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Globalization Wins the First Round of the Trade War

Mariano Bernardez
4 days ago
4 min read

Mark Twain famously quipped that reports of his death were greatly exaggerated. Today, we might say the same of globalization.

Despite the bluster, the tariffs, and the "America First" podium-pounding, the global economy continues to hum—not in retreat, but in adaptation. Take, for instance, Donald Trump’s dramatic about-face in April 2025, when he backed off most of his tariffs for 90 days and jacked up duties on Chinese goods to 125%. It wasn’t a chess master’s pivot but a poker player folding under pressure in a pool hall.

Trump's high-stakes zero-sum tariff game, played like poker with China, was awkward for a global pool table with over 180 players, each taking careful, coordinated shots.

In a zero-sum poker game, someone’s win is another’s loss. But in today’s world of global trade, most players either win or lose together.

And Trump's bluff was called—not just by China but also by American farmers, automakers, semiconductor manufacturers, and a host of other industries intricately wired into global value chains.

This isn't theoretical.

American tech firms pay more when the U.S. slaps a tariff on Chinese microchips. When China retaliates on soybeans, Iowa farmers watch their crops rot in silos. Try building an iPhone in Tennessee without touchscreens from Japan, sensors from Germany, chips from Taiwan, and assembly in Vietnam.

Global supply chains aren't fragile—they're indispensable. And despite protectionist dreams, no country, not even the United States, can pretend to be self-sufficient in the 21st century.

Trump’s reversal wasn’t just a policy shift but a reality check.

Like a player who realizes too late that he’s brought poker chips to a billiards tournament, he discovered that in the real game of global trade, the rules are interdependence, the strategy is collaboration, and the only way to win is to play well with others.

What follows is an exploration of this dynamic through the lens of game theory—how zero-sum thinking leads to economic own-goals, why maximin strategies backfire in multi-player systems, and how globalization, far from being on life support, is adapting, evolving, and quietly winning.

In the high-stakes global trade arena, President Donald Trump's recent tariff maneuvers have unfolded like a high-stakes poker game, with strategies reminiscent of classic game theory. On April 9, 2025, Trump announced a 90-day pause on tariffs for most nations, reducing the baseline rate to 10%, while simultaneously escalating tariffs on Chinese imports to a staggering 125%. This abrupt shift sent shockwaves through international markets and is a textbook example of the perils associated with zero-sum, maximin strategies in global trade.

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The Maximin Strategy in the Context of Global Trade

The maximin strategy, rooted in John von Neumann's game theory, involves a player maximizing their minimum payoff to safeguard against the worst possible outcome. In international trade, this approach translates to implementing protective measures, such as tariffs, to shield domestic industries from foreign competition, thereby ensuring a baseline level of economic security. However, this defensive posture often overlooks the broader implications, particularly the retaliatory actions from trading partners and the resultant inefficiencies.

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Trump's Tariff Actions: A Case Study in Maximin Thinking

Trump's decision to impose steep tariffs aligns with a maximin approach, aiming to protect U.S. industries by minimizing potential losses from perceived unfair trade practices. By escalating tariffs on Chinese imports to 125%, the administration sought to pressure China into favorable trade concessions. However, this move prompted immediate retaliation, with China imposing an 84% tariff on U.S. goods and vowing to "fight to the end" . Such tit-for-tat measures exemplify the zero-sum mindset, where one nation's gain is perceived as another's loss, often leading to escalating conflicts that harm all parties involved.

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A Win-Win Global Model: Highlighting the Costs of Economic Segmentation

Our analysis in the paper "Globalization or Segmentation? Post-2025 Scenarios – Inflation and Recession Risks" (Bernardez, 2025) sheds light on the ramifications of economic fragmentation. He posits that increased trade barriers and geopolitical divisions can lead to higher inflation and slower growth as nations forgo the efficiencies of integrated markets. Trump's tariff policies, by fostering segmentation, risk ushering in such stagflationary conditions, where stagnant growth coincides with rising prices, ultimately diminishing global economic welfare.

Historical Parallels and Lessons

The Smoot- Hawley Tariff Act of 1930 is a historical cautionary tale. Intended to protect American farmers and manufacturers, it instead provoked widespread retaliatory tariffs, leading to a significant contraction in global trade and exacerbating the Great Depression. Similarly, Trump's aggressive tariff strategies risk igniting a trade war that could stifle economic growth and disrupt international supply chains, echoing past mistakes.

The Prisoner's Dilemma: A Framework for Understanding Trade Wars

The dynamics of Trump's tariff escalations can be likened to the classic prisoner's dilemma in game theory, where rational actors, acting in their self-interest, end up in a worse situation than if they had cooperated.

By imposing retaliatory tariffs, the U.S. and China may believe they are protecting their interests.

However, this mutual defection leads to reduced trade, higher consumer prices, and economic inefficiencies, leaving both nations worse off.

The End of The Beginning: The Imperative for Cooperative Strategies

On November 10, 1942, Winston Churchill said, "Now, this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

I believe this is where we are today.

Trump's recent tariff reversals underscore the limitations and dangers of zero-sum, maximin strategies in global trade. While the intent may be to protect domestic industries, the resultant economic fragmentation and retaliatory spirals often lead to outcomes detrimental to all parties. Embracing cooperative, positive-sum approaches, where nations seek mutual gains through negotiation and collaboration, offers a more sustainable path toward global economic prosperity.