In the remainder of this paper we examine the effect of using the new value-added
trade databases on two important empirical applications. First, we build a version
of the now standard computable general equilibrium (CGE) trade model, using a
GTAP based database and a model that uses information derived from the USITC
global value chains work instead of traditional trade data and examine the impact
of two scenarios – a US tariff placed on Chinese imports aimed at offsetting a
low exchange rate and a second scenario approximating an appreciation of the
renminbi by a similar amount as the US tariff. We then compare the results of
this global value chains (GVC) based model with results from a model based on
traditional data and find that the GVC trade model has quite important differences
that more clearly illustrate how global value and supply chains work through the
global economy, and how they can cause some unexpected and unintended effects
within and across economies.