This paper develops a general equilibrium model of international trade in homogenous
intermediate inputs. In the model, trade between countries is driven by uncertainty in
the delivery of inputs. Because their managers are risk-averse, final good firms contract
with multiple suppliers to decrease the variability of their profits. The analysis shows
that risk diversification provides an incentive for international trade over and above such
reasons as comparative advantage and economies of scale, and highlights a new channel
– a reduction in uncertainty – through which trade can increase welfare. Econometric
evidence reveals that the model is consistent with qualitative features of the data.