Geopolitical Tensions and Global Value Chains: Evidence from the US and APEC Economies

This paper examines how geopolitical tensions shape global value chain (GVC) participation between the United States and APEC economies. Motivated by rising geopolitical frictions and growing uncertainty surrounding the stability of international production networks, the study focuses on three dimensions of geopolitical tensions: political distance between countries, country-specific geopolitical risk, and geopolitical risk originating in the United States. Using detailed GVC indicators derived from the OECD Inter-Country Input-Output tables, the analysis documents how these geopolitical actors are associated with both export- and import-side GVC structures. The results show that political distance is negatively associated with forward GVC participation in exports to the United States, suggesting that political alignment plays a role in shaping specific segments of value-added trade. Country-specific geopolitical risk exhibits limited influence on GVC participation. By contrast, geopolitical risk originating in the United States is consistently associated with lower GVC-related exports and imports, particularly for components involving foreign value added. These findings indicate that geopolitical tensions, especially those arising in the United States, have measurable implications for the configuration of value-added trade within the US–APEC production network. The study contributes to a growing literature on geopolitics and global value chains by providing systematic evidence on how geopolitical conditions correspond with the structure of international production linkages.