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