Abstract: While existing economic literature extensively documents how the U.S.-China trade war led to tariff diversion through Mexico, little research examines the role of de minimis imports due to limited publicly available data. The de minimis rule allows shipments valued at $800 or less to enter the U.S. duty-free with minimal customs processing. This paper is among the first to analyze de minimis trade as a mechanism for tariff circumvention. Using proprietary U.S. Customs and Border Protection data, I find that de minimis imports from China increased in response to the tariffs, while imports from other countries did not. To assess Mexico’s role, I analyze bill of lading data from 2011 to 2022, distinguishing between shipments that qualify for de minimis treatment and those exceeding the threshold. I find that non-de minimis exports from Mexico to the U.S. rose in tariff-affected HTS codes, while Mexico’s de minimis exports remained unchanged and China’s de minimis exports increased. This study contributes to the broader discussion on trade policy efficacy and regulatory loopholes, offering new insights into the unintended consequences of tariff-induced trade adjustments.

Numerous researchers have documented wage losses and local labor markets hit by rising import competition. In a wide variety of settings, labor incomes in locations dependent on import-competing industries fall relative to incomes in other locations. This paper attempts to see if there are differences in these effects between demographic groups in the US case in the context of the most studied example, commonly referred to as the ‘China Shock.’ We examine the ‘matched CPS,’ which allows us to observe year-to-year economic transitions of a sample of US workers, to see if the losses in labor income fall more heavily on identifiable demographic groups. We find that income losses are more likely in the face of a trade shock for workers in manufacturing; workers with a bachelor’s degree, and workers with high household income. By contrast, losses are smaller or zero for workers with low family income and for Black workers. We argue that these last findings may be due to liquidity constraints, causing workers to scramble to keep their incomes from falling below the level required to meet essential expenses. These effects seem to be new to the trade literature.

This paper quantifies the unintended consequences of trade policy uncertainty triggered by President Trump’s 2017 renegotiation of NAFTA on Mexico’s foreign direct investment (FDI) inflows. Using panel data on 92 industries across 32 Mexican states from 2009 to 2019, the analysis exploits variation in industry- and state-level exposure to the renegotiation through difference-in-differences, triple-difference, and Poisson Pseudo Maximum Likelihood estimation strategies. The results show that the threat of reverting to Most-Favored Nation (MFN) tariffs led to a significant decline in FDI: a 1% increase in tariff exposure is associated with a $2.5 million reduction in FDI for industries that are the sole exporters of their state. While the U.S.-China trade war increased FDI inflows to Mexico by 24%, the uncertainty surrounding NAFTA reduced them by 3%. These findings highlight how trade agreement renegotiations can discourage investment, suggesting that future agreements include safeguards—such as gradual tariff adjustments or clauses discouraging sudden termination—to mitigate uncertainty-induced shocks.