Yves here. I wish this post had provided a more in-depth discussion of what game theory says about the strategy, if you can call it that, employed by Trump. Perhaps the results really are too bushy to say much. But analyses like this also presuppose that Trump is driving towards some sort of desired end state. I highly doubt that is the case, despite his love of the 1890s. For Trump, this is all about process, about repeated demonstrations of his dominance and power, such as having very big type lead stories all over the world virtually every day with his name in them, even if outcomes are bad. Chas Freeman, Larry Wilkerson, and Professor Marandi, in their latest talk with Nima, discussed how Trump’s one-note “art of the deal” negotiating strategy is just about the worst way to try to come with an agreement with Russians or Iranians.
By Sylvester Eijffinger, Emeritus Professor, Tilburg University. Originally published at VoxEU
With President Trump’s announcement of sweeping tariffs on 2 April, he appears to be waging an economic war against the rest of the world. This column turns to non-cooperative game theory to attempt to understand what Trump thinks the US will gain from this war. Although including Europe’s military security vulnerabilities may give Trump the upper hand in his ‘game’, it is likely that in the end there will only be losers.
President Trump is once again waging a ruthless economic battle against the rest of the world. While during his first term it remained a threat, in his second term he appears serious about initiating a global trade war. Trump is not only attacking old enemies such as China; friendly Europe will also have to pay a price in this fight (Evenett and Fritz 2025). What does he think the US will gain from this? In this column, I will try to sketch a Trumpian world view, which I will then apply to the prosaic reality of economic science.
If we try to explain the current situation on the basis of a non-cooperative game theoretical model, a lot becomes clear. The answer to the question of the purpose of the trade war can be found in this mathematical model, which was developed during the Cold War between the US and the USSR. In initiating a trade war with the US’s geopolitical allies Canada, Mexico, and now the EU, Trump is forcing a non-cooperative game on his trading partners without any negotiation or restraint. This represents a similarity between Trump’s first and second terms in office.
In the first game, however, power relations were still equal. It was a so-called Nash game, named after the mathematician and Nobel Laureate John Nash. In Nash’s model, all opponents have equal power and therefore all participants act independently of each other, without agreements with each other and also without coalitions.
This time around, a much more complex game is being played. In Trump’s first trade war, there was no clear winner and all parties eventually compromised, with some collateral economic damage into the bargain. Now the deck has been fundamentally reshuffled. This time is different and there is no question of equality. Trump has raised the stakes by also including European military security in the non-cooperative game. America is still the dominant player in the military field (Yared 2024) and in particular when it comes to military intelligence. This gives Trump the upper hand in the game. The US leads and Europe can only follow. In game theory, this is called a ‘Stackelberg game’.
Because it has become not only a trade war but also a security crisis, the predicted outcome of the game becomes a lot more complex. Who could imagine that President Macron of France would make nuclear weapons available for European defence and that, under new Chancellor Merz, Germany would let go of the so-called Schuldenbremse?
Trump appears to be carrying out Project 2025 – the plan of an ultra-conservative think tank in which he rules by decree to sideline the US Congress (e.g. Anil 2025). And he doesn’t care about constitutional boundaries, which is leading to clashes with many courts and even with Chief Justice John Roberts of the United States Supreme Court.
But where does this game end, and what will be the consequences for the US and for Europe? In America, the pendulum of power usually swings further from ‘left’ to ‘right’ than in Europe. And Trumpism is a reaction to the ‘wokeism’ that dominated under the Presidents Obama and Biden.
Trump is in a hurry because, in the midterm elections a year and a half away, the Republicans could lose massively, and then there would be a new balance with his Democratic opponents in Congress. That is how it has always been so far. So, Trump wants to achieve his ultimate goal – to take back dominance in a military, political, and economic sense – quickly. He is making no secret about that. America is trying to put pressure on the rest of the world. But because Trump is charging on all fronts at the same time, there are no more separate files. And that makes the outcome of this game incredibly complex.
In the end, Trump is not going to win, but he will have damaged relations with America’s allies. This non-cooperative game that is Trump enforcing on his trading partners will only have losers, and this time there will be another compromise with Canada, Mexico, Britain, and the EU.
See original post for references
“For Trump, this is all about process, about repeated demonstrations of his dominance and power, such as having very big type lead stories all over the world virtually every day with his name in them, even if outcomes are bad.” Well said
> about repeated demonstrations of his dominance and power, such as having very big type lead stories all over the world virtually every day with his name in them
I’ve been joking at home and with work folks that were are now in the era of constantly “BREAKING NEWS!!!!” where we can invariably expect our various devices to have notifications sounding off or lighting up every few minutes/hours, and further expect that the subject matter will be “something that Trump has done or the consequences thereof”.
applying a classical “Game Theory” framework to the current dumpster fire would take too long for an internet comment…….
For any film buffs, we are in a situation that is a schizo mixture of the entire suite of games played by “Joshua” in the 1984 film, “War Games.”
“Game Theory” implies that every actor knows what game their playing….much like post-invasion Biden v. Putin in April 2022, the US has no idea that we are playing more than one game.
Trump Admin (too little blame is being placed on Bessent and Senate GOP) thinks it’s playing poker, we are really playing: because this is: Prisoner’s Dilemma + Poker + “Hotelling Equilibrium” + “Global Thermonuclear War” (from the “War Games” film) + a few others
what an own-goal dumpster fire as Icarus is flying too close to the sun.
I am with Yves on wishing that Game Theory had more to say. It never really got properly fleshed out in terms of moving into a fully probabilistic framework. Those of us who used to analyse consumer behaviour got fairly good at identifying respondents’ strategies and tricks. One that has been mentioned re Trump is “try to be the last person he talks to after a meeting because that is what is most likely to stick”.
Which would be fine if he were deterministic. But you have to be very careful about interpreting the level of probabilistic behaviour among the elderly. The “old rule of thumb” during my career was that older people had larger noise-to-signal so you had to adjust for this in predicting behaviour. However, there are more and more areas where this does not hold anymore: politics is the archetypal example and plenty of us can recount stories of the “weird uncle” who is 100% consistent in supporting some political doctrine/policy/person. They simply have no “error term”.
I don’t personally know if Trump has much of an error term. TBH he could (which would explain his inconsistency) OR he may have NONE (and simply have a deterministic rule based on cognitive decline and/or a personality disorder) and thus, if we look closely, see the “method in his madness”, which might be rooted in the “who spoke to him last” thing.
But I really don’t think game theory is fleshed out enough to give us answers. Once you have a probabilistic world things get real complicated real fast.
also throw in that whatever transactional, “Vicar of Bray” mindset Trump had may have been thrown out the window by surviving an asassination. Trump said in interviews that he felt divine intervention.
So Trump may think he has plot armor, and is going full “Inshallah”
https://en.wikipedia.org/wiki/The_Vicar_of_Bray_(song)
No game theory, no 4D chess. He is just a mob boss with a huge ego that believes he is immortal after surviving everything thrown at him.
The result of his ‘do as I say or else’ message to everyone, and I mean everyone, will be either a retreat to fortress America ( north central and south) or a very big war which the US will lose. Its possible of course that there is a third possible outcome , but none of us will be around to check the result.
If Japan and SK really get closer to China, that combination and ASEAN can put their two fingers up, and the tariffs will die a death. I have no idea what Europe will do besides talk ‘big’, does it really matter? India and China were already starting to feel a bit more comfortable with each other, this will put that on steroids as it will BRICS++.
I thought there was a chance he would try to talk to Putin and Xi as equals, but no, the US supremacy even in mob rule is paramount.
In his mind, Trump is a cowboy breaking a horse. All the horses. At the same time. Also, bears.
Lol!
But you’re right. This is about dominance and bringing allies to heel. He is circling the wagons for late stage Empire. If you want to be inside the stockade, you have to pay the price of admission (move your industrial production and/or profits to the USA).
I have to agree with the intro. Trump only had one job which was to get rid of Biden. Unfortunately now we are stuck with him and his increasingly obvious character flaws. If everything is transactional and nothing is about principles then there’s little reason why Putin or anyone else should take Trump at his word. Playing the bully and constantly making threats simply invites a comeuppance that, unfortunately, we Americans have to share with this erratic personality in the drivers seat.
You Americans are the reason he is where he is. He did not fall from Mars into the White House, but was taken out of reality TV and put there by the society. The society that is eager to be great again by driving that car over others, just like in the good old days.
I wouldn’t be so judgmental on this topic. Many Europeans, Canadians, Australians, New Zealanders and UKers are responsible for their current political, economic and social disasters as well…
Just look for nations that have fully embraced neoliberalism, and you will find this type of rot. The real reason Trump stands out so much is that he says, and does, the quiet part out loud.
Col Wilkerson has admitted that US after 2003 has invested untold billions in blackmailing, buying, and grooming the new generation of European (and non-European) leaders as well as creating an international media that works in sync with the dictates from Washington… As such all these populations have only “traitors” to choose from.
Well, we could just blame it on the rain, and keep on trucking. Or we could not try to paint accomplices as victims. Many Germans fought against Nazism (and were not responsible for all the troubles), but the Germans are still the ones to blame for it (though not the only ones).
Trump is not the USA, as much as he may think he is (just like Zelensky is not Ukraine). The rot in USA did not come from China (or Russia, Iran, etc), but is homegrown. He stands out so much because he is bigger attention whore (sorry for not-so-family-blog term) than previous presidents (just like Zelensky).
America is a sick, colonial society acting out its repressed traits as to hold on to what they once had. The domination, the racism, the oppression, the exceptionalism, the violence, were all underlying beliefs held by a significant number of the populous that resurfaced as the status quo was threatened. It’s what the country was built on not that long ago, and that doesn’t just disappear.
A lot of this was happening behind the scenes for people, only discussed by a minority of people focused on justice, but now that facade is gone for those who were fooled by it.
Agreed, but the 500 years of colonialism—thankfully ending—were started and run by Europe, with the US dropping in late (a century or so ago) and then pressuring a destitute (after WW2) Europe to support the status quo with the US atop. I do not think it was hard pressure.
Now, though, as the age ends, the emperor (Biden then Trump then ??) demands seppuku of the vassals to maintain the emperor—now that takes blackmail.
Obama and Clinton brought us Trump I, Biden and Harris brought us Trump II. Each time he won the election he was the change option. I doubt it goes much deeper than that. More to the point, Trump only lost an election when he was the incumbent and Biden was the change candidate.
The difference between us and Europe is Europe does a better job of jailing and banning their opposition candidates.
That’s because Europe has opposition candidates.
It seems quite a few people have tried to apply game theory (Nash equilibrium particularly) to the ongoing tariff wars. Not sure how useful the analyses are.
https://www.tcd.ie/Economics/assets/pdf/SER/2017/9trump.pdf
https://medium.com/@laurelweber/what-game-theory-can-tell-us-about-tariffs-e7c0c70a897d
https://www.natesilver.net/p/the-game-theory-of-trumps-tariff
Looks to me that the plan is to re-create conditions pre-ww2 – fall into depression, let europe conflagurate and step in with the re-building of the industrial base…..If limited nuclear option is hit, great good on the environmental overpopulation front with a mini Ice age
Just set up everything to repeat history and then, when met with depression turn the opposite way that FDR did- go all in authoritarianism.
I would say it is creating conditions post WW2, rather than pre, but this time with US advantage.
The batshit crazy article in Links yesterday likening Ukraine to the reconstruction of Germany was right but in a way it could never admit. Project Ukraine has failed so the plan is now for a Washington Pact to fall upon Europe from the Atlantic to the Dnieper, under which the lucky satellites will pay for the costs of their garrisoning and, like Stalin before him did to the German Reich, Trump will lift and carry their industrial base home to USA as (p)reparations for the new cold war.
I go with him re-creating the pre-Great War USA of the Gilded Age but without the philanthropy.
We’re not only witnessing the collapse of NATO and the end of the EU fantasy of becoming a sovereign state, we are seeing the rapid collapse of cost-effectve US supply chains and the loss of confidence of its allies. I think Trump has already established himself as the most consequential US President of all time. Few politicians have had the brass balls and matching brain cells to sacrifice so much for so little.
He is Caligula with little hands and he seems to be the ultimate disgruntled Manchunian candidate most probably brainwashed by sitting alone in his bedroom trying to understand the modern world by listening to The Smiths in the 80s.
But think of the bright side. Every disaster Big Don creates is a leap forward for mankind, at least for those still living. America’s inability to treat Russia as an equal in the nineties because, apart from the likes of George Kennan, US “experts” didn’t realise that the US moment in the sun would not linger long.
Now, China, Russia and the BRICS countries will create an alternative to the UN or, as China wishes it, to revivify the institution and return it to something closer to the original Roosevelt-Stalin model.
Every president since Carter has left the USA weaker than his predecessor, whether in terms of education, industrial production, inability to manage the drug problem, fight wars they can’t win – with the solitary exception of Grenada – weapons technology, the electrical grid system, road and rail transportation, etc, etc, etc.
Declining empires collapse creating bloodbaths while they do so. I’ve witnessed the collapse of the British, Belgian and French empires and their retreat into blind murder before releasing their colonies, and now it’s America’s turn. Trump is a man of his time fulfilling the role dictated by his belief imaginary past, using tariffs to hold back new powers that have emerged – and are emerging in Asia – rising to challenge just how exceptional the “exceptional country” really is.
I think that Yves is quite correct that Trumpian impulsiveness & chaos has a big role, but I also believe there are multiple actors with their own (probably contradictory) agendas. It’s enough to make your head spin.