Talks or no talks: who blinks first in US-China trade war?

Itroduction As of May 1, 2025, the U.S.–China trade war has reached a critical juncture. Both nations have imposed steep tariffs—up to 145% by the U.S. and 125% by China—significantly hindering bilateral trade. Despite mutual economic strain, neither side has made a decisive move toward de-escalation, leading to a prolonged stalemate. --- The U.S. Stance: Maximum Pressure President Donald Trump's administration continues to apply pressure through extensive tariffs, citing issues such as trade imbalances and national security concerns. While Trump has expressed openness to negotiations, he insists that China must first demonstrate sincerity by making concrete concessions. The U.S. has also implemented additional measures, including a 20% tariff related to China's role in fentanyl production, further complicating the trade landscape. [1] China's Position: Conditional Engagement China has signaled a willingness to engage in trade talks, provided the U.S. takes the first step by reducing tariffs. Chinese officials emphasize that unilateral tariffs have eroded trust, making sincere dialogue challenging. Nevertheless, China has made minor conciliatory gestures, such as exempting certain American goods from retaliatory tariffs and implementing legal reforms to bolster its private sector. [2] --- Economic Impacts: Mutual Strain The trade war has adversely affected both economies. The U.S. experienced a contraction in GDP during the first quarter of 2025, while China's manufacturing sector has slowed, despite early signs of recovery. Analysts warn that continued escalation could lead to further economic downturns and increased global market volatility. [2] --- Game Theory Perspective: The Prisoner's Dilemma The current impasse can be analyzed through the lens of the Prisoner's Dilemma, a concept in game theory. Both nations face the choice to cooperate (reduce tariffs) or defect (maintain or increase tariffs). Mutual cooperation would benefit both, but the fear of unilateral concession leading to exploitation keeps both sides from making the first move. This dynamic perpetuates the stalemate, as neither wants to appear weak or lose face. [3] Domestic Political Considerations Domestic politics play a significant role in the trade war's trajectory. President Trump, facing no immediate electoral threat, may prioritize a tough stance to appeal to his political base. Conversely, China's leadership, overseeing the world's second-largest economy, cannot afford a downturn that could spark a meltdown in its ballooning debt pile. Both leaders must balance international negotiations with domestic political pressures. [4] --- Global Repercussions The trade war's impact extends beyond the U.S. and China, affecting global markets and supply chains. Asian stock markets and U.S. futures have shown volatility in response to trade tensions. Companies like Apple and Amazon have reported earnings pressures due to tariffs, while broader Asia-Pacific indexes have experienced fluctuations. [5] --- Potential Pathways to Resolution While both nations express a willingness to engage in dialogue, significant barriers remain. China insists on the U.S. demonstrating sincerity through tariff reductions, while the U.S. demands concrete actions from China before easing tariffs. Analysts suggest that without mutual concessions, the stalemate is likely to persist, prolonging economic strain for both countries and the global economy. [6] Conclusion The U.S.–China trade war stands at a crossroads, with both nations entrenched in their positions. The path to resolution requires mutual trust, willingness to compromise, and recognition of the broader economic implications. Until then, the question remains: who will blink first?