Climate Trade Costs: Extreme Weather, Transportation, and Supply Chains

Transportation infrastructure is vulnerable to extreme weather events. Vulnerability is prominent at maritime ports, where tropical cyclones frequently halt operations and force firms to adapt to transportation disruptions. I quantify these responses by linking high-frequency maritime shipment data to tropical cyclone tracks. Exposure to tropical cyclones temporarily disrupts port activities (1–2 weeks), prompting firms to reroute shipments to alternative ports (1–4 months), but this adaptation mechanism is insufficient to prevent persistent declines in firm-to-firm trade. To evaluate the general-equilibrium implications of these weather disruptions, I develop a quantitative model of spatial production networks with endogenous routing. Port-level transportation costs increase with traffic (congestion) and cyclone risk, and decrease with port capacity (scale). Investigating future climate hazards to the transportation network, I find that welfare effects are primarily distributional; congestion forces at ports account for most of the general-equilibrium absorption of the climate shock, while firm-level rerouting has limited effectiveness. To translate evidence into policy, I derive analytical sufficient statistics for evaluating and targeting future port investments in light of climate change. Allocation rules that ignore weather risk and firms' adaptive responses redistribute investment across ports, with distributional consequences.