Advancing Counter-Tariff Strategy Using Graph Theory and Mathematical Optimization

I'm excited to share my latest research on developing a novel framework for optimizing counter-tariff strategies in international trade disputes. This work represents a significant advancement in applying mathematical methods to complex economic policy problems.

The Core Innovation

My new paper, "TARIFF RESPONSES: A GRAPH-THEORETIC APPROACH WITH INDUSTRY DEPENDENCIES," introduces a hypergraph-based optimization framework that provides policymakers with more precise tools for crafting strategic tariff responses.

The key innovation is modeling the global trade ecosystem as a multi-layered, directed, weighted hypergraph, where:

• Vertices represent countries, industries, and subindustries
• Hyperedges capture complex multi-lateral trade relationships
• Weights reflect both trade volumes and dependency levels

Unlike traditional bilateral trade models, this approach explicitly accounts for complex supply chain dependencies, where export competitiveness often depends on imported inputs.

Why This Matters

Modern trade disputes occur in a context of deeply intertwined global value chains. Traditional tariff models often fail to capture the cascading effects of tariffs through these complex networks. My framework helps policymakers:

1. Maximize strategic impact on target economies
2. Minimize self-inflicted economic damage
3. Account for second-order effects across connected industries
4. Adapt strategies as economic conditions evolve

Key Findings

My simulations confirm that countries with diversified sourcing and lower input dependencies demonstrate significantly higher resilience to tariff shocks. For example, in a symmetric 120% tariff scenario applied to electric vehicle exports:

• German EVs maintain 0.61 competitiveness (highest)
• US EVs show 0.51 competitiveness (moderate)
• Chinese EVs drop to 0.36 competitiveness (lowest)

These results reveal how even "fair" tariff policies can produce asymmetric outcomes based on underlying industrial structures.

Game theory analysis further demonstrates that sectors with high mutual dependencies (like semiconductors) naturally tend toward cooperative equilibria, while asymmetric dependencies remain vulnerable to exploitation.

 

This research marks an important step toward more sophisticated, mathematically rigorous approaches to trade policy. I look forward to extending this framework to include dynamic supply chain adaptation and multi-country strategic games in future work.

fulltext