Strategic Games in Global Trade: A Game Theory Analysis of the US-China Trade War and Beyond

Introductory Note

The US-China trade war, escalating since 2018, serves as a complex case study in game theory, reflecting strategies akin to the iterative Prisoner’s Dilemma and Hawk-Dove games. China employs a disciplined tit-for-tat strategy, mirroring US actions to deter aggression while signaling openness to cooperation, driven by its economic resilience and global trade networks. The US adopts a mixed Hawk-Dove approach, balancing aggressive tariffs with selective concessions, motivated by domestic politics and a desire to curb China’s technological rise. This essay delves into these strategies, their rationales, and their implications, while examining US actions against the EU and Russia. It analyzes the roles of ASEAN, India, the EU, other G7 nations, Africa, and Latin America, drawing insights on global dynamics. An appendix explores the iterative Prisoner’s Dilemma, Axelrod’s experiments, and conditions affecting strategy success, including when tit-for-tat falters. An annexure on the Hawk-Dove game details its structure, simulations, and equilibrium.

---

Strategic Games in Global Trade: A Game Theory Analysis of the US-China Trade War and Beyond

The US-China trade war, intensified since 2018, exemplifies strategic interactions analyzed through game theory, particularly the iterative Prisoner’s Dilemma and Hawk-Dove frameworks. This essay dissects the strategies of China and the United States, their underlying rationales, and their sustainability, while exploring US moves against the EU and Russia. It evaluates the roles of global players—ASEAN, India, the EU, other G7 nations, Africa, and Latin America—and draws insights on cooperation and conflict. An appendix details the iterative Prisoner’s Dilemma, Axelrod’s experiments, and conditions for strategy success or failure, followed by an annexure on the Hawk-Dove game.

---

Game Theory Perspective

In the iterative Prisoner’s Dilemma, players choose to cooperate (e.g., maintain open trade) or defect (e.g., impose tariffs), with outcomes depending on mutual choices. Cooperation yields moderate mutual gains, defection offers short-term advantages at the cooperator’s expense, and mutual defection results in losses. The Hawk-Dove game complements this, where players adopt aggressive (Hawk) or conciliatory (Dove) stances, leading to escalation, compromise, or one-sided gains. Both frameworks illuminate the trade war’s dynamics.

China’s Tit-for-Tat Strategy and Rationale

China employs a tit-for-tat strategy, characterized by cooperating unless provoked, retaliating proportionally, and resuming cooperation if the opponent de-escalates. Since 2018, China has mirrored US tariffs with precision: for instance, responding to US tariffs on $50 billion in Chinese goods with equivalent tariffs on US agricultural products, and countering the US’s 145% tariffs in February 2025 with tariffs on US energy and luxury goods. Non-tariff measures, such as probes into US firms like Qualcomm and restrictions on rare earth exports, further reflect this approach. China’s rhetoric—emphasizing “mutual respect” while vowing to “resolutely respond” to aggression—underscores its commitment to reciprocity.

Why Tit-for-Tat?
China’s choice is driven by strategic and economic considerations:

• Economic Resilience: China’s state-driven economy, bolstered by policies promoting domestic consumption and the Belt and Road Initiative (BRI), allows it to absorb tariff impacts. In 2024, China’s trade surplus reached $1 trillion, mitigating losses from US markets.
• Global Positioning: Tit-for-tat signals reliability to partners like ASEAN and the EU, reinforcing China’s role as a predictable trade partner. The RCEP, signed in 2020, diversifies its trade base, reducing US leverage.
• Deterrence and Flexibility: By matching US moves, China deters further escalation while leaving room for de-escalation, as seen in its 2025 proposal for bilateral talks.
• Domestic Stability: Retaliation satisfies nationalist sentiments without overcommitting to escalation, preserving internal cohesion.

This strategy leverages tit-for-tat’s strengths: niceness (starting cooperatively), retaliation (punishing defection), forgiveness (allowing de-escalation), and clarity (predictable responses). It aligns with China’s long-term goal of maintaining global influence while countering US pressure.

US Strategy: Mixed Hawk-Dove and Motivations

The US pursues a mixed Hawk-Dove strategy, oscillating between aggressive tariffs and selective concessions. Since 2018, it has imposed tariffs on Chinese goods—starting at 25% on $34 billion and escalating to 145% by 2025—targeting sectors like technology to curb China’s advancements. Export controls, such as those on semiconductors under the CHIPS Act, and sanctions on Chinese firms like Huawei, reflect Hawkish aggression. Yet, Dove-like moves—Trump’s decision to delay a TikTok ban in 2025, exemptions for certain Chinese imports, and openness to Xi Jinping talks—reveal flexibility.

Why Mixed Hawk-Dove?
The US strategy reflects a blend of domestic and geopolitical drivers:

• Domestic Politics: Tariffs appeal to voters concerned about job losses and trade deficits, which reached $419 billion with China in 2024. Trump’s rhetoric about “winning” the trade war fuels Hawkish moves.
• Technological Dominance: Restricting China’s access to AI, semiconductors, and 5G technology aims to maintain US supremacy. The 2025 ban on Chinese telecom equipment in federal contracts exemplifies this.
• Economic Leverage: The US dollar’s global dominance and alliances with G7 nations provide leverage to absorb tariff costs, encouraging bold moves.
• Flexibility for Negotiation: Dove-like concessions signal willingness to deal, preserving room for agreements that favor US interests, as seen in the 2020 Phase One deal.

This mixed approach risks inconsistency: Hawkish escalation raises consumer prices (e.g., 2018 tariffs cost US households $419 annually), while Dove-like retreats may undermine credibility. Unlike tit-for-tat’s clarity, the US strategy relies on unpredictability to pressure China into concessions.

US Moves Against the EU and Russia

The US has extended its trade aggression beyond China, targeting the EU and Russia with distinct strategies:

• EU: The US adopts a Hawk-leaning strategy with occasional Dove concessions. In 2018, it imposed 25% tariffs on EU steel and aluminum, citing national security, and threatened auto tariffs in 2025. These moves aim to address the $151 billion US-EU trade deficit and pressure the EU to align against China. However, Dove-like actions—such as the 2021 suspension of Airbus-Boeing tariffs and joint commitments to WTO reforms—reflect a need for EU cooperation on issues like climate and technology standards. The EU’s response, mixing retaliation (e.g., tariffs on US whiskey) with dialogue, resembles tit-for-tat, constraining US escalation.
  Rationale: The US seeks to leverage EU markets while countering China’s influence, but economic interdependence and shared security interests (e.g., NATO) temper aggression.
• Russia: Against Russia, the US employs a pure Hawk strategy, driven by geopolitical rivalry. Post-2022 Ukraine invasion, the US imposed sanctions—freezing $300 billion in Russian assets, banning oil imports, and restricting tech exports. In 2025, tariffs on Russian metals escalated to 200%, aiming to cripple Russia’s economy. Unlike China or the EU, Russia faces unrelenting pressure with no Dove concessions, reflecting minimal economic interdependence (US-Russia trade was $27 billion in 2024).
  Rationale: Russia’s military actions and limited trade ties justify a strategy prioritizing punishment over negotiation.

These moves highlight the US’s tailored strategies: mixed against interdependent partners (China, EU), uncompromising against adversaries (Russia).

Who Has a Better Chance of Outlasting?

China’s tit-for-tat strategy likely gives it an edge in endurance. Its clarity deters US overreach while preserving options for cooperation, supported by economic diversification (e.g., 40% of 2024 exports went to non-US markets). The BRI and RCEP bolster China’s resilience, enabling it to redirect trade to ASEAN ($870 billion in 2024) and Africa.

The US’s mixed strategy, while leveraging financial dominance and alliances, faces constraints:

• Economic Costs: Tariffs raise US consumer prices, with 2025 estimates suggesting a $1,200 annual household burden.
• Political Volatility: Domestic divisions and midterm elections (2026) may force concessions if economic pain mounts.
• Allied Hesitance: The EU and G7, wary of collateral damage, resist fully aligning with US tariffs, limiting diplomatic leverage.

China’s disciplined reciprocity and global trade networks position it to outlast the US, which risks overplaying its Hawkish hand unless it shifts toward consistent negotiation.

Why Tit-for-Tat Succeeds, and China’s Expected Approach

Tit-for-tat thrives due to:

• Niceness: Starts cooperatively, inviting mutual gains.
• Retaliation: Punishes defection swiftly, deterring aggression.
• Forgiveness: Resumes cooperation post-punishment, avoiding spirals.
• Clarity: Transparent rules foster trust and predictability.

In Axelrod’s experiments (see Appendix), tit-for-tat outperformed others by balancing toughness and cooperation, eliciting reciprocal behavior. For China, this suggests:

• Continued Reciprocity: Match US tariffs (e.g., countering 145% tariffs with equivalent measures) and restrictions, ensuring costs for aggression.
• Signaling Cooperation: Propose phased tariff reductions, as in its 2025 white paper, to test US willingness.
• Diversification: Deepen ties with ASEAN, Africa, and Latin America to offset US market losses, leveraging BRI investments ($1.3 trillion since 2013).
• Domestic Focus: Bolster internal markets to reduce export reliance, as 2024’s stimulus package aimed to do.

This approach maintains pressure on the US while preserving China’s global standing.

Likely US Approach

The US will likely sustain its mixed Hawk-Dove strategy:

• Hawkish Moves: Escalate tariffs on Chinese tech and critical minerals, building on 2025’s 200% tariffs on electric vehicles. Tighten export controls to limit China’s AI and semiconductor capabilities.
• Dove Concessions: Offer exemptions (e.g., for US firms like Apple) or partial deals to reduce domestic backlash, mirroring the 2020 Phase One agreement.
• Alliance Building: Pressure the EU, Japan, and Canada to join tech restrictions, though their $1.2 trillion trade with China in 2024 limits compliance.
• Domestic Messaging: Frame tariffs as protecting jobs, despite CBO projections of 0.5% GDP losses by 2026.

Economic costs and allied reluctance may push the US toward negotiation if China’s resilience holds, but political posturing could delay this shift.

Alternative Strategies

Beyond tit-for-tat, viable strategies include:

1. Grim Trigger: Cooperate until defection, then defect permanently. It enforces cooperation but risks permanent conflict if missteps occur, unsuitable for interdependent economies.
2. Pavlov: Repeat actions yielding good outcomes; switch otherwise. It adapts to patterns but falters against consistent defectors, limiting its use in volatile trade wars.
3. Generous Tit-for-Tat: Occasionally cooperate post-defection to break retaliation cycles. It mitigates noise but risks appearing weak, a concern for both nations’ domestic audiences.
4. Always Cooperate: Maximize joint gains but invites exploitation, impractical given political pressures.

Tit-for-tat’s balance makes it optimal, but generous tit-for-tat could work if paired with robust communication to clarify intentions.

---

Global Players’ Strategies

• ASEAN: Adopts a neutral, opportunistic strategy, gaining from trade redirection (Vietnam’s exports to the US rose 20% in 2024). RCEP integration ($2.6 trillion trade bloc) reduces reliance on US-China markets, enabling ASEAN to balance ties.
• India: Pursues a pivot strategy, attracting manufacturing (e.g., Apple’s $14 billion investment in 2024) while avoiding alignment. It leans toward the US to counter China but prioritizes domestic growth, limiting strategic commitment.
• EU: Employs a tit-for-tat-like strategy, retaliating against US tariffs (e.g., 25% on US bourbon) while seeking dialogue via the Trade and Technology Council. Strategic autonomy drives diversification to Asia and Africa.
• Other G7: Follow a cautious alignment strategy, supporting US tech restrictions but resisting trade war escalation due to China ties (Japan’s $150 billion exports in 2024). Canada and the UK prioritize US relations but seek EU-like autonomy.
• Africa: Uses an opportunistic strategy, leveraging China’s $254 billion trade and US’s AGOA to maximize aid and investment without choosing sides.
• Latin America: Adopts a bystander strategy, with Mexico gaining from USMCA ($700 billion trade) and Brazil balancing China’s commodity demand with EU talks.

These players exploit trade war gaps, pressuring the US and China to moderate escalation to retain influence.

---

US-EU and US-Russia Dynamics

• US-EU: The US’s Hawkish tariffs aim to reduce trade deficits and align the EU against China, but interdependence ($1.2 trillion trade in 2024) necessitates Dove concessions. The EU’s tit-for-tat responses—retaliation paired with WTO advocacy—limit US leverage, suggesting a stalemate unless dialogue deepens.
• US-Russia: The US’s unrelenting Hawk strategy isolates Russia economically, exploiting minimal trade ties. Russia’s counter-sanctions (e.g., gas export cuts) have limited impact, reinforcing the US’s dominance but risking broader geopolitical fallout, such as Russia-China alignment.

---

Key Insights and Conclusions

1. Strategic Discipline Wins: China’s tit-for-tat clarity outperforms the US’s volatile mixed strategy, aligning with game theory’s emphasis on predictable reciprocity.
2. Economic Buffers Matter: China’s trade networks and domestic focus enhance its resilience, while US vulnerabilities—consumer costs, political divides—limit endurance.
3. Global Players Shape Outcomes: Neutral actors like ASEAN and the EU constrain escalation, benefiting from trade shifts but incentivizing cooperation.
4. Cooperation Needs Credibility: Tit-for-tat’s success suggests that credible commitments (e.g., tariff freezes) could de-escalate tensions, but political rhetoric complicates trust.
5. Tailored Strategies Reflect Context: The US’s nuanced approach to China and the EU contrasts with its blunt Russia policy, highlighting the role of interdependence.

China’s tit-for-tat positions it to outlast the US, provided it sustains global ties. The US must balance aggression with negotiation to avoid economic and diplomatic isolation. Global players’ opportunism underscores the need for multilateral solutions to prevent decoupling and foster stability.

---

Appendix: Iterative Prisoner’s Dilemma, Axelrod’s Experiment, and Strategy Dynamics

Iterative Prisoner’s Dilemma

The Prisoner’s Dilemma models two players choosing to cooperate or defect without knowing the other’s move. A typical payoff matrix (higher is better) is:

• Both Cooperate: 3, 3 (mutual gain).
• Both Defect: 1, 1 (mutual loss).
• One Cooperates, One Defects: 0, 5 (defector wins, cooperator loses).

In a one-shot game, defection dominates, as it yields better outcomes regardless of the opponent’s choice. In an iterative Prisoner’s Dilemma, repeated rounds introduce a “shadow of the future,” where long-term cooperation can outweigh short-term defection. Strategies evolve based on past interactions, making reciprocity and trust critical.

Axelrod’s Experiment

Robert Axelrod’s 1980s tournaments tested strategies in an iterative Prisoner’s Dilemma via computer simulations. Participants submitted algorithms competing in round-robin matches, aiming to maximize total payoffs over ~200 rounds. Key strategies included:

• Tit-for-Tat: Cooperate first, then copy the opponent’s last move.
• Always Defect: Defect every round, seeking short-term gains.
• Always Cooperate: Cooperate always, risking exploitation.
• Grim Trigger: Cooperate until defection, then defect forever.
• Pavlov: Repeat successful actions; switch after poor outcomes.
• Generous Tit-for-Tat: Like tit-for-tat but occasionally cooperates after defection.
• Tit-for-Two-Tats: Retaliates only after two defections, more forgiving.

Results: Tit-for-tat, submitted by Anatol Rapoport, won both tournaments, excelling due to:

• Niceness: Starts cooperatively, inviting mutual gains.
• Retaliation: Punishes defection immediately, deterring exploitation.
• Forgiveness: Resumes cooperation post-punishment, avoiding grudges.
• Clarity: Simple rules ensure predictability.

Why Strategies Succeed or Fail

1. Tit-for-Tat:
   • Success Conditions: Thrives in iterative settings with a long shadow of the future, where opponents value future payoffs. It balances cooperation with punishment, eliciting reciprocity from cooperative players while limiting losses against defectors.
   • Failure Conditions: Struggles in noisy environments (misinterpreted moves lead to retaliation spirals), short-term games (no incentive to cooperate), or against unconditional defectors (e.g., Always Defect), where it cannot change behavior. In trade wars, political missteps or domestic pressures can mimic noise, disrupting tit-for-tat’s effectiveness.
2. Grim Trigger:
   • Success Conditions: Works when defection must be harshly deterred, and players fear permanent losses. Ideal in settings with high stakes and clear communication.
   • Failure Conditions: Fails in noisy environments or when defection is accidental, as permanent defection escalates conflicts unnecessarily. In trade, it risks decoupling economies, harming both sides.
3. Pavlov:
   • Success Conditions: Excels when opponents follow patterns, allowing adaptation to cooperative or defective trends. Effective in stable, predictable settings.
   • Failure Conditions: Weak against consistent defectors, as it may oscillate without punishing effectively. Trade war volatility reduces its reliability.
4. Generous Tit-for-Tat:
   • Success Conditions: Succeeds in noisy environments by forgiving occasional defections, breaking retaliation cycles. Useful when miscommunications are common.
   • Failure Conditions: Risks exploitation by aggressive defectors if forgiveness is too frequent, undermining deterrence. Political optics limit its use in trade wars.
5. Always Cooperate:
   • Success Conditions: Works only if all players cooperate, maximizing joint gains in trust-based settings.
   • Failure Conditions: Fails against any defector, as it offers no punishment, making it impractical for competitive trade dynamics.
6. Always Defect:
   • Success Conditions: Dominates in one-shot games or against naive cooperators, securing short-term gains.
   • Failure Conditions: Fails in iterative games, as mutual defection reduces payoffs. In trade, it leads to economic losses for all.

When Tit-for-Tat Falters

Tit-for-tat may underperform under:

• Noise: Misinterpreted actions (e.g., a tariff misread as aggression) trigger unintended retaliation, escalating conflicts. In trade wars, political rhetoric or media distortions amplify noise.
• Short Horizons: If players prioritize immediate gains (e.g., US election cycles), cooperation loses appeal, favoring defection.
• Asymmetric Payoffs: If one player values outcomes differently (e.g., China’s resilience vs. US consumer sensitivity), tit-for-tat’s symmetry breaks down.
• Unresponsive Opponents: Against players ignoring reciprocity (e.g., a purely Hawkish US), tit-for-tat cannot shift behavior, leading to stalemates.

Lessons on Cooperation

1. Reciprocity Builds Trust: Tit-for-tat’s success shows that rewarding cooperation and punishing defection fosters mutual gains, applicable to trade negotiations.
2. Forgiveness Mitigates Errors: Allowing de-escalation prevents permanent conflict, crucial when missteps occur.
3. Predictability Reduces Risks: Clear strategies minimize misunderstandings, suggesting transparent trade policies could de-escalate tensions.
4. Long-Term Focus Pays Off: Prioritizing future benefits over short-term wins aligns with iterative trade dynamics, favoring diplomacy.
5. Adaptability Balances Strength: Strategies must deter aggression while inviting cooperation, as tit-for-tat does, guiding real-world approaches.

---

Annexure: The Hawk-Dove Game

Structure of the Hawk-Dove Game

The Hawk-Dove game, also known as the Chicken game in some contexts, models conflicts where two players compete for a shared resource (e.g., market dominance, geopolitical influence) by choosing between aggressive (Hawk) or conciliatory (Dove) strategies. Unlike the Prisoner’s Dilemma, where defection dominates, the Hawk-Dove game emphasizes the cost of mutual aggression and the benefits of compromise. It is particularly relevant to the US-China trade war, where escalation (tariffs, sanctions) risks mutual harm, but yielding can secure partial gains.

The game’s payoff matrix is defined as follows, where $V$ is the value of the resource (e.g., trade advantages), and $C$ is the cost of conflict (e.g., economic losses from tariffs), with $C > V > 0$:

Player 1 \ Player 2	Hawk	Dove
Hawk	$(V - C)/2, (V - C)/2$	$(V, 0)$
Dove	$(0, V)$	$(V/2, V/2)$

• Hawk vs. Hawk: Both players fight aggressively, splitting the resource but incurring high costs (e.g., mutual tariffs harm both economies). Payoff: $(V - C)/2$, typically negative since $C > V$.
• Hawk vs. Dove: The Hawk takes the entire resource, while the Dove retreats, avoiding conflict costs. Payoff: Hawk gets $V$, Dove gets $0$.
• Dove vs. Dove: Both share the resource peacefully, splitting it without conflict. Payoff: $V/2$ each.
• Dove vs. Hawk: The Dove yields, getting nothing, while the Hawk claims all. Payoff: Dove gets $0$, Hawk gets $V$.

In the trade war context:

• Hawk: Imposing high tariffs or restrictions (e.g., US’s 145% tariffs, China’s rare earth curbs).
• Dove: Offering concessions or avoiding escalation (e.g., US TikTok ban delay, China’s talk proposals).
• V: Economic or strategic gains (e.g., market access, tech dominance).
• C: Costs of escalation (e.g., GDP losses, consumer price hikes).

The game assumes players choose simultaneously, with no prior knowledge of the other’s strategy, and payoffs reflect the trade-off between aggression and compromise.

How Simulations Work

Simulations of the Hawk-Dove game explore how strategies evolve over repeated interactions, often using computational models or evolutionary game theory. Two common approaches are:

1. Single-Round Simulations: Players choose Hawk or Dove, and payoffs are calculated based on the matrix. This tests immediate outcomes but misses dynamic adjustments. For example, if the US plays Hawk (tariffs) and China plays Dove (concessions), the US gains market leverage ($V$), while China avoids losses ($0$). If both play Hawk, both suffer (e.g., 2025’s mutual tariffs reduced US GDP by 0.3% and China’s by 0.2%).

2. Iterative Simulations: Players interact repeatedly, adjusting strategies based on past outcomes, similar to Axelrod’s Prisoner’s Dilemma tournaments. Strategies can be:

   • Pure Strategies: Always play Hawk or Dove.
   • Mixed Strategies: Choose Hawk or Dove probabilistically (e.g., 70% Hawk, 30% Dove).
   • Adaptive Strategies: Adjust based on payoffs (e.g., switch to Dove if Hawk vs. Hawk yields losses).

   In evolutionary simulations, a population of players adopts strategies, and those with higher payoffs “reproduce” (i.e., their strategies spread). For instance:

   • Parameters: Set $V = 2$ (resource value), $C = 4$ (conflict cost).
   • Initial Population: 50% Hawks, 50% Doves.
   • Rounds: Players pair randomly, calculate payoffs, and update strategies. Hawks dominate against Doves but lose against Hawks, while Doves thrive when paired together.
   • Outcome Tracking: Over time, the population’s strategy mix shifts toward an equilibrium (see below).

   Simulations use software (e.g., NetLogo, MATLAB) to model thousands of interactions, revealing stable strategy distributions. In trade war simulations, the US’s mixed Hawk-Dove approach (e.g., tariffs plus exemptions) might compete against China’s tit-for-tat (Hawk when provoked, Dove otherwise), with payoffs reflecting economic data (e.g., tariff costs, trade gains).

How Equilibrium is Reached

The Hawk-Dove game has multiple equilibria, depending on whether players use pure or mixed strategies:

1. Pure Strategy Equilibria:
   • Hawk, Dove or Dove, Hawk: One player plays Hawk, the other Dove, resulting in the Hawk taking the resource ($V$) and the Dove getting nothing ($0$). These are Nash equilibria, as neither player benefits by switching:
     • If the Hawk switches to Dove, their payoff drops from $V$ to $V/2$ (sharing).
     • If the Dove switches to Hawk, they risk $(V - C)/2$ (negative if $C > V$), worse than $0$.
   • In the trade war, this could represent the US imposing tariffs (Hawk) while China concedes (Dove), or vice versa. However, both nations’ reluctance to yield fully makes these outcomes unstable.
2. Mixed Strategy Equilibrium:
   • Players randomize between Hawk and Dove to equalize expected payoffs. The probability of playing Hawk ($p$) is calculated by setting the expected payoff of Hawk equal to that of Dove:
     • Expected payoff for Hawk: $p \cdot (V - C)/2 + (1 - p) \cdot V$.
     • Expected payoff for Dove: $p \cdot 0 + (1 - p) \cdot V/2$.
     • Set them equal: $p \cdot (V - C)/2 + (1 - p) \cdot V = (1 - p) \cdot V/2$.
     • Solve for $p$: $$p \cdot (V - C)/2 + V - pV = V/2 - pV/2$$ $$p \cdot (V - C)/2 - pV + V = V/2 - pV/2$$ $$p \cdot (V - C - 2V)/2 + V = V/2 - pV/2$$ $$p \cdot (-V - C)/2 + V = V/2 - pV/2$$ Multiply through by 2 to clear denominators: $$p(-V - C) + 2V = V - pV$$ $$p(-V - C) + pV = V - 2V$$ $$p(-C) = -V$$ $$p = V/C$$
     • Thus, each player plays Hawk with probability $p = V/C$ and Dove with $1 - V/C$.
   • Example: If $V = 2$, $C = 4$, then $p = 2/4 = 0.5$, meaning each player plays Hawk 50% of the time.
   • In the trade war, this reflects the US and China mixing aggression (tariffs) and concessions (talks), with probabilities tied to the stakes (market gains vs. economic costs).
3. Evolutionary Stable Strategy (ESS):
   • In evolutionary simulations, the population stabilizes at a mix of Hawks and Doves or a mixed strategy where the proportion of Hawks is $V/C$. This is an ESS because it resists invasion by alternative strategies:
     • If too many Hawks, Hawk vs. Hawk conflicts increase losses ($(V - C)/2$), favoring Doves.
     • If too many Doves, Hawks exploit them, increasing Hawk prevalence.
     • Equilibrium occurs when the average payoff balances, at $p = V/C$.
   • For $V = 2$, $C = 4$, 50% Hawks (or each player playing Hawk 50% of the time) is stable. In trade, this suggests a balance where neither the US nor China can dominate without risking mutual harm.
4. Reaching Equilibrium:
   • Single-Round: Players may coordinate on Hawk-Dove or Dove-Hawk if one signals willingness to yield, but miscommunication risks Hawk-Hawk.
   • Iterative: Repeated play allows learning. If both start Hawk and lose, one may switch to Dove, converging to Hawk-Dove or a mixed strategy. Simulations show convergence to $p = V/C$ as players adjust to maximize payoffs.
   • Evolutionary: Random pairings and strategy reproduction drive the population toward the ESS, with fluctuations stabilizing over thousands of rounds.

In the trade war, equilibrium is elusive due to political noise and asymmetric stakes (e.g., US consumer sensitivity vs. China’s state buffers). The US’s mixed Hawk-Dove approach approximates $p = V/C$, but China’s tit-for-tat introduces Prisoner’s Dilemma dynamics, complicating pure Hawk-Dove outcomes.

Detailed Analysis

The Hawk-Dove game illuminates the trade war’s dynamics:

• US Strategy: The US’s oscillation between Hawk (tariffs, tech bans) and Dove (exemptions, talks) resembles a mixed strategy, with $p$ closer to Hawk due to domestic pressure for “wins.” If $V$ (tech dominance) is high and $C$ (economic costs) is underestimated, the US leans Hawk, risking Hawk-Hawk losses (e.g., 2025’s projected 0.5% GDP drop).
• China Strategy: China’s tit-for-tat mimics Dove when the US cooperates (talks) and Hawk when provoked (tariffs), aligning with a conditional mixed strategy. Its lower $C$ (state-backed economy) allows sustained retaliation, pushing for Hawk-Dove where China occasionally yields to avoid escalation.
• Equilibrium Challenges: The mixed strategy equilibrium ($p = V/C$) assumes equal stakes, but China’s resilience lowers its perceived $C$, while US political cycles inflate $V$. This asymmetry favors China in iterative play, as it can sustain Hawk longer without collapsing to Hawk-Hawk.
• Global Context: Other players (EU, ASEAN) act as Doves, gaining from US-China conflict (e.g., Vietnam’s export surge), which pressures both to avoid mutual Hawk outcomes, nudging toward mixed strategies or Hawk-Dove coordination.

Limitations:

• Noise: Misinterpretations (e.g., US tariffs as aggression rather than politics) mimic Hawk-Hawk, disrupting equilibrium.
• Asymmetry: Unequal costs (China’s buffers vs. US consumer pain) skew probabilities, making pure Hawk-Dove unstable.
• Externalities: Third-party actions (EU’s retaliation, Russia’s alignment) alter $V$ and $C$, complicating simulations.

Trade War Implications: The Hawk-Dove game suggests that mutual Hawk (escalation) is unsustainable due to high $C$, favoring a mixed strategy or Hawk-Dove outcome. China’s tit-for-tat stabilizes this by punishing Hawk while offering Dove exits, while the US’s inconsistency risks overshooting equilibrium, prolonging conflict unless negotiations align payoffs.

---

References

1. Axelrod, R. (1984). The Evolution of Cooperation. Basic Books.
2. U.S. Trade Representative. (2025). Annual Report on China’s WTO Compliance.
3. China Ministry of Commerce. (2025). White Paper on US-China Trade Relations.
4. Congressional Budget Office. (2024). Economic Impacts of US Tariffs.
5. World Bank. (2024). Global Trade Statistics.
6. ASEAN Secretariat. (2024). RCEP Implementation Report.
7. European Commission. (2025). EU-US Trade and Technology Council Progress.
8. U.S. Department of Treasury. (2024). Sanctions on Russia: Economic Impact.
9. Peterson Institute for International Economics. (2024). The Costs of the US-China Trade War.
10. Maynard Smith, J. (1982). Evolution and the Theory of Games. Cambridge University Press.