Specific Objectives of the Project: The objectives of this project are to

1. Create an evidence based and detailed primer that characterizes supply and demand in the underlying market reflected by California’s Veles spot market water index (NQH20).
2. Use time series econometric methods to identify the determinants of spot water prices in the Veles water market.

Summary of Results:
Preliminary results provide the following facts about the market for water in California:

1. 82% of water trades are one-year leases, meaning that they are a temporary transfer of the right to extract either surface or groundwater that last for one year only. All the following stylized facts only apply in the market for one-year leases.
2. Most short-term water trades happen in the groundwater market, but most of the volume is traded in the surface water market. 75% of one-year leases are for groundwater in adjudicated basins, but these only represent 25% of the total volume traded.
3. The market for surface water responds to drought conditions, but the market for groundwater does not. Prices, price volatility, total volume traded, and number of trades increase in response to drought in the market for surface water but remains consistent in the market for groundwater.
4. In the groundwater market, virtually all transactions happen in May, and the price is constant over time at around $200. The limited number of transactions that take place during other times of the year generally have a higher price, and the price trends upward over time. Seasonality is also present in the surface water market, but it is less pronounced and less important.
5. Beyond seasonality, most of the price variation in the groundwater market comes from differences in location, specifically subbasin. Location and month fixed effects control for 92% of the variation in price for groundwater.
6. In contrast, most of the price variation comes over time in the market for surface water. During times of drought surface water prices can be five times higher than when there is no drought or less severe drought. In fact, during some months of the year when there is no drought the price of surface water can be close to zero. This wide range of prices reflects the dependence of the surface water market on drought conditions.

Specific Objectives of the Project:
The Trump administration initiated a trade war in 2018 that triggered several countries, including Canada, China, and Mexico, to retaliate against the United States. These countries implemented waves of retaliatory tariffs that disproportionately impacted California agriculture. Canada and Mexico revoked their retaliatory tariffs in May 2019 as part of the USCMA negotiations. China then started to reduce retaliatory tariffs for selected agricultural products in response to the Phase One Deal signed in early 2020. While these tariff reversals reduced trade tensions between the United States and its trading partners, the effects of the trade war are still lingering. Using product-level trade data for the United States, China, Canada, and Mexico, our study aims to measure the degree of trade recovery after the retaliatory tariffs were fully or partially revoked in 2019 and 2020.

Summary of Results:
The Trump administration initiated several rounds of import tariffs in 2018, sparking a trade war that persisted into 2023. As a result, countries such as Canada and Mexico imposed retaliatory tariffs on U.S. goods. This study assesses the dynamic trade effects of the trade war tariffs, focusing on the impact of tariff enforcement and revocation among CUSMA countries. Our event study estimates indicate an immediate and substantial decline in trade for targeted varieties. In contrast, the trade recovery was more gradual and incomplete after tariff revocation. The average trade destruction effect was -37 percent during tariff enforcement, while we find limited evidence of significant trade diversion. Although the trade destruction caused by tariff enforcement was immediate, trade recovery was slower and took three to six months after tariff revocation. The average trade recovery effect for the post-tariff period was 31 percent. These results suggest that the trade war tariffs caused only limited long-term trade destruction. Additionally, we observe notable heterogeneity in the trade war effects across different good classifications and according to the tariff level. Our estimates indicate that e 2018 trade war led to trade destruction for targeted varieties among CUSMA countries of USD 17.7 billion in the first 18 months after tariff enforcement.