Determinants of Intermediate Goods Trade

This paper examines the impact of various determinants of trade, including geopolitical risks, on global supply chains using a structural gravity model and the newly constructed International Trade and Production Database by End Use (ITPD-U), which disaggregates trade into intermediate, capital, and consumer goods. Results show that intermediate goods trade responds differently to standard trade determinants compared to capital and consumer goods: distance is the largest barrier, while regional agreements and currency unions have weaker effects. Geopolitical risks reduce trade overall, though its impact is notably smaller for intermediate goods, reflecting the "stickiness" of global supply chains. These results highlight the relatively high trade costs and structural inertia characterizing intermediate goods trade amid geopolitical uncertainty.