What is the « escalation dominance » of the war of duties, what has to do with poker and why the advantage has China, not America

(This article was taken from the press review first now. If you want to subscribe Click here)

«I think this Chinese escalation was a big mistake, because they are playing with a couple of two. What do we lose if the Chinese increase the rates on us? We export to them a fifth of what they export to us, so for them it is a losing hand ».

The American approach that overturns reality

When it is possible to reconstruct the most colossal protectionist attack ever, and the commercial war of the 1920s century between the United States and China, these words of Scott Bessent They will be studied by historians and economists even more than Donald Trump’s belligerent tweets. It is the Secretary of Commerce, even more than the President, to have shown how the ideological-dortrinarian matrix of the American move is a mix between games and poker theory. However, an approach that overturns reality: in a war of duties, those who export more is in advantage, not those who export less.

From the game theory, the administration has changed the concept of Escalation Dominance. But what does it mean to « dominate the escalation » of a conflict? It means always being able to control it, to intensify the clash in ways that the opponent can only undergo but without reciprocating.

As for poker, the inspiration is evident in Bessent’s appeal to the metaphor of the « couple of two ». But poker is the farthest from the background logic of trade. No game is as zero as the pokeA: Either you win or lose. Commerce, however, was one of the first human activities moved by mutual convenience: I give you this in exchange for this other, I sell you this for this sum, and we both draw users.

What is Trump’s plan? And isn’t dominating China?

After that, to be optimistic, you can also think – and the justificationist tendency is strong and recurring – that the Trumpian logic is actually truly transactional, that points to a compromise as advantageous as possible but that does not aim to the total annihilation of the opponent: it is the rhetoric of the great business-nugular bird that beyond the splitting to the deal, the agreement. To be even more optimistic, it could be added that America has adopted with a decades of patience, up to the final success on the military, economic and political level, the domain of the nuclear escalation with the Soviet Union.

If it were not that Trump certainly does not have a long -term logic comparable to the Cold War, and that the geo -economic disaster of these weeks – with the thousands of billions burnt on the markets and international earthquake relationships – has already made Tabula Rasa also of his (possible) better intentions, The decisive point is that his approach, poker or escalationist, is busted with the presentationto. Explains it perfectly, in an essay on Foreign PolicyAdam S. Posen, president of the Peterson Institute for International Economics and already long -term consultant of the US governments, Great Britain and Japan. In short, a very solid economist, which to the sectoral technicality sum of diplomatic and negotiating summary. And that it is therefore very credible, as well as very clear, when it overturns Beesent’s assumption explaining that his logic is wrong: «It is China that has the domain of the escalation in this commercial war».

Why? Because if the reason for this head -on clash is to reduce dependence from China on a series of vital goods and stimulate its production in America, « fight the current war before doingLo », that is, before that they have really managed to start this productive counter-revolution in an industrially desertified country for decades, »It is a recipe for an almost certain defeat, with enormous costs». Or, to return to the poker analogy of Bessent: « Washington, not Beijing, is aiming for the all on a losing hand ».

Because China is ahead

In practice, the assumption that if you expose more you have more to lose is a « factual error »: Because the money is fungible, the goods are not. It is the key concept. The Chinese have a commercial surplus on the USA of 263.3 billion dollars (2024 data). With the commercial war, therefore, they lose money. The Americans, on the other hand, lose goods and services that are not able to produce in a competitive way: not now, not immediately, and when they can be it you do not know. The money is fungible because if you lose it on one side you can find them elsewhere: by cutting expenses, pushing on other markets, drawing on savings (China like all maxi-exports save much more than it takes inves, and has a saving rate over 40%, among the highest in the world), stimulating consumption. The American market represents only 14% of Chinese exports, and replacing it is far from impossible.

For America, the exact opposite is worth: it spends much more than it saves. And the assets that import are not fungible, are not quickly replaceable as money. For this reason, explains Posen, « the impact makes itself felt on industries, locations or specific families that are faced to face deficiencies, sometimes of necessary assets, some of which are irreplaceable in the short term ». Trump’s bet, as his messages make it clear, is that his supporters have patience, that in the name of « patriotism » they know how to wait for Made to America’s return and that they do not regret the most low costs of Made in China.

Air conditioners, bicycle, dolls made in china

The step back on the smartphones, with the withdrawal of the duties announced on the weekend by Trump, is the First concrete example of a dynamic opposite to that desired by the PresidentE: More than half of the smartphones sold in America are iPhone, and 4 out of 10 iPhones are made in China: seeing themselves doubled the prices of such a popular product would not have made the Americans more cheerful. But it’s just the first example. As Gideon Levy explains on Financial Times« Trump will have to hope that it is not a hot summer, because about 80% of the world air conditioners are produced in China, as well as three quarters of the electric fans that America matters. The White House will surely want the commercial war to end by Christmas, because even 75% of the dolls and bicycles that the United States import are produced in China ». Of course all these things can also be done in America, « but it will take time to create new factories and final products will be more expensive ».

The reality is that the Chinese can choose between at least at all. Today, for example, they have chosen to counterattack with rare landsfundamental minerals for a whole series of key products such as automotive components, drones, robots, missiles and also F35, the heart of the US aviation. The next move may concern antibiotics: half of the components of those used by the Americans produce it. Not to mention the literally lethal moves: Beijing can affect the heart of the USA agriculture by buying soy beans from Brazil; It can stop collaborating to curb the export of the chemical precursors that serve to produce Fenanyl, the opiate that kills tens of thousands of Americans per year for overdose; Finally, it can begin to sell the mountain of titles of the American treasure that has accumulated (and perhaps, As Federico Fubini explainedhas already begun).

For all this, The arm wrestling will hurt more to those who launched the challenge: The Trump administration, is the Posen sentence, « can think of acting hard, but in reality it is putting the American economy at the mercy of the Chinese escalation ».