Category: Trade
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Trade Wars, Hegemony, and the New Global Order
The world is not deglobalizing, it is reorganizing. Recent research shows that globalization has always rested on hegemonic power, and when dominant powers diverge in their preferences, fragmentation follows. The next phase of globalization will be governed less by universal rules and more by a patchwork of geopolitically segmented blocs.
Supply Chain Disruptions and Inflation
New research from the IMF and the Dutch central bank reveals that global supply chain disruptions (from port congestion to geopolitical shocks) transmit into consumer prices faster and more forcefully in Europe than in the US, owing to the euro area’s greater dependence on imported intermediate goods.
How the World Trading System Survived Trump’s Tariffs
Despite the most aggressive tariff assault since the 1930s, the global trading system has not collapsed instead trade was rerouted rather than destroyed, domestic US political forces repeatedly hollowed out the tariffs themselves, and most countries wisely chose restraint over retaliation.
Who Really Pays for Tariffs? Evidence from Trade Networks and Import Prices
Two complementary studies reveal that U.S. tariffs impose their full economic burden on American consumers and manufacturers rather than on foreign exporters. Combined with analysis of how tariffs propagate through global production networks, the research demonstrates that protectionist policies generate stagflation worldwide.
How Exchange Rates Absorb Tariff Shocks
As tariff wars escalate, the exchange rate emerges as a critical adjustment mechanism, depreciating when retaliation occurs (as shown in 2025 data) and potentially offsetting tariff-induced distortions to relative prices. Optimal monetary policy harnesses exchange-rate movements to stabilize tariff shocks, but the appropriate response varies by sector and pricing regime.
Do Tariffs Lower Inflation?
Two working papers, both published in November 2025, offer sharply contrasting perspectives on tariff impacts on the U.S. economy, differing fundamentally in methodology and time horizon.
Trade Disruptions and Inflation
Rising trade costs have fundamentally different inflationary effects depending on their timing, nature, and target: gradual fragmentation can paradoxically prove disinflationary, while sudden shocks trigger temporary stagflation; similarly, higher costs for final goods produce short-lived inflation spikes, whereas increased costs for intermediate inputs generate persistent price pressures through global value chain propagation.
Trade Wars: Modeling Present Impact and Future Challenges
New research quantifies the substantial economic costs of trade wars, demonstrating that 2025 U.S. tariff increases reduced American real income by 1%. Another comprehensive analysis warns that escalating trade conflicts threaten the post-WWII trading system that has lifted millions from poverty and reduced global inequality.
Trade Uncertainty, Automation, and Labor Markets
Recent research shows that rising global uncertainty, when paired with advances in automation, is reshaping value chains: firms increasingly bring production home, relying on robots in place of foreign inputs and triggering broad changes in labor markets.
Optimal Tariffs in a Changing World
Recent cutting-edge research looks at how optimal trade tariffs are shaped by great power rivalry, shifting alliances, and intertemporal market responses as they re-define the calculus of trade policy in today’s fragmented global landscape.