Journal Article

The Economic Effects of the 2018 U.S. Trade Policy: A State-Level Analysis

Abstract: We evaluate, empirically, the effect of changes in trade policy during the 2018-19 trade war on U.S. economic activity. We begin by documenting that sectors and states across the United States are heterogeneous in their exposure to international trade. To do that, we construct a measure of exposure that combines the share of a sector’s gross output that is accounted for by trade with the pattern of comparative advantage of each state in that sector. We then exploit cross-state heterogeneity in exposure to international trade and correlate it with measures of economic activity across U.S. states. Our findings suggest that states that were very exposed to trade at the onset of the trade war experienced worse outcomes in terms of employment and output growth. Our analysis is not aimed at concluding any causality effects, but instead focuses on correlations.

Keywords: trade policy;

JEL Classification: F10; F13; F14;

https://doi.org/10.20955/r.102.385-412

Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Review

Publication Date: 2020-10-22

Volume: 102

Issue: 4

Pages: 385-412