This paper studies transport costs as market outcomes and highlights the round trip effect, a key feature of the transportation industry that links transport supply between locations. Incorporating transportation into an Armington trade model, I show that this effect mitigates shocks on a country's trade with its partner and generates spillovers onto its opposite direction trade with the same partner. A country's import tariffs can therefore translate into a potential tax on its exports to the same partner.
Using novel container freight rates data, I develop an instrumental variable based on this effect to estimate the containerized trade elasticity with respect to freight rates. Using my elasticity estimates as well as my trade and transportation model, I simulate a counterfactual increase in US import tariffs on all its partners. This tariff increase not only decreases overall US imports but also US exports on the same bilateral routes. A model with exogenous transport costs would over-predict the fall in US imports by 37 percent and fail to capture the associated bilateral reduction in US exports.