Saturday, May 24, 2025

Rerouting to Evade Tariffs - Our Latest Study

Tariffs and their impacts we have been researching for several decades now because of the relevance of the topic as well as the scientific interest in the mathematical modeling of supply chain networks and international trade. Furthermore, there are different types of tariffs, including unit tariffs, ad valorem tariffs, and even tariff rate quotas. We have studied the impacts of tariffs in perfectly competitive contexts such as spatial price equilibrium problems as well as in oligopolistic markets.

Recently, because of the escalating trade wars and imposition of various retaliatory tariffs in the second Trump administration, our research has included rerouting to evade tariffs. This topic has been quite newsworthy; see, for example, this article in The New York Times, which was published today: https://www.nytimes.com/2025/05/24/business/vietnam-china-transshipment.html

My paper, "Multicommodity Trade, Tariffs, and Rerouting," co-authored with my Isenberg School PhD student, Samirasadat "Samira" Samadi, was accepted in the very special volume: Convex and Variational Analysis with Applications: In Honor of Terry Rockafellar’s 90th Birthday. Panos M. Pardalos and Themistocles M. Rassias, Editors, Springer Nature Switzerland AG.

It was an honor to have been invited to contributed to this edited volume in honor of the amazing Professor Rockafellar, a giant in the optimization and variational inequalities.

A preprint of our paper can be downloaded from the Supernetwork Center website: https://supernet.isenberg.umass.edu/articles/MulticommodityTradeTariffsandRerouting.pdf
The case study in the paper focuses on tea, which is produced in both China and Vietnam, and, in our numerical examples, can be rerouted, with associated additional costs (although it is illegal) to demand markets. It is important to model and to quantify trade-offs associated with such illicit tariff evasion in order to provide policy- and decision-makers with insights for interdiction purposes. Our research continues.