Online Geneva Trade and Development Workshop - Gene Grossman

The Geneva Trade and Development Workshop (GTDW) is a seminar series, featuring invited speakers in the area of International Trade. It has been running for over ten years, with onsite meetings on a weekly basis in the Fall (September – December) and Spring (February – June) semesters. It is organized jointly by the Graduate Institute in Geneva (IHEID), the University of Geneva (UniGe), the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD). The online edition of GTDW will be co-organized with the Centre for Economic Policy Research (CEPR).

On 12th April, Gene Grossman will present the paper "When Tariffs Disrupt Global Supply Chains", joint with Elhanan Helpman.

Paper abstract: We study unanticipated tariffs on imports of intermediate goods in a setting with firm-to-firm supply relationships. Firms that produce differentiated products conduct costly searches for potential input suppliers and negotiate bilateral prices with those that pass a reservation level of match productivity. Global supply chains are formed in anticipation of free trade. Once they are in place, the home government surprises with an input tariff. This can lead to renegotiation with initial suppliers or new search for replacements. We identify circumstances in which renegotiation generates improvement or deterioration in the terms of trade. The welfare implications of a tariff are ambiguous in this second-best setting, but plausible parameter values suggest a welfare loss that rises rapidly at high tariff rates.