Impacts of trade wars on global supply chain configuration: a case of smartphones

Abstract:

The past three decades have witnessed rapid development of global configuration of supply chains, thanks to low trade barriers among countries and regions. However, recent trade wars have disrupted original configuration of supply chains by export restriction and escalated tariffs, which limit the global flow of modules, finished products and services. Therefore, this paper aims to investigate the ripple effects of trade wars on global supply chain configuration (SCC). We introduce a generic bill of materials (GBOM) of a product-service system composing of necessary and optional modules and services with different price and quality. Considering trade policies, taxes and consumers’ preferences to price and quality, a mixed-integer linear programming (MILP) model is developed to obtain optimal SCC decisions and corresponding performances under various global trade environments. The performances include product quality, supply chain’s profit, consumer surplus and social welfare. A case study of a product family of smartphones is adopted to illustrate model application and present detailed analysis. We find that the trade wars have significantly reduced product quality and supply chain’s profit. Moreover, consumer surplus in various markets has experienced different degrees of decline, while social welfare has decreased in most cases.