The U.S.-China trade war, according to game theory

Planet Money

2025/05/30

Overview Shownote Highlights Transcript Chapters Pins

Shownote

Over the last few months U.S.-China trade relations have been pretty hard to make sense of – unless you look at what's happening through the lens of game theory. Game theory is all about how decisions are made, based not just on one side's options and payo...

Highlights

The complex dynamics of U.S.-China trade relations have baffled many, but through the lens of game theory, these interactions become clearer. By analyzing the strategies and decisions made by both nations, we can better understand the motivations and potential outcomes in this high-stakes economic standoff.

00:00

U.S.-China trade relations saw multiple rounds of tariff retaliations.

06:53

Trump's trade approach is akin to an ultimatum game in game theory.

12:26

U.S.-China trade war likened to a game of chicken, but more accurately described as a war of attrition.

24:46

Trade economists see the Prisoner's Dilemma as about cooperation, with low tariffs being a win-win and high tariffs a lose-lose.

Chapters

Why Do Tariffs Seem Like Moves in a Game?

00:00

Is It Really an Ultimatum? A Closer Look

06:53

Who Will Blink First in This War of Attrition?

12:26

Can Cooperation Solve the Trade Dilemma?

19:05

Transcript

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