Fake News, International Trade, and Asymmetric Information: Tracing the Changing Trade Preferences

Misinformation can influence decision-making by fueling individual's belief, prejudices, and stereotypes. In the context of international trade, misinformation refers to the spread of false or misleading information and facts mostly with the malicious intent of maligning reputation of products, services, trade policies of a country and thus negatively influencing liberal trade policies toward that country. Stereotypes and prejudices fueled by misinformation coupled with economic nationalism and populism cast a dark shadow over the liberal international order. Exaggerated claims about unfair trade practices laced with stereotypes, prejudices, and misinformation can fuel tensions and may eventually lead to trade dispute and retaliatory action such as the imposition of tariffs or breakdown of trade blocs. Fake News, as a term, came into prominence recently during the 2016 US elections. The spread of fake news during the election generated remarkable interest among researchers. While most research focused on the effect of misinformation, a few studies have shown the influence of misinformation in changing trade preferences. The intricate connection among trading partners can propagate misinformation. Misinformation can lead policymakers to undertake protectionist policies. However, policies driven by misinformation, taken by major economies, can have strong rippling effects on other trading partners because of their strong network connectedness. Therefore, it motivates us to understand and evaluate international trade in terms of network statistics. This chapter provides an in-depth analysis of the network effects of some major and emerging economic powers involved in bilateral or multilateral trade agreements.