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Regional Trade Policy Uncertainty

In: NBER International Seminar on Macroeconomics 2024

Author

Listed:
  • Céline Poilly
  • Fabien Tripier

Abstract

Higher uncertainty about trade policy has recessionary effects in U.S. states. First, this paper builds a novel empirical measure of regional trade policy uncertainty, based on the volatility of national import tariffs at the sectoral level and the sectoral composition of imports in U.S. states. We show that a state which is more exposed to an unanticipated increase in tariff volatility suffers from a larger drop in real output and employment, relative to the average U.S. state. We then build a regional open-economy model and we argue that the transmission channels of uncertainty shocks, in particular the precautionary-pricing channel, are magnified in regions that feature the highest import share and a strongest export intensity. Furthermore, we show that an expansionary monetary policy may amplify the regional divergence since it worsens the recession in the most-exposed region to trade policy uncertainty.
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Suggested Citation

  • Céline Poilly & Fabien Tripier, 2024. "Regional Trade Policy Uncertainty," NBER Chapters, in: NBER International Seminar on Macroeconomics 2024, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:15273
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    Cited by:

    1. is not listed on IDEAS
    2. Firooz, Hamid & Leduc, Sylvain & Liu, Zheng, 2025. "Reshoring, automation, and labor markets under trade uncertainty," Journal of International Economics, Elsevier, vol. 156(C).
    3. Matthias Burgert & Benoit Mojon & Daniel Rees & Matthias Rottner & Hongyan Zhao, 2025. "A multi-sector assessment of the macroeconomic effects of tariffs," BIS Quarterly Review, Bank for International Settlements, September.
    4. Anastasiia Antonova & Luis Huxel & Mykhailo Matvieiev & Gernot J. Muller & Gernot Müller, 2025. "The Propagation of Tariff Shocks via Production Networks," CESifo Working Paper Series 11917, CESifo.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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