Effects of US Tariff Escalation and New Trade Barriers on Global Value Chains and Trade Flows - Especially US-China-EU Dynamic

Abstract

This study explores the impact of the U.S.–China trade war, which began in 2018, on global value chains (GVCs), trade flows, and economic welfare, focusing on the U.S., China, and the European Union (EU). The research utilizes a mixed-method approach, combining quantitative trade data analysis (2015–2025) with a Computable General Equilibrium (CGE) model to assess the effects of tariff impositions and trade barriers. The findings indicate that U.S.–China bilateral trade volumes were significantly reduced, with the U.S. experiencing a notable trade deficit increase. The EU, though not directly involved in the conflict, saw an influx of Chinese exports, positioning itself as a key intermediary. The study also reveals a global shift in trade dependencies, with both the U.S. and EU reducing their reliance on China. Additionally, the CGE model forecasts welfare losses, with the U.S. facing the largest economic burden due to higher import costs, while China's welfare loss is comparatively smaller. The global protectionism index has risen significantly, reflecting the broader implications of trade wars on global economic stability. Overall, the research underscores the long-term consequences of tariff escalations on global trade dynamics, supply chain configurations, and economic welfare.

Keywords : U.S.–China trade war, global value chains, trade flows, economic welfare, tariffs, Computable General Equilibrium (CGE) model, European Union, trade protectionism, supply chains, global trade dynamics, welfare loss.