Commentary
President Donald Trump didn’t tiptoe back into the White House in 2025—he stormed in, unleashing tariffs on what he dubbed “Liberation Day,” April 2: 10 percent on all imports, 54 percent on China, 46 percent on Vietnam, 20 percent on the EU, and a sliding scale for others.
Trump has crowned himself as king of dealmakers, claiming everything is negotiable, from steel to soybeans to wars, if he is at the table. He is betting that America’s economic heft can bulldoze the world into submission—maybe through negotiation. China is snarling back, but Trump is cranking the dial,
slapping another 50 percent on Chinese goods on April 7 and pushing tariffs to 104 percent, then 145 percent.
Trump says China “badly”
wants to talk but can’t find the phone.
Trump didn’t just raise tariffs—he rewrote the formula: Take the U.S. trade deficit with a country, divide it by imports, halve it, and apply a 10 percent floor. Vietnam’s average
tariff rate was just 5.1 percent.
China’s was 3 percent in 2024. But Trump’s art of the squeeze flips trade deficits into leverage, daring others to deal or pay up.
Trump’s Play: Defining the Game
Game theory lights the way here. Picture the famous “prisoner’s dilemma”: two players, each choosing to cooperate or defect, with payoffs hinging on both moves. Cooperation means low tariffs, no dumping (flooding markets with cheap goods), and no artificial currency depreciation (keeping exchange rates fair).
If both cooperate, trade flows freely, costs stay down, and economies flourish—consumers buy cheap goods, businesses profit, and jobs multiply. Both are happy, with a 3–3 win.
If one defects with high tariffs, subsidized exports, and a cheap currency, the defector shields its industries and gains market share. One can grab a gain of 5, while the other gets zero. Then the other retaliates; both slap tariffs; prices soar; trade shrinks; and both crash to the 1–1, lose-lose wasteland.
The question is, how do you keep both players in the cooperate-cooperate mode, despite the lure of short-term gain? If both players see a credible threat—if you defect, you will face steep consequences—then both can choose mutual cooperation over mutual destruction.
The numbers in this matrix represent relative strategic outcomes, not literal economic figures. A 5 reflects the outsized gain a country might achieve by defecting while the other side cooperates—gaining market share, shielding domestic industries, and imposing costs on the rival.
The textbook example of the prisoner’s dilemma assumes both prisoners have equal weight, and the gains and losses are equivalent for both players.
Trump and his team do not agree that the U.S. economy has the same mass as others. Trump claims only 25 percent of his tariffs will raise U.S. prices, while foreign exporters will bear the rest. He believes—and he wants his rivals to believe—that the cost of defecting is much higher for foreign nations than for the United States.
The table below illustrates Trump’s view: the U.S. holds greater leverage in trade disputes. In his version of the Prisoner’s Dilemma, America loses less and gains more—whether it cooperates or defects. That’s why threats alone have already nudged Canada and Mexico into renegotiation talks. Trump bets that other nations, fearing economic damage, will likewise swerve before the U.S. does.
China’s WTO Hustle: The Original Defector
Trump’s currently playing the defector, betting that the United States can weather the storm while others can’t. However, China is an early defector in this dilemma–cooperation was the WTO deal in 2001, tariffs cut from 15.3 percent to 3.0 percent by 2024. But they bolted beyond tariffs, subsidizing and dumping into the U.S. market.In January 2024, the U.S. Department of Commerce
determined that imports of tin mill products from China were being subsidized and dumped into the U.S. market, and the investigation resulted in antidumping duties of 122.5 percent. Between 2001 and 2018, in three sectors alone—primary metals, machinery, and fabricated metal products—the United States
lost 372,700 jobs due to growing trade deficits with China.
China’s intellectual property (IP) theft has been extensively documented. A 2024 House Homeland Security
report estimates China’s IP theft costs the United States $300 billion to $600 billion annually, or roughly $4,000 to $6,000 per American family. A 2019 CNBC CFO
survey revealed that one in five corporations reported China had stolen their IP within the previous year, and one in three indicated such incidents had occurred over the past decade. Meanwhile, the U.S. Office of the Trade Representative detailed, in its 2023 National Trade Estimate
Report, how China’s digital trade barriers undermined U.S. corporations’ ability to move data across borders.
While Chinese officials denied allegations of currency manipulation, the Chinese yuan fell to its lowest level against the U.S. dollar in 19 months on April 8, at 7.2038 yuan per dollar, coinciding with escalating trade tensions.
Chicken or War Wolf?
China’s roaring now, vowing to fight till the end, retaliating with 34 percent on U.S. goods last week, 84 percent this week, and slashing rare-earth exports.China exported $439.8 billion to the United States in 2024—2.38 percent of its GDP, compared to $143.5 billion in U.S. exports to China, just 0.5 percent of U.S. GDP. In 2024, China increased its exports to Russia, hitting $237 billion, but that is no U.S. substitute; America’s $23 trillion consumer market is irreplaceable.
China’s $9.95 trillion domestic demand is dwarfed by the United States’. Accounting for 54 percent of its GDP, despite Xi’s 1.3 trillion-yuan stimulus, is too weak to fill the void. Population decline adds pressure. China
lost 850,000 from its population in 2022,
2 million in 2023, and
1.4 million in 2024.
Trump’s playing this gap: America, powered by consumption, can shrug off Chinese exports, but China walks a razor’s edge, losing the U.S. market will bite hard. China is racing head-on, but swerving might be its only escape.
Can the US Afford to Lose? High-Tech on the Brink
The market is experiencing whiplash. Following Trump’s tariff announcements, the Nasdaq Composite Index experienced a significant drop: On April 7, it fell 5 percent, and the decline continued on April 8, with the Nasdaq falling an additional 2.15 percent, contributing to a broader market downturn that saw the S&P 500 nearing bear market territory with a 12 percent
decline over four days.
However, the S&P
surged back on April 9 with a 9.5 percent gain, the largest since 2008, and the Nasdaq rose 12.2 percent, the highest since 2001, after Trump announced a 90-day pause on tariffs for many countries—not including China.
China is central to the supply chain—providing 78 percent of U.S. smartphone
imports, 79 percent of laptops and tablets, and 90 percent of gaming
consoles. Consumer electronics account for a major slice of the $439 billion in total U.S.
imports from China in 2024.
Shifting supply chains away from China won’t happen overnight. While no definitive number quantifies total U.S. supply chain exposure to China, Deloitte
notes that building new manufacturing capacity—such as greenfield plants—typically takes 2 1/2 to 7 years. Apple, for example,
faces a five- to 10-year timeline to shift substantial iPhone production out of China, due to deep ecosystem entrenchment and skill shortages elsewhere.
Trump’s aggressive tariff strategy aims to pressure Beijing, but the immediate market reactions and potential supply-chain disruptions echo the trade tensions of 2018.
History’s Echo: The 2018–2019 Tariff War
Trump’s tariffs are as much psychology as economics—a battering ram in a high-stakes game of chicken. As of now, there is no deal in sight to stop the trade war between the United States and China.China defected first. Trump retaliated. China charged back. Trump doubled down. Are we headed for Trump’s version of game theory, or a double-defection collapse?
We’ve been here before. In 2018, Trump launched the U.S.–China trade war by imposing 25 percent tariffs on $50 billion worth of Chinese goods, targeting sectors tied to China’s industrial policy.
By 2019, that figure ballooned to cover $250 billion, with additional duties imposed on a further $300 billion—bringing the total to roughly $550 billion in Chinese goods. China retaliated, slapping tariffs on key U.S. exports. Soybean sales to China
plunged by 75 percent, from $12.3 billion in 2017 to $3.1 billion in 2018, inflicting major losses on U.S. farmers.
The Trump administration responded with $28 billion in aid to
offset the damage. Meanwhile, U.S. industry felt the squeeze: General Motors announced
plans to cut 14,000 jobs and shut multiple factories in late 2018, citing market shifts and rising tariff costs.
Facing mounting pressure, China signed the phase one trade deal in January 2020, committing to $200 billion in additional U.S. purchases over two years. But today’s stakes are arguably higher—China’s economy is weaker, and U.S. tech supply chains are more exposed than ever. The 2018–2019 trade war showed Trump’s gift for brinkmanship—and this time, he believes the stakes are worth it.
A ‘Trump Doctrine’ or a Wreck?
The current trade conflict has escalated beyond a bilateral U.S.–China dispute into a shifting landscape of global trade. Vietnam blinked first. It rushed to mitigate tensions, with plans to increase imports of American goods, and begged for a 45-day delay in tariff implementation.As of today, Trump’s administration claimed that more than 75 countries, including Japan, South Korea, and India, are lining up for negotiations with Trump.
The European Union’s response is multifaceted. The European Commission has
proposed a “zero for zero” tariff agreement—a deal to eliminate tariffs on industrial goods between the United States and EU. The EU remains open to talks, but isn’t standing still. On April 9, EU member states are
expected to approve the first wave of tariffs—25 percent duties on products including motorcycles, poultry, clothing, and fruit. Furthermore, they are exploring strategic partnerships to diversify trade relations and reduce reliance on U.S. imports.
Trump’s trade blitz looks like doctrine in the making: Punish deficits, force deals, reset the global order. And it’s working—sort of. A long list of countries scrambled for carve-outs, concessions, or temporary truces.
Game theory—textbook and Trump’s rough-hewn version—says playing nice while others defect is a losing hand. Trump’s bet: Brinkmanship resets the table and restores balance. It’s Nixon’s “madman theory” meets Reagan’s “we win, they lose,” bur with tariffs, not tanks. I hope he’s right. This could be the boldest trade recalibration in a generation.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
