{"id":347955,"date":"2025-09-09T23:02:30","date_gmt":"2025-09-10T04:02:30","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2025\/09\/09\/why-we-teach-international-trade-and-foreign-direct-investment-together\/"},"modified":"2025-09-09T23:02:30","modified_gmt":"2025-09-10T04:02:30","slug":"why-we-teach-international-trade-and-foreign-direct-investment-together","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2025\/09\/09\/why-we-teach-international-trade-and-foreign-direct-investment-together\/","title":{"rendered":"Why We Teach International Trade and Foreign Direct Investment Together"},"content":{"rendered":"

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Or, why should a bunch of ICE agents running amok in a Hyundai-LG factory<\/a> have an impact on trade policy uncertainty?<\/p>\n

People tend to think of international trade and foreign direct investment as substitutes (one can import widgets into country A from country B, or alternatively a firm in Country B can build a new widget factory in Country A). That kind of makes sense in a world of differing goods, maybe without information asymmetries. However, when there are differentiated productions, supply chains, intellectual capital etc., it is perhaps more useful (especially in trade between advanced economies) to think of trade and FDI as complements (or FDI as technology transfer, as this was a chip manufacturing facility). In any case, see Chapter 6 of Chinn and Irwin (2025)<\/a>.<\/p>\n

So, here\u2019re two trade policy uncertainty measures:<\/p>\n

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Figure 1:<\/strong> EPU-Trade (blue, left scale), TPUD Caldara et al. (red, right scale). Source: policyuncertainty.com and Iacoviello.<\/a><\/em><\/p>\n

Given the impact of uncertainty on FDI (see e.g.\u00a0 Jardet, Jude, Chinn, 2023<\/a>), it\u2019s no wonder FDI fell in Q1.<\/p>\n

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