Geoeconomic Fragmentation in a Multi-Country GVC Model

Charles Serfaty and Sebastian Stumpner

Working papers from Banque de France

Abstract: This paper analyzes the welfare impacts of trade decoupling in a multi-sector general equilibrium trade model with global value chains. We show that decoupling leads to a fall in world trade and world welfare, and that losses are larger if fragmentation arises via trade costs than if it arises via tariffs. Decoupling creates both winners and losers, with neutral countries typically gaining from fragmentation. This makes blocs unstable, as bloc members have an incentive to take a neutral stance. In a final exercise, we therefore ask which bloc neutral countries would choose if forced to choose one. Here the Western bloc has a natural advantage due to its size, and it can expand in several rounds

Keywords: Geoeconomic Fragmentation; Trade Blocs; Global Value Chains; Tariffs; Welfare (search for similar items in EconPapers)
JEL-codes: C67 C68 F11 F13 F15 F60 F61 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2026
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:1030

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