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Will Trade Uncertainty Boost Automation?

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Abstract

Recent surges in trade policy uncertainty highlight the fragility of global supply chains, prompting businesses to consider reshoring—moving production from abroad to domestic locations. Reshoring can be costly, creating incentives for businesses to automate. Evidence suggests that businesses facing heightened trade policy uncertainty in industries more exposed to international trade reshore more and automate more than those that are less exposed to trade. Automation appears to help mitigate the otherwise negative effects of trade policy uncertainty on production and labor productivity.

Suggested Citation

  • Deepika Baskar Prabhakar & Hamid Firooz & Sylvain Leduc & Zheng Liu, 2025. "Will Trade Uncertainty Boost Automation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2025(20), pages 1-6, September.
    • Handle: RePEc:fip:fedfel:101566
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    1. Daron Acemoglu & Gary W. Anderson & David N. Beede & Catherine Buffington & Eric E. Childress & Emin Dinlersoz & Lucia S. Foster & Nathan Goldschlag & John Haltiwanger & Zachary Kroff & Pascual Restre, 2024. "Automation and the Workforce: A Firm-Level View from the 2019 Annual Business Survey," NBER Chapters, in: Technology, Productivity, and Economic Growth, pages 13-55, National Bureau of Economic Research, Inc.
    2. Faber, Marius, 2020. "Robots and reshoring: Evidence from Mexican labor markets," Journal of International Economics, Elsevier, vol. 127(C).
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