The Impact of the U.S.-China Tariff War on Trade and Investment in Developing Countries in Disrupted Global Value Chains

Teuku Riefky, Syahda Sabrina and Mohamad Dian Revindo
Additional contact information
Syahda Sabrina: Institute for Economics and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI), Jakarta, Indonesia
Mohamad Dian Revindo: School of Strategic and Global Studies, Universitas Indonesia, Jakarta, Indonesia

Economics and Finance in Indonesia, 2025, vol. 71, 15-30

Abstract: As the world is more open and more integrated than ever, the trade war between the two largest economies, the United States (U.S.) and China, has significant and unexpected implications for multinational companies within global value chains. Since both markets are closed to each other due to the imposition of higher import tariffs, businesses have to shift their trade activities to alternative countries. Employing historical data, existing country-level data from the Global Trade Analysis Project on Value-Added (GTAP-VA), and tariffs imposed during the U.S.-China trade war, this study comprehensively examines the impacts of the trade war on global value chains, with a particular emphasis on developing countries. This study discovers that the increase in US import tariffs has a positive and statistically significant effect on the total exports of developing countries. Higher gross exports will generate higher domestic value-added (DVA) exports from developing countries, particularly those in ASEAN, as several countries compensate for reduced exports from China to the U.S. Furthermore, certain sectors or commodities are projected to benefit from the trade war, while others may experience adverse effects. The primary contributors to the increase in DVA exports are agricultural, textile, and leather products. On the other hand, high-technology manufacturing exports are likely to suffer due to the low comparative advantage of developing countries in these types of products.

Keywords: trade war; tariff; trade policy; computable general equilibrium (search for similar items in EconPapers)
JEL-codes: F11 F12 F13 F17 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://lpem.org/repec/lpe/efijnl/202502.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lpe:efijnl:202502

Access Statistics for this article

More articles in Economics and Finance in Indonesia from Faculty of Economics and Business, University of Indonesia Contact information at EDIRC.
Bibliographic data for series maintained by Muhammad Halley Yudhistira ( this e-mail address is bad, please contact ).