What insights does Game Theory offer on the U.S. tariff policy approach? I can think of at least two:

1. Given the relative strength of the U.S. and the relative weakness of many other countries—both cyclically and structurally—the approach promises gains for America in the short-term. The key question is whether these gains materialize immediately or only after other countries attempt to resist and fail.
   
2. The longer-term outlook would become less favorable for the US if tariffs become a “repeated game.” The more it appeals to tariffs, the stronger the incentive for other countries to reduce their economic and financial dependence on the US and accelerate the fragmentation of an international economic order that has historically served America well.
   Put differently, the weaponization of trade promises immediate gains for the US. But, if sustained over time, it risks eroding America’s central position in the global economy while encouraging other countries to look for alternative systems that bypass it.
   

   economy #markets #trade #tariffs