The welfare effects of trade policy are shaped by the outcomes of imports reallocation and price changes. In this paper, I show that these outcomes crucially depend on whether importing firms are matched with multinational suppliers or with single-country producers. I study an antidumping duty imposed by Colombia on the imports of Chinese truck tires. In the data I observe the full network of Colombian importers and their foreign suppliers. For the latter, I use data on tire plant's location to distinguish between multinational (manufacturing in many countries) and single-country manufacturers. Due to the policy, approximately 75% of imports of Chinese tires where replaced with imports from other origins, and the bulk of this geographical substitution involved multinational suppliers. I estimate a quantitative trade framework to match the reallocation and price changes in the data. I analyse the policy under a counterfactual network without multinational suppliers, and find that pass-through increases. The analysis suggests that ignoring this type of network structure could lead to biases for the prediction of the welfare effects of tariff -and similar- shocks.
An importer, "Company X" (left), sources tires manufactured in various countries (middle), establishing commercial links with different suppliers (right). Khumo Tire Co (pink/right) manufactures tires in China and Korea and sells both products to Company X. Other suppliers (green/right) manufacture tires in a single origin and, while many of them sell relatively little amounts, altogether they constitute an important share of Company X's purchase. This paper analyses a policy that makes Chinese tires prohibitively expensive. The findings remark on the importance of these buyer-seller links in substituting Chinese tires with Korean and Mexican, and other origins in general.