Trade wars and global value chains: Shooting oneself in the foot

a column by Cecilia Bellora and Lionel Fontagné for VOX: CEPR’s Policy Portal

Since 2018, the US administration has implemented several measures limiting free trade with China and other countries.

Using cross-country data and a general equilibrium model, this column argues that a trade war hurts not only the targeted countries but also the country imposing the tariffs.

Global value chains prompt countries to decrease tariffs when the domestic content of foreign-produced final goods and the imported content of domestic production of final goods are high. Once imposed, tariffs have an indirect effect on third sectors and countries through global value chains.

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