TDPE | TRADE DAY 2025

We investigate quantitatively how geopolitical rivalry shapes international trade and technology transfer. Empirically, we document a novel fact: technology flows are far more sensitive than goods trade to geopolitical distance, but only where IPR enforcement is weak. We also show that these geopolitical penalties have intensified since 2017, consistent with the escalation of great-power rivalry and rising use of export controls. Motivated by this evidence, we develop a new growth–trade model in which geopolitical distance raises breach risk in licensing contracts. Counterfactuals show that (i) fragmentation generates larger welfare losses through technology than through goods trade, and (ii) once governments value relative techno-logical leadership, export controls can be welfare-improving despite efficiency costs. 

Anson Soderbery
Associate Professor of Economics at the Daniels School of Business, Purdue University.

Co-author: Justin L.Tobias (Purdue)

Passthrough—the degree to which tariff increases are reflected in the prices paid by importers—is commonly studied in international trade research and forms a crucial component in the economic evaluation of trade policy. Many empirical analyses in the existing literature summarize passthrough via a single parameter and focus primarily, if not exclusively, on whether or not passthrough is complete (i.e., if the tariff burden is entirely absorbed by the importing country). In this paper we consider a variety of generalized models and, using data on Chinese im-ports during the first Trump administration, investigate if rates of passthrough vary across different traded goods. We introduce and describe a strategy for estimating a mixed discreet/continuous model that estimates probabilities of complete passthrough for all goods and examines how those probabilities change with good characteristics. We find strong and consistent evidence that models allowing good-specific passthrough rates are favored by the data, that agricultural (input) goods have the lowest (highest) rates of passthrough, and that the evaluation of trade policy is sensitive to whether or not models permit heterogeneity in rates of passthrough at the product level. In addition, we find that products subsidized by the Chinese government are associated with higher average rates of passthrough, suggesting potential retaliatory responses to Trump era tariff policies.

Nuno Limão 
Wallenberg Chair Professor of International Business and Finance at Georgetown University.

“Economic Consequences of US National (In)Security Export Controls”
Co-authors: Kyle Handley (University of California, San Diego) and Jingting Fan (Pennsylvania State University)

We examine the structure, rationale, and economic impacts of export controls and their growing use for national security reasons. U.S. export controls primarily target dual-use goods with both civilian and military applications—through licensing requirements and multilateral agreements such as the Wassenaar Arrangement. Recent policy changes, particularly in high-tech sectors like semiconductors and aerospace, have increased trade frictions, causing delays, higher costs, and regulatory uncertainty. About 44% of U.S. exports fall under some form of export control, though only a fraction require a formal license. We estimate how much export controls, even those requiring minimal licensing, reduce exports and how the effects are mitigated for members of multilateral export control regimes (MECRs). We combine our estimated effects with a structural input-output general equilibrium model to quantify the impact of unilateral versus multilateral control measures on trade.