Macroeconomic Risks from Maritime Trade Disruptions

Abstract

This paper develops a model of maritime chokepoint closures in which interrupting a shipping passage produces losses that are not measured, or even bounded, by the value of the trade that transits it. They stem from disruptions in the flow of intermediate goods that are complementary in downstream production. Re-matching displaced trade on the buyer and seller sides of the market limits the damage but cannot eliminate it. Across countries, the incidence is heavy-tailed, and it reaches economies whose cargo never crosses the passage, not only those that route their trade through it. The two ends of a severed corridor lose unequally, the exporting side by three to five times as economic geography funnels commodity-concentrated sellers through a single passage while their buyers re-source. Joint closures depart from the sum of their parts: the Middle East scenario is sub-additive, while the East Asia and Russia-Europe scenarios are super-additive.