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Trading places: How trade policy is reshaping multinational firms’ location

Author

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  • Alejandro Graziano
  • Monika Sztajerowska
  • Christian Volpe Martincus

Abstract

The recent changes in trade policy have significantly impacted trade flows. There is an ongoing debate on whether and to what extent firms may have also reacted to the new trade barriers by modifying the spatial organization of their multinational production to circumvent them. This paper aims to provide new evidence on whether such a tariff induced shift in the location patterns of multinational firms has actually taken place. To do so, we exploit the changes in U.S. import tariffs in 2018-2019. The evidence indicates that firms have indeed responded to these new tariffs by adjusting the extensive margin of their multinational production across countries and that both structural factors and trade agreements played an important role in shaping these adjustments.

Suggested Citation

  • Alejandro Graziano & Monika Sztajerowska & Christian Volpe Martincus, 2024. "Trading places: How trade policy is reshaping multinational firms’ location," Discussion Papers 2024-06, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:2024-06
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    File URL: https://www.nottingham.ac.uk/gep/documents/papers/2024/24-06.pdf
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    Keywords

    Multinational Firms; Foreign Direct Investment; Trade Policy; Tariffs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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