Tariff Rate Uncertainty and the Structure of Supply Chains

Sebastian Heise, Justin Pierce, Georg Schaur and Peter Schott

No 32138, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that reducing the probability of a trade war promotes long-term importer-exporter relationships that ensure provision of high-quality inputs via incentive premia. Empirically, we introduce a method for distinguishing between these Japanese versus spot-market (i.e., American) relationships in customs data, show that their use varies intuitively across trading partners and products, and find that Japanese importing from China increases after a reduction in the possibility of a trade war. Extending the standard general equilibrium trade model to encompass potential trade wars and relational contracts, we estimate that eliminating Japanese procurement reduces welfare about a third as much as moving to autarky.

JEL-codes: F13 F15 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-cna and nep-int
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Working Paper: Tariff Rate Uncertainty and the Structure of Supply Chains (2024)
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