Barriers to Trade: How Border Walls Affect Trade Relations

Since trade must cross borders, to what extent do border walls affect trade flows? We argue that border walls can reduce trade flows. Even if the objective is to only stem illicit flows, border walls heighten border effects that can also inhibit legal cross-border flows. Using a gravity model of trade that reflects recent developments in both economic theory and econometrics, we find that the creation of a wall is associated with a reduction in legal trade flows between neighboring countries. We provide a battery of evidence that suggests this reduction is not simply a function of worsening bilateral relations. Our findings have implications for understanding how governments have taken measures to assert sovereign control of their borders in an age of increasing economic globalization.