As global value chains (GVCs) account for 80% of global trade, the revival of protectionism, amidst the looming trade tensions between United States and other trading partners, particularly China will dampen the international input–output relations. By using a multi-regional and multi-sectoral dynamic computable general equilibrium model, this study analyses China driven GVCs. The study explores the impact of tariff change on China and its major trading partners on economic variables like consumption, investment, government expenditure, exports and imports and sectors like electronic goods, coal, crude oil and machine equipment for the five-year period, that is, 2021–2025. GTAP 10 database has been used. The findings of the study suggest that although China’s dominance may diminish, yet it would continue to be one of the prominent players in GVC. Further, based on the results, the global economy can look forward to fragmented and locally oriented supply chains. At the sectoral level, the shorter supply chains would lead a further disjoint global trade system with a wider range of suppliers for similar products and hence increased regionalisation of production.
Aguiar de MedeirosC., & TrebatN. (2017). Inequality and income distribution in global value chains. Journal of Economic Issues, 51(2), 401–408.
2.
AguiarA., ChepelievM., CorongE. L., McDougallR., & van der MensbruggheD. (2019). The GTAP data base: Version 10. Journal of Global Economic Analysis, 4(1), 1–27.
3.
AicheleR., & HeilandI. (2018). Where is the value added? Trade liberalization and production networks. Journal of International Economics, 115, 130–144.
4.
AkbulutH., & EğenH. T. (2020). Import tariffs and informal labour market: A computable general equilibrium (CGE) analysis for Turkey. Review of Economic Analysis, 12(1), 213–234.
5.
AltomonteC., Di MauroF., OttavianoG., RungiA., & VicardV. (2012). Global value chains during the great trade collapse: A bullwhip effect? InFirms in the international economy: Firm heterogeneity meets international business (pp. 277–308). MIT Press.
6.
AmitiM., ReddingS. J., & WeinsteinD. E. (2019). The impact of the 2018 tariffs on prices and welfare. Journal of Economic Perspectives, 33(4), 187–210.
7.
AndersonM. D., HuntM. B., KortelainenM., KumhofM. M., LaxtonM. D., MuirD., MursulaS., & SnuddenS. (2013). Getting to know GIMF: The simulation properties of the global integrated monetary and fiscal model (No. 13–55). International Monetary Fund. https://www.imf.org/external/pubs/ft/wp/2013/wp1355.pdf
8.
BairJ., & GereffiG. (2003). Upgrading, uneven development, and jobs in the North American apparel industry. Global Networks, 3(2),143–69.
9.
BaldwinJ. R., & YanB. (2016). Global value chain participation and the productivity of Canadian manufacturing firms. Institute for Research on Public Policy.
10.
BaldwinR., & EvenettS. (2009). The collapse of global trade, murky protectionism and the crisis: Recommendations for the G20. Vox EU.org. https://ycsg.yale.edu/sites/default/files/files/Murky_Protectionism.pdf
11.
BerthouA., JardetC., SienaD., & SzczerbowiczU. (2018). Costs and consequences of a trade war: A structural analysis. Rue de la Banque, 72. https://publications.banque-france.fr/sites/default/files/medias/documents/818459_rdb72_en_v5.pdf
12.
BoltW., MavromatisK., & van WijnbergenS. (2019). The global macroeconomics of a trade war: The EAGLE model on the US-China trade conflict [DNB Working Paper, No. 623]. Netherlands Central Bank, Research Department. http://dx.doi.org/10.2139/ssrn.3328570
13.
BouetA., & LabordeD. (2017). US trade wars with emerging countries in the 21st century: Make America and its partners lose again [IFPRI Discussion Paper 1669]. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3029615
14.
BrodaC., LimaoN., & WeinsteinD. E. (2008). Optimal tariffs and market power: The evidence. American Economic Review, 98(5), 2032–2065.
15.
CarboneJ. C., RiversN., YamazakiA., & YonezawaH. (2020). Comparing applied general equilibrium and econometric estimates of the effect of an environmental policy shock. Journal of the Association of Environmental and Resource Economists, 7(4), 687–719.
16.
CarvalhoM., AzevedoA., & MassuquettiA. (2019). Emerging countries and the effects of the trade war between US and China. Economies, 7(2), 45.
17.
CattaneoO., GereffiG., & StaritzC. (Eds). (2010). Global value chains in a postcrisis world: A development perspective. The World Bank. https://elibrary.worldbank.org/doi/abs/10.1596/978-0-8213-8499-2
18.
CernatL., & MadsenM. (2011). Murky protectionism and behind-the-border barriers: How big an issue? The 100€ billion question. VoxEU blog. https://voxeu.org/article/murky-protectionism-how-big-issue
19.
CiuriakD., & XiaoJ. (2018). Quantifying the impacts of the US Section 232 steel and aluminium tariffs [C. D. Howe Institute Working Paper]. https://www.cdhowe.org/sites/default/files/
20.
ConstantinescuC., MattooA., & RutaM. (2015). Explaining the global trade slowdown. VOX CEPR’s Policy Portal, 18. https://voxeu.org/article/explaining-global-trade-slowdown
21.
ConstantinescuC., MattooA., & RutaM. (2019). Does vertical specialisation increase productivity?The World Economy, 42(8), 2385–2402.
22.
ConstantinescuC., MattooA., & RutaM. (2020). The global trade slowdown: Cyclical or structural?The World Bank Economic Review, 34(1), 121–142.
23.
Corley-CoulibalyM., KizuT., KühnS., PeelsR., & ViegelahnC. (2015). Changes in global production patterns and impacts on enterprises and employment. World Employment and Social Outlook, 2015(2), 131–159.
24.
DegainC., MengB., & WangZ. (2017). Recent trends in global trade and global value chains. In Global Value Chain Development Report (2017): Measuring and analyzing the impact of GVCs on economic development. https://core.ac.uk/download/pdf/288468065.pdf
25.
DellinkR., Van der MensbruggheD., & SaveynB. (2020). Shaping baseline scenarios of economic activity with CGE models: Introduction to the special issue. Journal of Global Economic Analysis, 5(1), 1–27.
26.
EscaithH. (2014). Mapping global value chains and measuring trade in tasks. In FerrariniBenno & HummelsDavid (Eds), Asia and global production networks (pp. 287–337). Edward Elgar Publishing.
27.
EvenettS. J. (2014). Beggar-thy-poor-neighbor: The incidence of protectionism in LDCs and Sub-Saharan Africa. In EvenettS. J. (Ed.), Beggar-thy-poor-neighbor: Crisis-era protectionism and developing countries (pp. 1–10). CEPR Press
28.
EvenettS. J. (2019). Protectionism, state discrimination, and international business since the onset of the Global Financial Crisis. Journal of International Business Policy, 2(1), 9–36.
29.
EvenettS. J., & FritzJ. (2015). The tide turns? Trade protectionism, and slowing global growth. The 18th Global Trade Alert Report. https://www.globaltradealert.org/reports/21
30.
EvenettS. J. & FritzJ. (2017). The global trade alert database handbook. Technical report, Global Trade Alert Initiative. https://www.globaltradealert.org/reports
31.
FajgelbaumP. D., GoldbergP. K., KennedyP. J., & KhandelwalA. K. (2020). The return to protectionism. The Quarterly Journal of Economics, 135(1), 1–55.
32.
FarajzadehZ., & BakhshoodehM. (2015). Economic and environmental analyses of Iranian energy subsidy reform using computable general equilibrium (CGE) model. Energy for Sustainable Development, 27, 147–154.
33.
FeenstraR. C. (2010). Offshoring in the global economy: Microeconomic structure and macroeconomic implications. MIT Press. https://mitpress.mit.edu/books/offshoring-global-economy
34.
FengL., LiZ., & SwensonD. L. (2016). The connection between imported intermediate inputs and exports: Evidence from Chinese firms. Journal of International Economics, 101, 86–101.
35.
Fernandez-StarkK., & GereffiG. (2019). Global value chain analysis: A primer. In Handbook on global value chains. Edward Elgar Publishing.
36.
FerrantinoM. J., & KotenE. E. (2019). Understanding supply chain 4.0 & its potential impact on global value chains. In Global value chain development report 2019: Technological innovation, supply chain trade and workers in a globalised world. WTO. https://www.wto.org/english/res_e/booksp_e/gvc_dev_report_2019_e_ch5.pdf
37.
FreundC., FerrantinoM., MaliszewskaM., & RutaM. (2018). Impacts on global trade and income of current trade disputes. MTI Practice Notes, 2. http://documents.worldbank.org/curated/en/685941532023153019/Impacts-on-Global-Trade-and-Income-of-Current-Trade-Disputes
38.
GeorgeH. (1949). Protection or free trade. Robert Schalkenbach Foundation.
39.
GereffiG. (2014). Global value chains in a post-Washington Consensus world. Review of international political economy, 21(1), 9–37.
40.
GereffiG. (2019). Global value chains and international development policy: Bringing firms, networks and policy-engaged scholarship back in. Journal of International Business Policy, 2(3), 195–210.
41.
GibbonP., BairJ., & PonteS. (2008). Governing global value chains: An introduction. Economy and Society, 37(3), 315–338.
42.
GrossmanG. M., & HelpmanE. (1991). Innovation and growth in the global economy. MIT Press.
43.
GuoM., LuL., ShengL., & YuM. (2018) The day after tomorrow: Evaluating the burden of Trump’s trade War. Asian Economic Papers, 17(1), 101–120.
44.
HernándezV., & PedersenT. (2017). Global value chain configuration: A review and research agenda. BRQ Business Research Quarterly, 20(2), 137–150.
45.
HodaA. (2016). Trade and protectionism—The emerging role for G20. In Global economic cooperation (pp. 229–232). Springer.
46.
HorwellD. J. (1966). Optimum tariffs and tariff policy. The Review of Economic Studies, 33(2), 147–158.
47.
International Monetary Fund. (2016). Subdued demand: Symptoms and remedies. World Economic Outlook October 2016. International Monetary Fund. https://www.imf.org/en/Publications/WEO/Issues/2016/12/31/Subdued-Demand-Symptoms-and-Remedies
48.
ItakuraK. (2020). Evaluating the impact of the US–China trade war. Asian Economic Policy Review, 15(1), 77–93.
49.
JangamB. P., & AkramV. (2019). Does participation in global value chain foster export concentration?Economics Bulletin, 39(4), 2913–2920.
50.
JiangH. D., HaoW. T., XuQ. Y., & LiangQ. M. (2020). Socio-economic and environmental impacts of the iron ore resource tax reform in China: A CGE-based analysis. Resources Policy, 68, 101775.
51.
JohnsonH. G. (1954). Optimum tariffs and retaliation. Review of Economic Studies, 21, 142–153.
52.
KanoL. (2018). Global value chain governance: A relational perspective. Journal of International Business Studies, 49(6), 684–705.
53.
KanoL., TsangE. W., & YeungH. W. C. (2020). Global value chains: A review of the multi-disciplinary literature. Journal of International Business Studies, 51, 1–46. https://doi.org/10.1057/s41267-020-00304-2
54.
KimE., HewingsG. J., & HongC. (2004). An application of an integrated transport network–multiregional CGE model: A framework for the economic analysis of highway projects. Economic Systems Research, 16(3), 235–258.
55.
KimI. S., & OsgoodI. (2019). Firms in trade and trade politics. Annual Review of Political Science, 22, 399–417.
56.
KummritzV., TaglioniD., & WinklerD. (2017). Economic upgrading through global value chain participation: Which policies increase the value added gains?The World Bank. https://openknowledge.worldbank.org/handle/10986/26348
57.
Kutlina-DimitrovaZ. (2017). The economic impact of the Russian import ban: A CGE analysis. International Economics and Economic Policy, 14(4), 537–552.
58.
LauL. J., & TangJ. (2018). The impact of US imports from China on US consumer prices and expenditures [IGEF Working Paper No. 66]. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3175677
LiM., BalistreriE. J., & ZhangW. (2020). The US–China trade war: Tariff data and general equilibrium analysis. Journal of Asian Economics, 69, 101216.
61.
LisenkovaK., MeretteM., & WrightR. (2013). Population ageing and the labour market: Modelling size and age-specific effects. Economic Modelling, 35, 981–989.
62.
McKibbinW. J., & FernandoR. (2020). The global macroeconomic impacts of COVID-19: Seven scenarios [CAMA Working Paper 19/2020 February 2020]. http://www.sensiblepolicy.com/download/2020/2020WorkingPapers/2020_19_CAMA_COVID19_mcKibbin_fernando_0.pdf
63.
McKibbinW. J., & WilcoxenP. J. (2013). A global approach to energy and the environment: The G-cubed model. In Handbook of computable general equilibrium modeling (Vol. 1, pp. 995–1068). Elsevier.
64.
MecklingJ., & HughesL. (2017). Globalizing solar: Global supply chains and trade preferences. International Studies Quarterly, 61(2), 225–235.
65.
MostertJ. W., & Van HeerdenJ. H. (2015). A computable general equilibrium (CGE) analysis of the expenditure on infrastructure in the Limpopo economy in South Africa. International Advances in Economic Research, 21(2), 227–236.
66.
MudambiR. (2008). Location, control and innovation in knowledge-intensive industries. Journal of Economic Geography, 8(5), 699–725.
67.
NeilsonJ., PritchardB., & YeungH. W. C. (2014). Global value chains and global production networks in the changing international political economy: An introduction. Review of International Political Economy, 21(1), 1–8.
68.
NiamirL., IvanovaO., & FilatovaT. (2020). Economy-wide impacts of behavioral climate change mitigation: Linking agent-based and computable general equilibrium models. Environmental Modelling & Software, 134, 104839.
69.
NolandM., RobinsonS., & MoranT. (2016). Impact of Clinton’s and Trump’s trade proposals. Assessing Trade Agendas in the US Presidential Campaign, PIIE Briefing 16-6. https://www.piie.com/publications/piie-briefings/assessing-trade-agendas-us-presidential-campaign
70.
O’RyanR., NasirovS., & Álvarez-EspinosaA. (2020). Renewable energy expansion in the Chilean power market: A dynamic general equilibrium modeling approach to determine CO2 emission baselines. Journal of Cleaner Production, 247, 119645.
71.
OsabouhienE., EfobiU. R., & BeecroftI. (2014). Free trade, protectionism and the balance of trade: New empirical insights. In Beggar-thy-poor-neighbour: Crisis-era protectionism and developing countries (pp. 13–24). CEPR Press.
72.
PlouffeM. (2015). Heterogeneous firms and policy preferences. In MartinL. (Ed.), The Oxford handbook on the political economy of international trade. Oxford University Press.
73.
RobinsonS., & ThierfelderK. (2019). Global adjustment to US disengagement from the world trading system. Journal of Policy Modeling, 41(3), 522–536.
74.
RodrikD. (2018). New technologies, global value chains, and developing economies (No. w25164). National Bureau of Economic Research. https://doi.org/10.3386/w25164
75.
RokickiB., HaddadE. A., HorridgeJ. M., & StępniakM. (2020). Accessibility in the regional CGE framework: The effects of major transport infrastructure investments in Poland. Transportation, 48(4), 1–26.
76.
RoseA. K. (2019). The causes of trade tensions and their consequences for financial stability. http://faculty.haas.berkeley.edu/arose/SeoulG20.pdf
77.
StaritzC., GereffiG., & CattaneoO. (2011). Shifting end markets and upgrading prospects in global value chains. International Journal of Technological Learning, Innovation and Development, 4(1), 2.
78.
StephensonS. (2013). Global value chains: The new reality of international trade. Development Challenges and Policy Options, Proposals and Analysis, 3. https://e15initiative.org/wp-content/uploads/2015/09/E15-GVCs-Stephenson-Final.pdf
79.
StiglitzJ. E. (2002). Globalization and its discontents. Norton and Company.
80.
StruttA., & WalmsleyT. (2011). Implications of the global financial crisis for China: A dynamic CGE analysis to 2020. Economics Research International, 2011. https://doi.org/10.1155/2011/926484
81.
StruttA., MinorP. J., & RaeA. N. (2015). A dynamic computable general equilibrium (CGE) analysis of the Trans-Pacific Partnership agreement: Potential impacts on the New Zealand economy. Ministry of Foreign Affairs and Trade.
82.
TimmerM. P., ErumbanA. A., LosB., StehrerR., & De VriesG. J. (2014). Slicing up global value chains. Journal of economic perspectives, 28(2), 99–118.
83.
TowerE. (1975). The optimum quota and retaliation. The Review of Economic Studies, 42(4), 623–630.
84.
UNCTAD (2013). Global value chains and development: Investment and value added trade in the global economy – A preliminary analysis. UNCTAD. https://unctad.org/en/PublicationsLibrary/diae2013d1_en.pdf
85.
WangZ., WeiS. J., YuX., & ZhuK. (2017). Measures of participation in global value chains and global business cycles (No. w23222). National Bureau of Economic Research. https://www.nber.org/system/files/working_papers/w23222/w23222.pdf
86.
XiangH., & KuangY. (2020). Who benefits from China’s coal subsidy policies? A computable partial equilibrium analysis. Resource and Energy Economics, 59, 101124.
87.
YashiroN., De BackerK., HutfilterA. F., KoolsM., & SmidovaZ. (2017). Moving up the global value chain in Latvia [OECD Economics Department Working Papers No. 1438]. OECD Publishing.
88.
ZhangM. L., BrooksM. R., DingD., DingH., HeH., LuJ., & ManoR. (2018). China’s high savings: drivers, prospects, and policies. International Monetary Fund. https://doi.org/10.5089/9781484388778.001
