Self-Harming Trade Policy? Protectionism and Production Networks

Abstract

Using monthly data on temporary trade barriers (TTBs), we estimate the dynamic employment e¤ects of protectionism through vertical production linkages. First, exploiting highfrequency data and TTB procedural details, we identify trade policy shocks exogenous to economic fundamentals. We then use input-output tables to construct measures of protectionism a¤ecting downstream producers. Finally, we estimate panel local projections using the identi-…ed trade-policy shocks. Protectionism has small and insigni…cant bene…cial e¤ects in protected industries. The e¤ects in downstream industries are negative, sizable, and signi…cant. The employment decline follows an increase in intermediate-input and …nal goods prices, and a decline in stock market returns.JEL Codes: F13; F14; F62.

Local Labor Market Effects of the 2002 Bush Steel Tariffs

“…Bown et al (2021) find that US anti-dumping (AD) duties against China over the 1998-2016 period cost nearly 2 million jobs in downstream industries. Barattieri and Cacciatore (2020) find that employment in downstream industries falls by 0.5% points following a 1% point increase in the share of imports subject to AD and countervailing (CV) duties in upstream industries. 4 Like us, Barattieri and Cacciatore (2020) also find little evidence that tariffs boosted employment in industries protected by the tariffs.…”

“…Barattieri and Cacciatore (2020) find that employment in downstream industries falls by 0.5% points following a 1% point increase in the share of imports subject to AD and countervailing (CV) duties in upstream industries. 4 Like us, Barattieri and Cacciatore (2020) also find little evidence that tariffs boosted employment in industries protected by the tariffs. However, neither paper analyzes the effect of safeguard tariffs.…”

“…Handley et al (2020) emphasize the negative effect of tariffs on intermediate inputs for export sales. They found that exported US goods with intermediate inputs highly exposed to Trump's trade war tariffs effectively faced ad valorem tariffs of up to 4% on their exports.4 In an extension,Barattieri and Cacciatore (2020) show their results are robust to including safeguard tariffs.…”

The Employment Consequences of Anti-Dumping Tariffs: Lessons from Brazil

“…Prusa (1997), Bown and Crowley (2006), Bown and Crowley (2007), Baylis and Perloff (2010), and find that AD tariffs increase imports from non-targeted countries, while Konings et al (2001) and Durling and Prusa (2006) do not find a significant third-country effect. This literature has also found that AD tariffs affect firm performance in the protected sector (Konings and Vandenbussche 2008, Pierce 2011, and Jabbour et al 2019, as well as employment (Trimarchi 2020, Cacciatore 2020, andBown et al 2021).…”

“…Gallaway et al (1999) also evaluates the welfare loss from AD tariffs with a computable general equilibrium model. 8 Flaaen and Pierce (2019) and Trimarchi (2020) find that 2018-19 U.S. tariffs weakly increase employment in the protected sectors, but Barattieri and Cacciatore (2020) and Bown et al (2021) find that anti-dumping tariffs have insignificant employment effect on the protected sectors. Flaaen and Pierce (2019), Barattieri and Cacciatore (2020), and Bown et al (2021) find significant declines in employment in the downstream sectors.…”