Navigating Protectionism: Trade Barriers and Their Roles in Reshaping Global Value Chains

This study uses the novel measure of aggregate trade restrictions (MATR) to explore the dynamic effects of trade restrictions on global value chain (GVC) positions across 146 countries (1990 to 2015). Employing the local projection method, this study finds that the aggregate MATR persistently and negatively affects GVC downstreamness but not upstreamness. Decomposition analyses on the five MATR dimensions show diverse outcomes: import restrictions reduce upstreamness, while invisible transfer restrictions increase it. Finally, heterogeneity analyses show that the effects of trade restrictions vary significantly across countries and sectors. These findings offer actionable insights for policymakers on balancing protectionism and global integration.