The Effect of Tariffs in Global Value Chains

Johannes Eugster, Florence Jaumotte (), Margaux MacDonald and Roberto Piazza

No 2022/040, IMF Working Papers from International Monetary Fund

Abstract: This paper empirically investigates the impact of tariffs when production is organized in global value chains. Using global input-output matrices, we construct four different tariff measures that capture the direct and indirect exposure to tariffs at different stages of the production chain for a broad set of countries and industries. Our results suggest that tariffs have significant effects on economic outcomes, including on countries and sectors not directly targeted. We find that tariffs higher up and further down in the value chain depress value added, employment, labor productivity and total factor productivity to varying degrees. We find no benefits for the sector that enjoys additional protection, yet there is some evidence of economic activity being diverted, i.e. positive effects on value added and employment from tariffs imposed on competitors. Our paper relates to recent innovations in theoretical gravity models and provides an empirical assessment of possible long-term effects of recent trade tensions.

Keywords: Tariffs; global value chains; value added; productivity; IMF working paper research Department; tariff measure; employment from tariff; tariff war; upstream tariff; effect of tariff; Tariffs; Total factor productivity; Labor productivity; Exports; Imports; Global (search for similar items in EconPapers)
Pages: 33
Date: 2022-02-25
New Economics Papers: this item is included in nep-int
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