![]() Importantly, the magnitude of trade diversion across industries does not depend on Mexico’s industry-level trade exposure to the U.S., but rather on the U.S. The effects are stronger when nationally sourced input-output data is used compared to those derived from cross-country sources. Output tariff plays an important role, and there is some evidence of a positive impact through downstream tariffs. For the first episode, the paper finds higher trade diversion effects than estimates in literature. ![]() ![]() Difference-in-differences, local projections and few other empirical methodologies are used. from two episodes, with a focus on the first: the U.S.-China trade tension in 2018 and the U.S. Using this dataset to exploit higher supply linkages across a larger number of industries than what is available in cross-country sources, the paper estimates the trade diversion effect on Mexico’s exports to the U.S. The paper builds a unique industry-level dataset by combining Mexico’s nationally sourced inputoutput data (INEGI) with cross-country sources (WIOD, UN Comtrade). The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management. Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate.
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