Are Trade Wars Environmental Disasters? Evidence from Deforestation in Brazil

Clément Nedoncelle ()
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Clément Nedoncelle: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Trade wars reshape the geography of production, and environmental consequences depend on where production relocates. I study the US-China trade war and its impact on Brazilian soybean exports and deforestation. Using municipality-level trade data and a structural gravity framework, I document a sharp reallocation of exports toward China after the 2018 tariff escalation. Aggregate trade effects are modest, as higher exports to China are partly offset by diversion from other destinations. Deforestation impacts are meaningful but small relative to standard predictions. Both within-municipality diversion across destinations and cross-municipality reallocation toward low-deforestation regions drive these results. Estimates suggest the trade war increased soy-related deforestation in Brazil by about 5% of annual levels. Overall, environmental consequences depend not only on changes in total production but on the geography of adjustment within exporting countries.

Keywords: Brazil; Land-use change; US-China trade war; Trade policy; Deforestation (search for similar items in EconPapers)
Date: 2026-06-03
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