Game Theory Analysis of Global Supply and Demand Restructuring under the Sino-US Trade Conflict

Abstract

The trade conflict between China and the United States began in 2018. Before the conflict broke out, the two countries had already formed a deeply interdependent and mutually beneficial economic relationship. However, this symbiotic relationship was under multiple huge pressures: the continuous expansion of the US trade deficit with China, the intensification of intellectual property disputes, and the continuous escalation of geopolitical struggles. All these factors lay the groundwork for the conflict. The trade conflict between China and the United States has transcended the realm of a simple bilateral dispute and has subsequently evolved into a strategic game of readjusted global supply chain supply and demand patterns. This paper uses mathematical game theory as the analytical basis to dissect the strategic interaction motives of the trade tariff war between China and the United States, analyze the countermeasures, and propose a dynamic model for reconstructing the global supply and demand relationship. It is believed that this conflict is essentially an evolution process from the classic Prisoner’s Dilemma to a dynamic repetitive game. Through the theoretical mechanism of the Prisoner’s Dilemma, we can analyze the non-optimal Nash equilibrium outcome of the initial tariff war, and thereby further explore the response strategies for supply and demand reorganization.