Isolating China: Deglobalisation and its Impact on Global Value Chains

Abstract

As global value chains (GVCs) account for 80% of global trade, the revival of protectionism, amidst the looming trade tensions between United States and other trading partners, particularly China will dampen the international input–output relations. By using a multi-regional and multi-sectoral dynamic computable general equilibrium model, this study analyses China driven GVCs. The study explores the impact of tariff change on China and its major trading partners on economic variables like consumption, investment, government expenditure, exports and imports and sectors like electronic goods, coal, crude oil and machine equipment for the five-year period, that is, 2021–2025. GTAP 10 database has been used. The findings of the study suggest that although China’s dominance may diminish, yet it would continue to be one of the prominent players in GVC. Further, based on the results, the global economy can look forward to fragmented and locally oriented supply chains. At the sectoral level, the shorter supply chains would lead a further disjoint global trade system with a wider range of suppliers for similar products and hence increased regionalisation of production. JEL Codes: F10, F17, F60, F16, D58

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