Working Papers

Trade under Tensions: Insights from Media-Reported Bilateral Events - CEPII Working Paper 2026- 02 , March 2026 , CEPII.

with M. Crozet (U. Paris-Saclay, IFE-CEPII), C. Emlinger (IFE-CEPII), and D. Mirza (U. Tours, IFE-CEPII)

Latest version: [SSRN Working Paper] 

Earlier version: [CEPII Working Paper]

Abstract: International trade may respond not only to geopolitical shocks and alignment policies, but also to less visible signals such as diplomatic incidents, hostile declarations, or tensions involving third countries. Media coverage can translate these events into firms’ expectations about trade costs. This paper examines how media-reported bilateral tensions affect trade using a dataset based on the GDELT database that captures exposure to geopolitical tensions. Combining local projections with structural gravity equations across several trade datasets—at the product and sector levels, with and without intra-national flows—we find a robust negative effect of geopolitical tensions on trade. A one-standard-deviation increase in our negative tension indicator is equivalent to a rise in trade costs of 0.26% to 8.64% ad valorem, depending on the sample and trade elasticity. The effect is not driven by severe events: even nonviolent tensions significantly reduce trade. Trade sensitivity is weaker for products with more rigid transaction patterns.

Keywords: Geoeconomics, International Trade, Risk, GDELT