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 European Union (EU), and a sliding scale for others.
Trump has crowned himself king of dealmakers, claiming that everything is negotiable, from steel to soybeans to wars, if he is at the table. He is betting that the United States’ 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 five, 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 that both prisoners have equal weight, and that 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 that 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, the United States 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 United States does.
China’s WTO Hustle: The Original Defector
Trump is 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 World Trade Organization deal in 2001, which led to tariffs being cut from 15.3 percent to 3.0 percent by 2024. But it 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 because of growing trade deficits with China.
China’s intellectual property (IP) theft has been extensively documented. A 2024 House Committee on Homeland Security
report estimated that China’s IP theft costs the United States $300 billion to $600 billion annually, or roughly $4,000 to $6,000 per U.S. family.
A 2019 CNBC
survey of chief financial officers revealed that one in five corporations reported that China had stolen their IP within the previous year, and one in three indicated that such incidents had occurred over the past decade. Meanwhile, the Office of the U.S. 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 have 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 7.20 yuan per dollar, coinciding with escalating trade tensions.
Chicken or War Wolf?
China’s roaring now, vowing to fight until 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 gross domestic product (GDP), compared with $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. The United States’ $23 trillion consumer market is irreplaceable.
China’s $9.95 trillion domestic demand is dwarfed by that of the United States. Accounting for 54 percent of its GDP, despite Chinese leader Xi Jinping’s 1.3 trillion yuan stimulus, is too weak to fill the void. Population decline adds pressure. China’s population
declined by 850,000 in 2022,
2 million in 2023, and
1.4 million in 2024.
Trump’s playing this gap: The United States, 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? 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 by 5 percent, and on April 8, it fell by an additional 2.15 percent. This contributed 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 gain 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 seven years. Apple, for example,
faces a timeline of five to 10 years to shift substantial iPhone production out of China because of 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 to 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 to 2019 trade war showed Trump’s gift for brinkmanship—and this time, he believes that 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 U.S. goods, and begged for a 45-day delay in tariff implementation.As of today, Trump’s administration has claimed that more than 75 countries, including Japan, South Korea, and India, are lining up for negotiations with Trump.
The EU’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 the 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. There is a long list of countries that have scrambled for carve-outs, concessions, or temporary truces.
Game theory—both the textbook version and Trump’s rough-hewn version—says that playing nice while others defect is a losing hand. Trump’s bet: Brinkmanship resets the table and restores balance. It’s Richard Nixon’s “madman theory” meets Ronald Reagan’s “we win, they lose,” but 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.
