Past event
Department of Economics Seminar with Professor Natalie Chen, University of Warwick Trade diversion and labor market outcomes
Abstract: In 2018 and 2019, the US administration increased tariffs on imports from China. Do these tariffs merely reduce imports from China into the US, or do they at the same time lead to more imports from other countries such as Mexico? Using detailed Mexican firm-level export data, we find evidence of trade diversion from China to Mexico as higher US tariffs against China increased Mexico's exports to the US. We then combine the trade data with matched employer-employee data to investigate the effects of trade diversion on the labor market outcomes of formal workers employed in Mexico's private firms. We find that trade diversion increased the labor demand of the firms exposed to higher US tariffs against China, in particular in the manufacturing sector, with low-wage workers including female, unskilled, and younger workers experiencing a disproportionate increase in their employment and wages.