Systemic Trade Collapse Probability under Compounded Geopolitical Shocks: A Max-Stable Process Approach with Bivariate H\"{u}sler-Reiss Spectral Density for the Trump Tariff Regime and Iran Conflict

Classical approaches to modeling geopolitical trade shocks treat them as additive perturbations to a fundamentally stable system. The simultaneous imposition of sweeping US tariff regimes under the Trump administration and escalating military pressure on Iran expose the inadequacy of this assumption at a historically consequential scale. These are not perturbations. They are correlated tail events whose joint dependence structure in the extremes differs qualitatively from their center-of-distribution behavior, and modeling them additively systematically underestimates the probability of catastrophic multi-corridor trade collapse. We develop a formal framework for the systemic trade collapse probability (λT, λI, Γ, u), defined as the probability that d ≥ 2 critical bilateral corridors simultaneously fall below threshold fraction u of pre-shock volumes. The framework is grounded in max-stable process theory with a bivariate H\"{u}sler-Reiss spectral density characterizing tail dependence between tariff-induced and conflict-induced disruptions. Joint shock arrivals are modeled as a bivariate marked Hawkes process with a shared CIR intensity component. The TCEP admits a closed-form expression, and the risk amplification factor {equation*} A(Γ, u) = (λ_T, λ_I, Γ, u)/(λ_T, 0, Γ, u) + (0, λ_I, Γ, u){equation*} exceeds unity for all Γ < ∞, with amplification strictly increasing as tail dependence strengthens. Empirical estimation from bilateral trade flow data during the 2018 US-China tariff war and the 2019 Strait of Hormuz crisis yields Γ̂ = 1.84 with 95% confidence interval $[1.31, 2.47]$, corresponding to  = 2.13 at the 10% collapse threshold: the compound shock is more than twice as dangerous as either shock alone. Sensitivity analysis across fifteen systemic corridors identifies Hormuz-dependent routes as the dominant systemic risk nodes. Policy implications for reserve management, trade diversification, and multilateral coordination are developed. MSC 2020: 60G70, 62G32, 62P20, 91B84. JEL Classification: C58, F13, F51, F52, G15.