New study measures trade power: US and China dominate due to network position

A new preprint from economists Bhattathiripad and Veetil (arXiv:2607.09990, July 2026) quantifies an often-overlooked dimension of international trade: political power. They define power as the ability of one country to impose economic loss on another by withdrawing from trade while suffering less damage itself. Using a short-run model that reallocates trade under the constraint that no producer exceeds its pre-shock scale, they simulate 9,480 counterfactual severances on the 2022 world input–output network. The key metric is bilateral asymmetry—the difference in losses between two countries when they cut ties, scaled from 0 (perfect symmetry) to 1 (complete lopsidedness). The average across all pairs is 0.6, meaning trade dependence is highly asymmetric.

Strikingly, the asymmetry has only a weak correlation with bilateral trade imbalances but closely tracks network position: core countries wield disproportionate power over periphery nations. The US holds the favorable side in every one of its relationships; China in all but one. A stark example: severing trade with Russia would cost Belarus more than 10% of its economic activity, while Russia loses just 0.5%. The authors conclude that trade power is a structural property of network centrality, not a reflection of deficits or surpluses. This has profound implications for how nations assess leverage in trade negotiations and sanctions—core economies hold more cards than raw trade volumes suggest.