We use a large episode of trade liberalization in Spain to test a rich set of channels linking trade and markups. The effect of reductions in import tariffs on firm-level and aggregate markups is pro-competitive, but there are offsetting effects via other channels. We show that firms with high intangible investment experience a weaker reduction in markups. This provides evidence for the concentration channel highlighted by recent theoretical work. We find weak evidence for reallocation effects and conclude that the relationship between trade and markups is mostly driven by changes at the intensive margin, changes in firm-level markups.

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17 August 2026

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Review of International Economics 2026

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DOI: 10.1111/roie.70063

https://onlinelibrary.wiley.com/doi/10.1111/roie.70063

This Journal article is published under the centre's Trade programme.