Growing geopolitical tensions between the U.S. and China have compounded concerns about supply chain resiliency, emphasizing the importance of widening supply-chain relationships with other partner nations. Using firm-level import data from the U.S. Census, this study quantifies the sunk costs firms incur when de-risking critical supply chains by transitioning to an alternative supplier country and constructs two policy scenarios of supply chain disruptions. The results suggest that the sunk costs firm face in the first year of importing limit firms' ability to respond to trade shocks. Our scenario analysis suggests an unexpected decoupling from China could decrease U.S. firm’s operating profits by 15%-50% across critical sectors, but preemptive changes in trade policy that decreases tariffs for non-Chinese nations could offset these losses in some sectors. These results highlight the importance of policies aimed at reducing reliance on China and diversifying supply chains, such as promoting domestic production of critical goods, incentivizing diversification of supply chains, and strengthening alliances and trade relationships with other countries.

This paper studies the interaction of labor-market frictions and endogenous production-network formation in firms' decisions on employment, sourcing and production, within the context of trade policy. I construct a quantitative general-equilibrium model featuring worker-firm and firm-to-firm matching in the production process. I calibrate the model and investigate how trade policy and labor-market efficiency affect production-network density, trade flows, unemployment and wage inequality. The model shows a 1.5% decrease in relative labor-market frictions in one country can lead to a 0.1% decrease in the partner country's relative number of downstream production-network linkages. I explore how heterogeneity in firm-to-firm matching costs determines the effect of a trade shock on wage inequality. I show that a protectionist tariff by one country leads to increases in domestic long-run unemployment and real wages. Examining these channels separately leads to sizable quantitative and qualitative changes in the predicted outcomes of trade policy.

Intellectual property rights (IPRs) are a central emphasis in the negotiation of “deep” preferential trade agreements (PTAs) containing provisions on domestic regulatory policy. These provisions require member countries to adopt IPRs standards going beyond the baseline requirements of the World Trade Organization's TRIPS agreement. We use a structural gravity framework to study the effects of membership in such PTAs on bilateral international patenting, considering both within-agreement applications and registrations between members and non-members. We explore the heterogeneity of these effects arising from various attributes of different agreements. Our findings suggest that strong and enforceable IPRs standards in PTAs generate positive impacts on international patenting, albeit with significant disparities across agreement types. Agreements with multiple TRIPS-Plus norms increase patenting among members compared with patenting from outside those areas, while other types encourage more patenting from non-members.

This paper studies the interaction between trade liberalization and firm production networks in shaping spatial differences in environmental quality within countries. We first analyze the effect of inter-firm trade in intermediate goods on the level of total regional emissions and average emission intensities. Second, we study the effect of trade liberalization on the spatial distribution of firms within countries in a setting with firm-to-firm production networks. We find that regions with relative proximity to foreign markets attract more firms as international trade barriers diminish. This leads to higher total emissions in such regions due to agglomeration forces, whereas spatial selection together with production networks leads to a decline in average emission intensities.