Modeling Asymmetric Trade Adjustments to Tariff Shocks: Revisiting Delay Dynamics in East & South Asia

Modeling Asymmetric Trade Adjustments to Tariff Shocks: Revisiting Delay Dynamics in East & South Asia | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Modeling Asymmetric Trade Adjustments to Tariff Shocks: Revisiting Delay Dynamics in East & South Asia Hemendra Pal This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8543769/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract Background and Purpose Classical trade theory emphasizes that tariff shocks affect economies asymmetrically, depending on specialization, institutional capacity, and adjustment costs. Building on hysteresis in trade and system dynamics theory, this study tests whether delayed differential equations (DDEs)—commonly assumed to best capture lagged trade responses—actually improve explanatory power relative to ordinary differential equations (ODE). East and South Asia, with distinct degrees of global integration, institutional capacity, and trade infrastructure, are not only ideal for analyzing the structural and policy-driven asymmetries, but also provide an ideal comparative research during the 2025 tariff wave. Methods A dynamic comparative modeling approach is employed, integrating Ordinary Differential Equations (ODEs), Partial Differential Equations (PDEs), and Delay Differential Equations (DDEs) in trade flows, inflation, and GDP to capture both immediate and time-lagged responses in trade flows, inflation, and fiscal variables. Monthly import data (2024–2025) are log-transformed to improve model fit, with regional delay parameters "Tau" calibrated from trade, price, and logistics indicators. Model performance is evaluated using RMSE, AIC, and likelihood criteria. Model outputs are validated against empirical projections from the IMF and Asian Development Bank. Results East Asia shows faster, sharper, and shorter-lived trade adjustments, reflecting strong institutional agility and global trade integration. South Asia exhibits slower and more persistent deviations, due to infrastructural bottlenecks and policy rigidity. Contrary to expectations, ODE models consistently outperform DDEs in both regions. Tau-reduction policies significantly improve model responsiveness in South Asia. Conclusions Findings challenge the assumption that DDEs are universally supe­rior, showing that modeling response is region-specific. For policymakers, East Asia requires diversification to reduce vulnerability despite predictability, while South Asia must focus on "Tau"-reduction reforms (customs, logistics, infrastructure) to enhance responsiveness. JEL Codes: F13 (Trade Policy), C63 (Computational Techniques), C51 (Model Construction and Estimation), F14 (Empirical Studies of Trade). Tariff shocks Delayed Differential Equations East Asia South Asia Trade dynamics Time-lag modeling Data transformation Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. 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Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8543769","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":594110345,"identity":"e062bf3f-7d1c-4b4f-936c-7d7f8c4f6b46","order_by":0,"name":"Hemendra Pal","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAzUlEQVRIiWNgGAWjYBACAwYGxgMJBhI8bOwNIK4FUVoYDnyosJHj4zkA4koQp+XgjDNpxnISCSA+EVrMpZsfHOZtO5zYJvn86oYfBRIM/O3dCXi1WM45ZgDRIp1TdrMH6DCJM2c34HfYjQS4lrQbPEAtBhK5hLSkf4A67EzazT/EackxAHufTYL92G3ibLlzpgAcyGw8OWy3ZYARRNgvt9s3PgBFpXz78Wc33/yxkeNv78WvBSkieAzAJH7lqFrYHxBWPQpGwSgYBSMSAADHfE2w+tZwNAAAAABJRU5ErkJggg==","orcid":"","institution":"Royal Holloway University of London","correspondingAuthor":true,"prefix":"","firstName":"Hemendra","middleName":"","lastName":"Pal","suffix":""}],"badges":[],"createdAt":"2026-01-07 16:38:15","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8543769/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8543769/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":105141088,"identity":"fbf60eee-8a64-432a-98a6-d1252ec76745","added_by":"auto","created_at":"2026-03-22 10:40:19","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":1168652,"visible":true,"origin":"","legend":"","description":"","filename":"SubmissionResearch2026.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8543769/v1_covered_9b905fab-f1e1-4bc4-be45-2e1ab27d7b8e.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"Modeling Asymmetric Trade Adjustments to Tariff Shocks: Revisiting Delay Dynamics in East \u0026 South Asia","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Tariff shocks, Delayed Differential Equations, East Asia, South Asia, Trade dynamics, Time-lag modeling, Data transformation","lastPublishedDoi":"10.21203/rs.3.rs-8543769/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8543769/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003e\u003cstrong\u003eBackground and Purpose \u003c/strong\u003eClassical trade theory emphasizes that tariff shocks affect economies asymmetrically, depending on specialization, institutional capacity, and adjustment costs. Building on hysteresis in trade and system dynamics theory, this study tests whether delayed differential equations (DDEs)—commonly assumed to best capture lagged trade responses—actually improve explanatory power relative to ordinary differential equations (ODE). East and South Asia, with distinct degrees of global integration, institutional capacity, and trade infrastructure, are not only ideal for analyzing the structural and policy-driven asymmetries, but also provide an ideal comparative research during the 2025 tariff wave.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eMethods \u003c/strong\u003eA dynamic comparative modeling approach is employed, integrating Ordinary Differential Equations (ODEs), Partial Differential Equations (PDEs), and Delay Differential Equations (DDEs) in trade flows, inflation, and GDP to capture both immediate and time-lagged responses in trade flows, inflation, and fiscal variables. Monthly import data (2024–2025) are log-transformed to improve model fit, with regional delay parameters \"Tau\" calibrated from trade, price, and logistics indicators. Model performance is evaluated using RMSE, AIC, and likelihood criteria. Model outputs are validated against empirical projections from the IMF and Asian Development Bank.\u003c/p\u003e\n\u003cp\u003e\u003cstrong\u003eResults \u003c/strong\u003eEast Asia shows faster, sharper, and shorter-lived trade adjustments, reflecting strong institutional agility and global trade integration. South Asia exhibits slower and more persistent deviations, due to infrastructural bottlenecks and policy rigidity. Contrary to expectations, ODE models consistently outperform DDEs in both regions. 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