DANIËL ELOFF: Trump, China and non-cooperative games

After US President Donald Trump’s election at the start of the year, I decided to read Trump: The Art of the Deal to better understand his revived threats of tariffs and his executive order concerning SA.

The Kindle edition goes for R250, and while it reads more like a stream of swaggering anecdotes than a political memoir, it offers a useful glimpse into Trump’s worldview. The book coined the phrase “truthful hyperbole”, which neatly captures Trump’s political persona — part salesmanship, part provocation and entirely deliberate. More revealing still is his view of negotiation, which he views not as compromise but as controlled chaos, escalation as leverage and unpredictability as tactic. 

That lens proves useful when observing the standoff between the US and China. The latest tariff escalations — from 100% to 125% to 145% — signal more than just economic protectionism. They reflect a Trumpian logic of forcing the opponent’s hand by raising the stakes. It’s not just about outcomes, but optics. In The Art of the Deal world, strength is theatre and trade is combat staged for foreign rivals and domestic audiences. 

Beijing, ever the inscrutable counterparty, has responded in equal parts with its own tariffs and by absorbing, adapting and, above all, refusing to capitulate. The result will be a drawn-out stalemate, a classic example in game theory terms of a nonco-operative game, in which trust is scarce, agreements are unenforced and each side acts in calculated pursuit of its own advantage. 

Self-interest

In game theory, nonco-operative games occur when participants cannot commit to binding agreements. All players act in their strategic self-interest, assuming the other might defect at any moment. The situation lacks an external enforcer, with no shared norms, no trust, no referee. It’s every state for itself. 

Trump’s tariff hikes exemplify this dynamic. Far from being technical economic tools, they are deliberate, performative moves, calculated provocations meant to unsettle and outflank. In the Art of the Deal frame, tariffs are the equivalent of walking out of the room or threatening to kill the deal. They are about controlling the tempo, creating discomfort and forcing concessions. 

Yet as game theory predicts, such tactics often yield diminishing returns when the opponent refuses to fold. China’s response, though less flamboyant, is equally strategic. Backing down would carry domestic and international costs and signal weakness to rivals and its own leadership class. Unlike smaller economies that have folded in the face of Trump’s “Liberation Day” tariffs, China digs in.

This deadlock resembles a Nash equilibrium, where both players know the other’s likely response and thus have no incentive to change course unilaterally. But equilibrium does not mean optimality. In fact, like the classic game theory Prisoner’s Dilemma, it often traps rational actors in collectively unfavourable outcomes. The Prisoner’s Dilemma is a game theory scenario in which two players must choose between co-operation and betrayal, the paradox being that mutual co-operation yields the best joint outcome, but individual incentives push both towards betrayal. Both thus end up worse off than if they had trusted each other. 

International trade can often be a textbook case of the Prisoner’s Dilemma. In the ideal scenario, mutual openness delivers shared prosperity. But each nation faces the temptation to defect, imposing mild tariffs to protect domestic industries while benefiting from the other’s openness. If both sides do so, they end up worse off than if they had co-operated. 

This is precisely what drives trade wars. What begins as rational self-interest quickly becomes a self-perpetuating spiral of retaliation and resistance. The structure of the game encourages escalation, even when all players understand it leads to higher costs, supply chain disruptions and a worse off economy. 

This logic helps explain why such disputes are hard to resolve. Once the trade war begins, stepping back can seem like unilateral surrender. The conflict becomes sticky not because leaders are irrational, but because the system they are in rewards entrenchment. It is rationality trapped. 

Fair play

In co-operative games, institutions such as courts, treaties or norms can enforce fair play. But in this arena the World Trade Organisation is toothless, and trust between Washington and Beijing is minimal. No third party can compel compliance or credibly verify good faith. The game plays on, locked in its own logic. 

Yet the costs are real. Inflation, investment uncertainty, market volatility … these are not abstractions. They are the human consequences of two rational actors playing a game whose rules are designed for deadlock. 

But states are not abstract utility-maximising entities. They are governed by politicians with their own motives and constraints. This introduces what economists call the “agency problem”, the gap between the interests of the public and those of their political representatives. 

In theory, politicians act on behalf of citizens. In practice, they are influenced by elections, interest groups, legacy concerns and ideological convictions. Tariffs are not merely geopolitical tools but domestic political currency. They allow leaders to reward allies, punish enemies and posture for nationalist approval. 

This adds a second layer to the game. Tariffs may be economically irrational in the long term, but they can be politically rational in the short. Particularly in an increasingly postliberal world, tariffs signal toughness and may yield more votes than securing long-term economic benefit for the whole world. 

In this sense, Trump’s approach is not so much a deviation from the political norm as a distilled version of it, Art of the Deal politics as tactic and theatre. 

China’s position

While Trump’s strategy is loud and visible, China’s vulnerabilities are hidden but still in plain sight. Its official debt-to-GDP ratio is reportedly 30%, but independent estimates, accounting for opaque local debt and state-owned enterprise liabilities, push that figure closer to 150% or even higher. Much of this is tied up in state banks whose balance sheets remain inaccessible to outsiders. 

Geography adds further complexity. China spans two Europes in land mass and population but has only one time zone, masking vast regional disparities. Coastal megacities such as Shenzhen rival developed nations, while interior provinces remain poorer than countries such as Moldova. The south floods, the north parches. These conditions have forced China into enormous infrastructure investments and a reliance on imported food and energy. 

Even its grand geopolitical initiative, the Belt & Road, has faltered. Intended as a soft-power masterstroke, it now resembles a costly write-off, with partners defaulting and enthusiasm waning. In short, while China maintains a façade of strength, it is playing the game under considerable internal strain. 

This is the true insight of game theory — bad outcomes do not always require bad intentions. Rational players, pursuing their own interests, can arrive at collectively harmful results.

Trump’s Art of the Deal philosophy offers a valuable window into one side of the board: escalate, disorient and extract. But game theory reminds us that when both sides play hardball, the game can grind into deadlock. 

The same logic explains why knee-jerk protectionism is no solution to the real discontents of globalisation. Reacting to complex disruptions by dismantling the global trading system risks throwing out the baby with the bathwater. While imperfect, trade liberalisation remains one of the few levers that has lifted hundreds of millions out of poverty and created a more peaceful world. 

If there is a way out of this noncooperative game it will depend on whether either side is willing, or able, to change the rules. Until then we will have to wait and see how long the game continues and what it ultimately costs. 

• Eloff, a writer and nonprofit executive, is a legal adviser to the mayor of Cape Town. He writes in his personal capacity.