About this event
This paper examines the rise of "onshoring" since the mid-2010s, characterized by a shift in global trade volume towards more upstream inputs from downstream final goods. To study these trends, we develop a novel production network representation using a bootstrapped large language model (LLM) measurement approach. Our method links all 6,000 six-digit traded product codes by leveraging LLMs trained on production-specific information. We then combine this network with product-level trade data to document recent patterns in onshoring. To understand the drivers of onshoring, we exploit time-series discontinuities in unit prices to measure vertical substitution across countries, products, and time. Lastly, we study the abrupt 2017 blockade of Qatar by surrounding Gulf countries as a natural experiment. Using the timing and differential exposure of products to this blockade, we find that more exposed goods drove demand for vertically linked upstream goods, consistent with a strong onshoring response. Our findings help frame the current trends towards protectionist trade and industrial policies, highlighting that the onshoring response can occur quite fast, undermining the economic and geopolitical gains from trade linkages.
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