Abstract

The present study examines a measure, the embodied tariff, which is defined as the sum of all tariffs imposed on intermediate inputs at various stages of productions. It captures the total tariff costs in products in the context of the global value chain. We estimate the embodied tariff for 44 economies and 56 sectors, decompose it by tariff source, and also decompose its temporal changes using structural decomposition analysis. The embodied tariff is more than twice the size of the traditional direct input tariff, indicating a non-negligible value chain effect. This demonstrates an overall declining pattern over time, which reflects a dominating effect of decreasing customs tariffs over increasing international production fragmentation. Since 2011, however, the decline in international production fragmentation has also decreased embodied tariffs. A country’s customs tariff is sizably translated into the embodied tariff of its own products, creating a competitive disadvantage for domestic producers.