History is less likely than game theory to provide useful insights into where the latest trade dispute between the US and China may be heading. The question, ultimately, is whether new tariffs will eventually lead to a more cooperative game, or to a competitive one in which everyone loses.
CAMBRIDGE – The trade confrontation between the United States and China is heating up. After firing an opening salvo of steep tariffs on steel and aluminum, the US administration has released a plan for a 25% tariff on 1,333 Chinese imports – worth about $50 billion last year – to punish China for what it views as decades of intellectual property theft. China has fired back with a plan to slap 25% levies on a range of US goods, also worth about $50 billion. In response to what he labels “unfair retaliation,” US President Donald Trump is now said to be considering yet another set of tariffs, covering another $100 billion worth of imports from China. Economists and market analysts are scrambling to figure out what will come next.
CAMBRIDGE – The trade confrontation between the United States and China is heating up. After firing an opening salvo of steep tariffs on steel and aluminum, the US administration has released a plan for a 25% tariff on 1,333 Chinese imports – worth about $50 billion last year – to punish China for what it views as decades of intellectual property theft. China has fired back with a plan to slap 25% levies on a range of US goods, also worth about $50 billion. In response to what he labels “unfair retaliation,” US President Donald Trump is now said to be considering yet another set of tariffs, covering another $100 billion worth of imports from China. Economists and market analysts are scrambling to figure out what will come next.