Modeling tariff-induced network failure and hysteresis

Tariffs imposed on modern global production industries, marked by deep interconnections and interdependencies, pose a critical risk of cascading economic failures. We model the impact of adding and removing tariffs on interdependent industries using a network with a hypernode framework governed by heterogeneous k-core percolation dynamics. Our analysis, using a modified generating function formalism, identifies a critical transition threshold: When tariffs remain below this value, global trade experiences only a modest reduction and fully recovers once tariffs are lifted. By contrast, tariffs that exceed the threshold trigger catastrophic collapse that spreads beyond the targeted goods into unrelated sectors. Recovery is further hindered by hysteresis, with the system in some cases failing to return to its pretariff state even after tariffs are fully removed. Moreover, multiple transition points may exist, leaving the system increasingly vulnerable to deeper failures once weakened. These findings demonstrate that the apparent reversibility of global trade under weak tariffs can foster a false sense of security, masking proximity to tipping points and the risk of irreversible collapse.