Trade wars are usually bad for the countries involved. After the U.S. and China launched tit-for-tat tariffs on imports from each other in 2018, prices rose for American consumers, jobs were lost and corporate profits fell. Economic growth in both countries slowed. 

There was also some fear that the Trump administration’s tariffs, which hit other U.S. trading partners, would suppress global exchange and lead to a new period of protectionism. 

But for countries not in the middle of the trade war, research suggests, the opposite happened. 

In a working paper, UCLA’s Pablo Fajgelbaum, Yale’s Pinelopi Goldberg, UC Berkeley’s Patrick Kennedy, Yale’s Amit Khandelwal and the World Bank’s Daria Taglioni describe how “bystander countries” — those on the sidelines of the U.S.-China dispute — increased their exports of products subject to the tariffs to both the U.S. and to the rest of the world. (Exports to China were mostly unchanged.) 

The findings suggest that these countries didn’t just shift goods from their existing trading partners to fill a gap caused by the higher tariffs. Instead, they were able to boost production and increase exports of targeted goods into new and expanded markets. Overall, bystander countries increased their exports of taxed items an average of 6.7% during the period studied, compared with nontaxed products.

Winners and Losers 

“The trade war created net trade opportunities rather than simply shifting trade across destinations,” the authors write. 

Not all countries benefited, though. Some — notably Vietnam, Thailand, Korea and Mexico — were able to boost exports significantly, in part by providing substitutes for goods subject to the U.S.-China tariffs. Others, such as Ukraine and Colombia, saw a decline, largely because their exports complemented goods hit by the tariffs. 

The U.S.-China trade war began in mid-2018 when then-President Donald Trump hit China with a series of rising tariffs on a variety of imported goods and China retaliated by raising duties on U.S. products. (At the same time, the Trump administration also imposed duties on steel, aluminum and machinery imports from other trading partners.) The U.S. tariffs affected about $350 billion in imports from China, or about 18% of the total, while China’s tariffs covered about $100 billion, or about 11%, of goods imported from the U.S. 

Although trade tensions eased in 2020 when the two countries agreed to put a freeze on plans for additional trade duties, the existing tariffs remain in place.

Tariffs Caused a Huge Shift in Trade

The tariffs quickly had an impact. An analysis by the Peterson Institute for International Economics found that in 2022, Chinese imports subject to the highest U.S. tariffs — including semiconductors, furniture and some consumer electronics — were about 25% below their levels before the start of the trade war. The decline wasn’t due to a larger economic slowdown — Chinese imports that weren’t covered by added duties, such as laptops and computer monitors, increased by 42%.

But what about the rest of the world? To see how the trade war affected exports from bystander countries, the authors examined data from the United Nations’ Comtrade database about the trading patterns of the 48 largest exporting countries, (excluding oil exporters) between 2014 and 2019. 

They found that bystanders increased exports to the U.S. for products with high tariffs, but not to China. Shipments to the rest of the world increased for products subject to both U.S. and Chinese tariffs. Not only was there considerable variance among exporting countries, but also the most successful were those that were able to increase exports to the rest of the world, not just to the U.S. 

Two factors seem to explain the difference. For one, successful exporters tended to ship goods that were substitutes for Chinese imports. So when U.S. customers looked for a replacement for, say, smartphones made in China, countries like Vietnam that made phones were poised to benefit.  

What’s more, they were able to scale up production and achieve economies of scale so that the unit costs of their goods fell. This meant that the countries not only could compete successfully with the higher cost of taxed items, but their products became more competitive in markets that weren’t subject to the tariffs. 

Vietnam, for instance, was one of the biggest winners from the trade war, increasing its exports of tires, sweatshirts and vacuum cleaners to both the U.S. and the rest of the world. 

The study also suggests that successful countries weren’t just lucky enough to already specialize in products that would increase in demand after the trade-war tariffs hit. Instead, country-specific factors — such as a strong labor market or preexisting trade agreements — likely accounted for all the variation among countries.

Michael Totty is a freelance reporter and editor. Previously, he was a news editor with the Wall Street Journal in charge of assigning and editing Journal reports on technology, energy, health care, management and other topics. Totty works from Berkeley, California.

To read the full research brief, please click here. 

To read the full report as it was originally published by the National Bureau of Economic Research, click here.

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John W. Miller is Trade Data Monitor’s Chief Economic Analyst, in charge of writing TDM Insights, a newsletter analyzing key issues through trade statistics. John is an award-winning journalist who’s reported from 45 countries for the Wall Street Journal, Time Magazine, and NPR.

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Industrial raw materials are once again at the forefront of policy discussions, for several reasons.

The challenge of achieving net zero CO2 emissions by 2050 will require a significant scaling up of production and international trade of several raw materials which will be critical for transforming the global economy from one dominated by fossil fuels to one led by renewable energy technologies (IEA, 2021). Such technologies make generally more intensive use of minerals than their fossil fuel counterparts. For example, a typical electric car requires six times the mineral inputs of a conventional car and an onshore wind plant requires nine times more mineral resources than a gas-fired plant (IEA, 2021). Therefore, while the green transition will reduce the global dependence on fossil fuels, it will intensify the pressure on the production and efficient international exchange of other raw materials. For example, because of the increasing share of renewables in new investment in the energy sector, the average amount of minerals needed for a new unit of power generation capacity has increased by 50% since 2010 (IEA, 2021).

Some relatively abundant raw materials, which have traditionally underpinned industrial production (e.g. aluminium, copper and iron ore and steel) will also remain essential in green sectors and their enabling technologies. Other materials, such as rare earth minerals (notably neodymium and dysprosium), lithium, cobalt or nickel, are also prevalent in new technologies and thus their demand is expected to grow substantially (Gielen, 2021). The IEA projects, for example, that in the next twenty years the clean energy sector’s demand for materials such as cobalt, natural graphite or lithium will increase from twenty to more than forty times (Figure 1.1). Overall, depending on the assumed pace of green transition, it is estimated that the demand for minerals (from the energy as well as other sectors) will grow by on average four to six times between 2020 and 2030 (IEA, 2021).

To read the full policy paper, please click here.

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To read full report by The Export-Import Bank of the United States (EXIM), please click here.

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But this success has come at a price—Turkey is drawing international attention, and at times attracting criticism, over its drone export policies. The latest example was in December 2021 when the United States reportedly expressed humanitarian concerns over the use of Turkish drones in Ethiopia, where conflict between the government and fighters in the region of Tigray continues with severe implications for the civilian population. According to unofficial reports, Turkey brushed off this criticism by highlighting its engagement with all parties involved to help resolve the conflict and pointing out that Ankara attaches humanitarian provisions to its arms sales.

To read the full report from the Carnegie Endowment for International Peace, please click here. 

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To read the full report from the Peterson Institute for International Economics, please click here.

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Taiwan was the first developing country to adopt an export-oriented trade strategy after World War II. The factors usually associated with big shifts in policy—a macroeconomic crisis, a change in political power or institutions, lobbying by export interests, pressure from international financial institutions—were not present; it was ideas that were key. In 1954, economist S. C. Tsiang proposed that Taiwan boost export earnings rather than squeeze import spending to deal with its chronic shortage of foreign exchange. He recommended a currency devaluation to establish a realistic exchange rate and a market-based system of foreign exchange allocation to end the inefficient rationing by the government. Four years later, a policymaker, K. Y. Yin, fought for the adoption of Tsiang’s proposal, helping clear the way for Taiwan’s phenomenal growth in trade.

To read the full report from the Peterson Institute for International Economics, please click here.

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Medical devices are technologies that help diagnose or treat patients, or prevent illness without the use of drugs. They include everything from MRI scanners, hip implants and scalpel blades to smartphone apps that treat depression. The EU is currently struggling to implement a wide-ranging change in how medical devices are regulated – from the 1993 Medical Device Directive (MDD) to the 2017 Medical Device Regulation (MDR). Phased introduction of the MDR was due to be completed by May 2020, but was extended until this year due to COVID-19 pressures. This new regulatory framework is designed to ensure more thorough testing of devices before they can be used on patients, and more rigorous monitoring of performance of devices once on the market. The MDR’s implementation, however, has not gone smoothly.

To read the full report from the Centre for European Reform (CER), please click here. 

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The Golden State has been among the strictest states in terms of COVID-19 distancing measures. It was the first state to impose a statewide stay-at-home order and closure of “non-essential” businesses in March 2020, and it reimposed them in December 2020 after never fully reopening in between. Even after the CDC lifted mask requirements, restrictions remained: Masks were still mandated in indoor workplaces for example—even for those who were vaccinated—unless everyone in the workplace was fully vaccinated.2 Small businesses and working-class people have borne the brunt of the state government’s economic shutdown. COVID-19 restrictions on economic activity have also had serious repercussions in Californian ports, hindering international trade responsible for hundreds of thousands of California jobs.

To read the full report from The Heritage Foundation, please click here.

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