PHBS Seminar Series: Self-Harming Trade Policy? Protectionism and Production Networks

In recent years, hidden behind unchanging tariff policies, governments used temporary trade barriers (TTBs)---antidumping, countervailing duties, and safeguards---to restrict trade in intermediate inputs (Bown, 2018). Using monthly, product-level data on U.S. TTBs, we estimate the effects of protectionism on economic activity both in protected industries and through vertical production linkages. First, exploiting institutional details of TTBs regulation and the high-frequency of the data, we identify movements in protectionism that are plausibly free of endogenous and anticipatory movements at the level of NAICS 4-digit industries. Second, by combining the identified shocks with input-output tables, we construct exogenous measures of protectionism faced by downstream producers. We then estimate panel local projections using the identified trade-policy shocks to determine the dynamic effects of protectionism on employment within and across industries. We find that protectionism has small, short-lived, and mostly insignificant beneficial effects in protected industries. In contrast, protectionism has sizeable, long-lasting, and significant negative effects in downstream industries.