How Will the Tariff War End? What Evolution and Game Theory Reveal
- Apr 5
- 3 min read
Retaliation feels right. Natural, even. When we’re hurt, challenged or attacked, our instinctive response is to hit back. It’s not just human - it’s hardwired across much of the animal kingdom. But instinct doesn’t always lead to the best outcomes.
Take the global tariff war. The pattern is familiar: one country imposes trade barriers, and the other responds in kind. Tit for tat. Blow for blow. But if we zoom out, a deeper and more instructive story begins to unfold - one rooted in game theory, evolutionary biology, and the timeless mechanics of strategy.
Mathematicians and biologists have studied this dynamic for decades, and the conclusion is quietly transformative.
Let’s begin with game theory. You may have heard of the Prisoners’ Dilemma—a classic model of decision-making under uncertainty. In it, each player chooses between cooperation and defection (or in negotiation terms, concession vs. confrontation). If both defect, they both lose. If both cooperate, both gain. If one defects while the other cooperates, the defector gets a short-term win - at a cost to long-term trust.
This brings us to dominant and dominated strategies. A dominant strategy is one that promises a better result, regardless of what the other party does - like imposing a steep tariff expecting the other country to back down. A dominated strategy, on the other hand, is more conciliatory - like suggesting tariff negotiations or offering a mutual reduction. It may appear weaker at first glance. But appearances can be deceiving.
The danger of retaliation lies in its endless nature. In relationships where the number of encounters is finite and known - say, a one-off trade negotiation - it can pay to play hardball. But in relationships where the number of interactions is unknown or effectively infinite (as is the case in most geopolitical and economic partnerships), that strategy begins to crumble.
Why? Because perpetual retaliation erodes value on both sides. And while two nations may be locked in a mutual standoff, others - those choosing to cooperate - gain ground. Over time, those who collaborate quietly build wealth, influence, and resilience. Those who remain isolated and combative fall behind.
Biology offers powerful parallels. Consider:
Cleaner fish and their hosts: Small fish like the cleaner wrasse feed on parasites found on larger fish. The host fish could easily eat the cleaner, but instead allows the service to continue - both benefit. It's a long-term relationship built on trust and mutual gain.
Mycorrhizal fungi and trees: Underground, fungi connect with tree roots, exchanging nutrients for sugars. This invisible network supports whole forests, creating ecosystems far more robust than any one organism could manage alone.
Wolfs: These predators hunt cooperatively, relying on intricate teamwork. Packs that coordinate well dramatically increase their hunting success, compared to solitary competitors.
In all these examples, cooperation yields not just survival, but flourishing. Retaliation—or selfish behaviour—leads to exclusion or extinction.
When scientists simulated long-term negotiations with varied strategies, they found something remarkable: in rounds that stretch on indefinitely, dominant strategies lose out. Worse, the players who rely on them eventually vanish, outcompeted by those who chose cooperation. The maths is clear, and the biology agrees.
So why do some still choose retaliation? Often, it’s because they believe they can control the length of the relationship. If they decide when the game ends, they can dominate without consequence. But in international trade, diplomacy, or ecosystems, such control is an illusion. No single actor dictates the timeline.
Already, in response to the latest wave of tariffs, we see two kinds of reactions. Some countries have mirrored the action - imposing their own tariffs in return. Others have signalled openness to renegotiation, floating the possibility of compromise. The difference is not just tactical - it’s strategic. The former play a short game. The latter, the long.
This is not about emotion - though emotional decisions are part of the problem. Some retaliate not out of strategy, but out of pride or perceived insult. Yet history and science suggest a quieter truth: in a world where relationships endure and interdependence is inescapable, cooperation isn't weakness - it’s the ultimate strength.
So, how does the tariff war end?
Not with a bang, or even a signature on a treaty. It ends, gradually, with the rise of new alliances. New economic blocs built not on dominance, but on interdependence. The countries that embrace cooperation will expand their networks, increase their influence, and grow stronger together. Those that fail to adapt may find themselves increasingly isolated - perhaps even obsolete.
In the end, evolution favours those who work together.
Here is the link to the video that explains the Prisoners’ Dilemma effect in negotiations: https://www.youtube.com/watch?v=mScpHTIi-kM&list=WL&index=2&t=1508s
