's pattern of specialization. Theoretically, we show that it is possible for international trade to increase capability growth in all countries and, in turn, to push all countries up the development ladder. This occurs if (i) shifting employment towards more complex sectors raises capability growth and if (ii) foreign competition is tougher in less complex sectors for all countries. Empirically, we provide causal evidence consistent with (i) using the entry of countries into the World Trade Organization as an instrumental variable for other countries' patterns of specialization. The opposite of (ii), however, holds in the data. Through the lens of our model, these two empirical observations imply dynamic welfare losses from trade that are pervasive, albeit small for the median country. The same economic forces also suggest that the emergence of China has held back capability growth for a number of African countries who are pushed away from their most-complex sectors, which China exports, and into their least-complex sectors, which China imports.
Tariffs and growth: Heterogeneity by economic structure
Mateo Hoyos
Journal of Comparative Economics, forthcoming
Abstract:
This paper provides novel empirical evidence that the medium-term relationship between trade liberalization and growth varies substantially with countries’ economic structure. Using a multi-method strategy, I examine per capita income dynamics after tariff reductions in a panel of 161 countries from 1960 to 2019. Baseline local projections reveal a sharp divergence: GDP per capita rises in manufacturer countries following tariff reductions, and notably falls in nonmanufacturers. A local projections difference-in-differences framework strengthens the analysis by accounting for treatment effect heterogeneity and variation in treatment timing. Finally, I study tariff reductions during the WTO-era reform period (1986 to 1994), a policy episode that historical evidence supports as plausibly exogenous, providing complementary evidence that confirms the observed heterogeneity. An exploration of mechanisms using local projections links these patterns to shifts in productivity, capital stocks, and manufacturing shares in GDP, consistent with theoretical expectations. The findings suggest that rising protectionism in manufacturer countries may be harmful, while further liberalization in nonmanufacturers could have unintended consequences.
From Cocaine to Avocados: Criminal Market Expansion and Violence
Chelsea Estancona & Lucía Tiscornia
International Organization, forthcoming
Abstract:
Most of what we know about organized criminal violence comes from research on illicit narcotics markets. Yet criminal groups also fight to capture markets for licit commodities, as evidenced by Sicilian lemons and Mexican avocados. When do organized criminal groups violently expand into markets for licit goods? We argue that rapid increases in the share of a good’s export value create opportunities for immediate profit and future market manipulation. These opportunities lead to violence as groups expand their territorial holdings and economic portfolio. We provide subnational evidence of our mechanism using data on avocado exports from Mexico, and address reverse causality with Google Trends data on the popularity of web searches for “avocado toast.” We also provide cross-national evidence by combining data from the Atlas of Economic Complexity, V-Dem, and the United Nations Office on Drugs and Crime (UNODC). We find that increases in a country’s share of global export value for agricultural goods are associated with more homicides—but only where organized criminal groups are present.
By-product recovery from US metal mines could reduce import reliance for critical minerals
Elizabeth Holley et al.
Science, forthcoming
Abstract:
The US has sufficient geological endowment in active metal mines to reduce the nation’s dependence on critical mineral imports. Demand is increasing for cobalt, nickel, rare earth elements, tellurium, germanium, and other materials used in energy production, semiconductors, and defense. This study uses a statistical evaluation of new geochemical datasets to quantify the critical minerals that are mined annually in US ores but go unrecovered. Ninety percent recovery of by-products from existing domestic metal mining operations could meet nearly all US critical mineral needs; one percent recovery would substantially reduce import reliance for most elements evaluated. Policies and technological advancements can enable by-product recovery, which is a resource-efficient approach to critical mineral supply that reduces waste, impact, and geopolitical risk.
Global value chains: Do they impact the allocation of foreign aid?
Basak Bayramoglu, Jean-François Jacques & Julie Lochard
Journal of Comparative Economics, forthcoming
Abstract:
The rise of global value chains (GVCs) in recent decades has induced significant changes in the geography of world production, with consequences for bilateral relations. What are the consequences of GVC-related bilateral trade for the allocation of bilateral foreign aid? Using data on bilateral aid from 22 donors to 127 recipient countries over 2000-2018, our findings, robust to endogeneity, show that a larger participation of the recipient country in GVCs increases the amount of aid allocated to that country. To rationalize these findings, we develop a theoretical model that provides a simple explanation for the existence of transfers among countries: foreign aid allows a donor country producing a final good to buy less expensive intermediate inputs from an upstream country. Overall, this suggests that donors allocate aid strategically to import inputs at a lower cost.
Nationalism, Regime Type, and Trade Agreements
Edward Mansfield & Jon Pevehouse
Journal of Conflict Resolution, forthcoming
Abstract:
Nationalism is on the rise throughout the world. Scholars and practitioners have expressed concern about the effects of rising nationalism on international cooperation, arguing that nationalism poses a risk to the liberal international economic order. Other observers maintain that nationalism need not be associated with trade protectionism. Yet there has been little cross-country research on the effects of nationalism on trade cooperation. We argue that nationalism has led to a reluctance to sign trade agreements in democracies, but that its effects on trade policy in autocracies are ambiguous. Nationalism in the public is associated with antipathy toward trade. Since democratically elected governments must be responsive to their constituents or risk losing office, nationalist governments in democratic countries tend to be protectionist. We find a strong negative relationship between nationalism and signing trade agreements in democracies. These findings shed light on the dynamics of trade and globalization in the current era of nationalism.