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The effects of tariff hikes in a world of global value chains

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  • Meinen, Philipp

Abstract

The expansion of global value chains (GVCs) over the past decades has influenced how trade tariffs affect economic activity. Global sourcing activities of firms imply that a tariff, usually imposed to protect a domestic industry, can entail higher input costs for other industries. The empirical evidence presented here corroborates this point: tariffs that raise input costs are found to negatively affect the output of industries relying on foreign sourcing. The analysis further suggests that the sensitivity of trade to tariffs is higher for production stages further downstream in global supply chains. In the context of the current trade dispute between the United States and China, this evidence may be of relevance, since the US tariffs against China affected a large number of intermediate goods and Chinese exports to the United States – in part – relate to downstream production stages of GVCs. JEL Classification: F14, F15, E23

Suggested Citation

  • Meinen, Philipp, 2019. "The effects of tariff hikes in a world of global value chains," Economic Bulletin Boxes, European Central Bank, vol. 8.
  • Handle: RePEc:ecb:ecbbox:2019:0008:1
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    Citations

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    Cited by:

    1. Jie Wu & Chan‐Guk Huh & Jacob Wood, 2021. "Globally chained economies, unwitting victims of the US‐China trade war," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 35(2), pages 60-76, November.
    2. Massimo Ferrari Minesso & Frederik Kurcz & Maria Sole Pagliari, 2022. "Do words hurt more than actions? The impact of trade tensions on financial markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(6), pages 1138-1159, September.

    More about this item

    Keywords

    Global Value Chains; Input Costs; Tariffs;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production

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