Ad valorem tariffs in global supply chain networks and impacts on labor

Global supply chain networks are essential to the production, trade, and consumption of commodities, including agricultural ones. Such networks have been increasingly impacted by trade policies, especially ad valorem tariffs, which are affecting commodity flows, prices, and profits. Furthermore, the labour market plays a critical role in the functioning of supply chain networks. However, the impacts of ad valorem tariffs on labour (and employment) have not yet been quantitatively examined in a competitive global supply chain network framework. This paper constructs an oligopolistic supply chain network equilibrium model that integrates ad valorem tariffs and labour. Firms compete noncooperatively in maximising their profits by determining their product flows across multiple production sites. Demand markets can be located in different countries, with production and shipment activities subject to labour upper bounds and wages. The governing Nash equilibrium conditions are formulated as a variational inequality. Through Lagrange analysis, an alternative variational inequality is derived with nice features for computations. Illustrative examples are provided along with a global soybean trade case study. Numerical results reveal how such tariffs shift trade flows, reshape labour allocation, and affect demand prices as well as profits, with labour shortages and cost disruptions further negatively compounding the effects.