Import liberalization as export destruction? Evidence from the United States

Holger Breinlich, Elsa Leromain, Dennis Novy and Thomas Sampson

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In trade models with scale economies, import liberalization reduces exports within industries by shrinking real market potential. We find this export destruction mechanism reduced US export growth following the permanent normalization of trade relations with China (PNTR). There was also an offsetting boost to exports from lower input costs. We use our estimates to calibrate a quantitative model and show that scale economies are economically important for trade policy analysis. Although PNTR increased aggregate US exports relative to GDP, exports declined in the most exposed industries. US gains from PNTR are positive but 30 percent smaller than under constant returns.

Keywords: import liberalization; China shock; trade policy; scale economies; comparative advantage (search for similar items in EconPapers)
JEL-codes: F12 F13 F15 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2026-07-01
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Published in American Economic Journal: Macroeconomics, 1, July, 2026, 18(3), pp. 77 – 111. ISSN: 1945-7707

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