Year: 2026
Type: article
Abstract: We study whether bilateral trade barriers trigger trade diversion to third markets, using the 2025 increase in U.S. tariffs on Chinese goods and focusing on the European Union as an alternative destination. At the HS6 level, we construct a novel diversion-potential measure that combines realized U.S. tariff increases with product-level trade elasticities to predict the decline in Chinese exports to the United States. Trade diversion effects are limited to highly exposed products. Only products in the top decile of diversion potential experience a rise in export quantities to the EU. Unit values do not respond significantly.
Source: Economics Letters
Institution: Deutsche Bundesbank
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,030
OpenAlex ID: W7213370686