Strategic Trade Tensions: A Game-Theoretic Analysis of the US-China Trade War

<p>This thesis applies game theory to analyze the strategic dynamics of the US-China trade war, one of the most consequential economic confrontations of the 21st century. By utilizing models such as the Prisoner's Dilemma and its repeated form, the study explores why rational actors may escalate conflicts that result in mutual losses and under what conditions cooperation can emerge. A qualitative payoff structure demonstrates how trust, time horizons, and enforcement mechanisms influence strategic behavior. The research highlights the role of the discount factor in sustaining cooperative equilibria and examines real-world events-such as the Phase One deal-through the lens of game theory. While the models are simplifications, they provide critical insights into the incentives, dilemmas, and potential resolutions in trade conflicts. The findings have broader relevance for policymakers navigating international economic relations in an era marked by geopolitical tensions and economic nationalism.</p>