Job Market Paper
“Building Walls and Building Blocs: The Two-Tale Story of the 2017-2019 U.S.-China Trade War” (with Peri da Silva), submitted.
Abstract: We examine the effect of the first Trump administration’s trade war on global trade flows. We employ a flexibility gravity model that, in addition to the tariffs applied by the U.S. and China, considers overall levels of protection practiced by importers and exporter partners against all partners (i.e., multilateral resistance), product-level variation in relative market access, and the tariffs of non-U.S., non-China countries (“bystanders”). The latter policies crucially include retaliatory tariffs imposed by bystanders on American exports. We find that the deglobalization (building walls) trend initiated under the first Trump administration was countered by China and bystander countries through the implementation of preferential trade agreements and multilateral tariff reduction (building blocks). However, our controls for relative market access are key to uncovering net losses in global trade, driven primarily by decreases in U.S.-China trade, indicating that the U.S. building walls strategy prevailed.