Game Theory in US-CHINA Trade War
The idea of game theory has been applied in a variety of the fields and areas in the real-world situation. The current US-China trade war has a huge involvement of Game Theory playing between these two countries. The article outlines that US and China trade war is like World War I, which the two players are intending to win in the war of attrition. Two countries are expecting each other to quit first so that one of them can win in the end. For example, Trump took actions like holding deals where China opens the market, stopping subsidizing industries and raising tariffs; on the other hand, China seeks to achieve cooperation and drop tariff while expressing adamant attitude regarding subsidizing industries. These two competitors are incompatible which are holding contradictory positions.
According to the game theorists and the idea presented in the class, the game theory predicts that Trump will win over the game; however, the economic tactics in China will not be affected. I believe that game theory will only lead to a rudimentary rational decision but without any affection of external factors. However, since Trump is not a rational actor which he always expresses impulsive emotions in the twitter to claim that he is the victory, the result could deviate from the calculated game theory decisions. Furthermore, many external factors played on both sides which are hard to calculate in the game theory. Just like what the article said, Chinese President Xi needs to manage the mood of angry farmers, angry owners and the economy which is affected by high tariffs; there are many factors that he needs to calculate which could lead to a wrong decision.
No matter what actual decision turns out at the end of the trade war, it is no doubt that the longer the trade war lasts, the more pain that both countries will get. The game theory still plays an important role in the trade war just that multiple external factors need to be considered. The trend is still unpredictable, but the thinking process of game theory would definitely help and leaning toward America winning the war.
Source: https://www.scmp.com/news/china/diplomacy/article/3011353/high-stakes-us-china-showdown-hardly-game-strategists-see-game