Tariff Cascades and Global Value Chain Participation: A Portable Diagnostic Framework with Evidence from a Global Dyadic Panel

This paper develops a theory-first framework explaining how tariff policy reshapes participation and position in global value chains (GVCs). Building on the input–output price model and value-added trade accounting, we formalize the tariff cascade and introduce three portable diagnostics: the Tariff Propagation Multiplier (TPM), the Backward/Forward Tariff Elasticity Decomposition (BFTED), and the Stage-Shift Metric (SSM). We derive sign-robust propositions and provide aggregate-level empirical evidence consistent with the cascade mechanism using a dyadic panel of 260,473 observations spanning 1999–2018. Results show that home input tariffs significantly compress both backward and forward GVC participation, and that apparent GVC upgrading frequently reflects measurement composition rather than genuine technological relocation. A policy simulation calibrated to 25% tariff escalation scenario projects significant participation losses, with Canada’s high-exposure manufacturing sectors facing amplified cascade effects due to their dense cross-border input linkages. The framework offers actionable diagnostics for trade and industrial policy in an era of renewed protectionism.