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Reshoring Under Tariff Uncertainty and Competition

出版	SSRN, 2022
URL	http://books.google.com.hk/books?id=H7rezwEACAAJ&hl=&source=gbs_api

註釋Recent developments in the U.S. tariff policies have prompted companies to rethink the need for a diversified global supply chain, particularly by adding an onshore/nearshore production location to the current offshore location. This paper adopts the Newsvendor Network framework and game-theoretic model to analyze the global firm's reshoring capacity, output quantity, and production decisions in the presence of domestic market competition and uncertainties around market demand and imposed tariffs at both the raw-material (RM) and finished-goods (FG) level. We show that an increase in the average RM tariff will reduce reshoring capacity investment, but the impact of the FG tariff is ambiguous. We identify two opposite effects in the increase of FG tariffs: an overflow effect, present when demand is above an overflow threshold, that encourages reshoring to reduce overflowing production to the more expensive offshore location when the FG tariff increases, and a full-utilization effect, present when demand is above a full-utilization threshold, that incents reduction of the reshoring investment due to a higher expected unit cost of production. The direction of change in the reshoring investment depends on the dominant effect. We also find that when the cost disadvantage of onshore relative to offshore production is large (small), the presence of domestic competition can lead to more (less) reshoring. Although higher tariffs hurt the global firm's profit, the domestic competitor can sometimes benefit if the global firm finds reshoring less attractive. Under certain conditions, domestic consumers can also benefit from an increased tariff when the global firm significantly increases its reshoring investment and expected output.