Modeling the Effects of Geopolitical Tensions on Trade and Global Value Chains

Client/Funding Institution

Asian Development Bank (ADB)

Abstract

The past few years have witnessed rising geopolitical tensions that have the potential to impact on the functioning of international trade and global value chains (GVCs). These tensions include rising tariffs, such as the recent unilateral tariff increases by US President Trump. Geopolitical tensions have the potential to engender significant shifts in trade patterns, including the reallocation of production and sourcing strategies, the emergence of regional trade blocs, and the increased reliance on alternative supply chains. Through such impacts, there is a concern over whether such tensions may put at risk the important role that GVCs can play in developing economies. The aim of this work is to identify a set of potential scenarios linked to current economic and geopolitical events and then to model the impact of these shocks on the level and structure of trade and global value chains.

Duration

October 2024 - December 2025

wiiw team Leader

Oliver Reiter

wiiw Staff

Corinna Covi, Javier Flórez Mendoza, Robert Stehrer

Research Areas: International Trade, Competitiveness and FDI

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