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Trade Protection, Stock-Market Returns, and Welfare

Author

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  • Mary Amiti
  • Matthieu Gomez
  • Sang Hoon Kong
  • David Weinstein

Abstract

This paper develops a methodology to assess the expected impact of trade-policy announcements on aggregate welfare using financial market reactions. We use an infinite-horizon specific factors model of production to map the present discounted value of firm cash flows into aggregate welfare. We show that the policy-induced movement in the present value of firm cash flows—a variable that can be estimated from financial data—encapsulates the welfare impact of the tariffs. After applying our framework to the data, we find that the U.S.-China trade war lowered U.S. welfare by three percent.

Suggested Citation

  • Mary Amiti & Matthieu Gomez & Sang Hoon Kong & David Weinstein, 2021. "Trade Protection, Stock-Market Returns, and Welfare," NBER Working Papers 28758, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28758
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    Cited by:

    1. Huang, Yi & Lin, Chen & Liu, Sibo & Tang, Heiwai, 2023. "Trade networks and firm value: Evidence from the U.S.-China trade war," Journal of International Economics, Elsevier, vol. 145(C).
    2. Dmitry Matveev & Francisco Ruge-Murcia, 2020. "Tariffs and the Exchange Rate : Evidence from Twitter," Cahiers de recherche 19-2020, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    3. Carter, Colin A. & Steinbach, Sandro & Zhuang, Xiting, 2022. "Global Shipping Container Disruptions and U.S. Agricultural Exports," Working Papers 320397, International Agricultural Trade Research Consortium.
    4. Alan Feng & Haishi Li & Yulin Wang, 2023. "We Are All in the Same Boat: Cross-Border Spillovers of Climate Shocks through International Trade and Supply Chain," CESifo Working Paper Series 10402, CESifo.
    5. Benguria, Felipe & Choi, Jaerim & Swenson, Deborah L. & Xu, Mingzhi (Jimmy), 2022. "Anxiety or pain? The impact of tariffs and uncertainty on Chinese firms in the trade war," Journal of International Economics, Elsevier, vol. 137(C).
    6. Carlomagno, Guillermo & Albagli, Elías, 2022. "Trade wars and asset prices," Journal of International Money and Finance, Elsevier, vol. 124(C).
    7. Carter, Colin A. & Steinbach, Sandro & Zhuang, Xiting, 2022. "Global Container Trade Disruptions and U.S. Agricultural Exports," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322364, Agricultural and Applied Economics Association.
    8. Dmitry Matveev & Francisco Ruge-Murcia, 2024. "Tariffs and the Exchange Rate: Evidence from Twitter," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 72(3), pages 1185-1211, September.

    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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