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Much of the discussion about trade and imports is based on discussions of products and sectors of the economy. But among the researchers who study international trade, a major shift has been a focus on relatively small firms that are directly involved in international trade. It turns out that many of these firms are both major importer and major exporters: indeed, they import intermediate goods in order as part of a global supply chain, to add economic value in the US economy while planning to export a finished (or more-finished) product. When you think about what US firms that are involved in international trade actually do, the arguments over tariffs take on a different flavor.
Pol Antràs provides a nice overview of thia research his FBBVA Lecture 2024: “The Uncharted Waters of International Trade,” delivered at the annual meetings of the European Economic Association, and now published in the Journal of the European Economic Association (February 2025, pp. 1-51). Researchers in international trade will be especially interested in the “uncharted waters” for future theoretical and empirical research that Antràs describes. Here, I’ll focus on looking back at the “charted waters” of key facts discovered by reseach in the previous decade or two.
(For an article from a few years back as this line of research got underway, I can recommend Andrew B. Bernard, J. Bradford Jensen, Stephen J. Redding, and Peter K. Schott, “Firms in International Trade,” from the Summer 2007 issue of the Journal of Economic Perspectives, where I labor as Managing Editor.)
Here’s Antràs with some facts about only a small share of US firms are involved in exporting.
First, … in the real world, only a small proportion of firms engage in exporting, with most exporting firms targeting just a few markets. … [O]nly 35% of all manufacturing firms in the United States exported in 2007. Furthermore, this is not driven by universal exporting in some sectors and zero exporting in import- competing sectors: The share of firms that export is highest among firms in “Computer and Electronic Products,”reaching 75% export participation, but this share is positive and significantly lower than 50% in most sectors.
Second, the distribution of exporters is highly skewed. Despite accounting for only 0.03% of all US manufacturing firms … the top 1% of exporters accounted for a staggering 80.9% of US manufacturing exports. The top 2%–5% and top 5%–10% accounted for an additional 12.1% and 3.3%, respectively, leaving the contribution of the bottom 90% at a mere 3.7% of total US exports. This phenomenon is not special to the United States. The top 1% of exporters accounted for 77% of exports in Hungary, 68% of exports in France, 59% of exports in Germany, 53% of exports in Norway, 51% of exports in China, 48% of exports in Belgium, 47% of exports in Denmark, 42% of exports in the United Kingdom, and 32% of exports in Italy (Mayer and Ottaviano 2008 ; Manova and Zhang 2012 ; Ciliberto and Jäkel 2021 ). Why are exporters often in the minority, even in an economy’s most competitive sectors, and why are aggregate exports so concentrated among a small number of firms?
The third stylized fact unveiled by empirical work in the late 1990s is that … exporters appear to be systematically different from non-exporters: they are larger, more productive, and operate at higher physical capital and skill intensities. … [T]hese differences are very large. US exporters are on average 1.11 log points (or 203% ) larger in terms of employment than non-exporters in the same sector, and even controlling for the number of employees, exporters feature substantially higher sales, labor productivity, total factor productivity (TFP), wages, capital intensity, and skill intensity.
A similar pattern arises for imports: that is, a relatively small share of firms account for a very large share of imports, and most of this trade involves inputs to finished goods, not the finished good themselves.
Perhaps most notably, the vast majority of world trade is not in finished products: It has been estimated that trade in intermediate inputs accounts for as much as two-thirds of world trade (Johnson and Noguera 2012 ). This implies that global firms not only export but also import. … More specifically, importers in the United States are in the minority, the distribution of US imports is as skewed as that for exports, importers are larger, more productive, and more capital and skill intensive than non- importers … Antràs, Fort, and Tintelnot ( 2017 ) further document that US importers are not only larger than non-importers, but that their relative size advantage is also increasing in the number of countries from which they source.
Indeed, in many cases imports and exports happen within a single firm: that is, the firm owns overseas suppliers and imports from them, and it owns overseas distributors and exports to them.: “Using a newly merged data on US firms’ exports and imports, and their global production locations in 2007, Antràs et al. ( 2024 ) estimate that around 80% of US exports and imports are accounted for by US firms that manufacture goods both in the US as well as in foreign countries.”
The current high-drama agenda of threatening tariffs, then backing away, then negotiating, then threatening again, all makes for lively headlines and talk shows. Yes, after a transition period of at least years and likely a decade or more, some of these firms that import-to-export could re-invent their production processes with much more reliance on domestic supply chains. But remember, these import-to-export firms evolved in this way because it was more cost-effective for them to do so–that is, there were gains from trade. These firms buy inputs in global markets either because the products aren’t available in US markets, or are available only at a substantially higher price; similarly, they export because global markets have the necessary demand to absorb the quantities that they produce.
These large US firms that import-to-export, often within the structure of the firm itself. are often among the crown jewels of the US economy. Remember, they are well above average in “sales, labor productivity, total factor productivity (TFP), wages, capital intensity, and skill intensity.” For these kinds of firms, which represent the lion’s share of US trade, the issue with tariffs isn’t about whether a family will be able to afford toys or T-shirts for their children. If these firms end up over time facing both substantially highe rtariffs on their imports of input for production and retaliatory tariffs on their exports, that policy will cut the heart out of their business model.
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