Foreword:
Accurately speaking, it should be called Sino-US trade friction, not a trade war. The US import tariffs on steel and aluminum are not only for China (not to mention that China only accounts for a very small part of the US steel and aluminum imports). The tariffs are only 3 billion U.S. dollars. Trump’s presidential memorandum signed under Section 301 has not yet come out, and there has not been a real trade war between the two sides.
Although the trade war has not yet started, but the Internet has already set off waves and waves - the big V small V have already turned over the sky, after all, they want to make a big news than anyone else. In the midst of excitement and sorrow, you must have been spared, and you have broken your heart.
I just want to persuade you to be a little calm, calm down, and just to understand the game theory.
1
Game
The so-called game is the process in which two or more parties involved in the game influence each other and exert each other. One of them will react to the other after the other party reacts, just like the force and reaction in physics.
The game is divided into a single game and multiple games. The former refers to the game only once, such as the same hammer, such as the stone scissors in the game, and the consumption of scenic spots in life (tickets/shopping/performance); the latter refers to the repetition of the game. Many times, cyclical, both sides or parties of the game can make new reactions after the other party reacts. The game in social and economic life is mostly repeated games. For example, everyone is familiar with the love of men and women, the regulation of the property market, Promotion in the workplace, and the Sino-US trade to be discussed this time.
There is always a beginning for love between men and women - it may be a conversation, it may be a book, or it may be a question. After the other party responds, the other party will react again. After that, the two sides will interact and exchange. Understanding - the process of understanding is the process of the game, if you feel that the two sides fall in love.
The regulation of the property market in the past two decades is a multi-party dynamic repeated game:
House prices have risen, and openers expect house prices to rise, so they are reluctant to sell, so the supply is reduced; buyers see prices rise, and the heart is panicked, and prices are expected to rise, so you can buy or not to buy. The result is a push for further price increases.
Developers and homebuyers will have a new reaction in the case of further increases in house prices – they are reluctant to sell more and run more enthusiastically. How is the loop interrupted? The government's regulation of the property market - restrictions on purchases, restrictions on loans, price limits, restrictions on sales ... government regulation is also a game - in response to housing price surges, public grievances. The game characteristics of this round of property market regulation in September 30, 2016 are extremely obvious.
Sino-US trade frictions, although there is only one beginning, the game traces are clearly visible.
2
income
Why should the participating parties participate in the game? In order to benefit - the world is the best for the benefit of the world.
Why do you want to do this instead of doing it? Because the benefits of doing so are the biggest – at least subjective judgment.
Why are the parties involved always changing? For example, the views have changed, the policies have changed, and the actions have changed. This is too normal, because this is a game. One side will react to the other after the other party reacts. You become a change, and I change you. This is a repeated game.
Why did Trump throw a ball of trade protectionism – such as tariffs on steel/aluminum, and tariffs on Chinese goods involving $60 billion based on Section 301? In order to benefit:
Trump took the stage to fight against the factions inside and outside the party, and the political situation was unstable. He wanted to consolidate his position and support.
In order to win the mid-term congressional elections, Trump will fulfill his original campaign promises and show voters their words and deeds;
The American elite headed by Trump wants to curb China's 2025 manufacturing plan and fragment China's industrial upgrading/high-end manufacturing;
One party makes a decision, the other party will certainly have new decisions to deal with. Trump imposes tariffs on other countries, and other countries will take the same measures to fight back. Trump’s decision has benefits, but also Loss? Yes, it depends on the gains and losses. Trump believes that the benefits of trade sanctions will be far greater than the losses suffered.
The problem is coming again: this is just Trump's own opinion, how no one actually knows, because now it's just an expectation, things haven't actually happened yet! It’s just a guess, just an expectation, just a thought, but people’s subjective judgments are likely to be wrong.
So there must be a game strategy - although I don't know how much profit I can get, I want to get as much income as possible. How can I do it? Take a step and look at it. I will first see how you react. Based on your reaction, I will make new countermeasures.
3
Strategy
Next, let's take a look at the game strategy between China and the United States - how the United States is making a move and how China is dismantling:
One stroke:
The US side moves: predicting that China will compromise, step by step, and strive for maximum benefits
Chinese demolition: to create uncertainty, to fight back, to punish betrayal
After Trump took office, regardless of his anti-globalization strategy - withdrawing from TPP, withdrawing from the Paris climate agreement, withdrawing from UNESCO, or returning to the manufacturing industry to create employment plans - Apple / General and other companies actively support, Foxconn's Guo Taiming / Ali's Ma Yun and so on are also actively responding... they are almost smooth and easy to achieve, which gives Trump great confidence and will produce a judgment that can be satisfied as long as the request is satisfied.
When the Chinese side's possible response is accurately predicted by the US, it is difficult to have room for the game. For example, last year Trump visited China and signed a large order of 250 billion US dollars. The Chinese thought it would bring cooperation, and did not think about Trang. After returning, he refused to recognize China’s market economy status. Since it is predicted that China will compromise, it will introduce a tariff-addition plan based on Section 301 and involving US$60 billion of Chinese goods after the introduction of tariffs on steel/aluminum products.
How should China respond? Prevent predictions, create uncertainty, and punish betrayal. After the iron and aluminum tariffs were imposed, China’s response was not strong. However, after the presidential memorandum was signed on Article 301, the Chinese official media/foreign/commercial/commercial department began to fight back and said: Come and not to indecent assault. And based on the US steel and aluminum tariffs, and the United States import of 3 billion US dollars of goods to impose tariffs, meaning that after the measures of Section 301 come out, China will also fight back. This is to create uncertainty, prevent the US from predicting the reaction, and punish the betrayal.
Trick 2:
The US moves: to create anchoring effects, the lions want to be expensive
Chinese demolition: breaking the anchoring effect, refusing to open the price and blackmail
People's judgments on the price of goods, the total habit comparison - compared with others, compared with their own psychological expectations, is widely used in real estate sales, luxury goods sales, that is, anchoring effect , this strategy is the most used in the negotiation game wide.
Trump opened a mouthful of $60 billion worth of goods (accounting for nearly 10% of the annual trade between China and the United States). The lion’s opening is to create an anchoring effect – first anchoring a high price in your mind, Your expectations are first mentioned, and even if you talk about it, you can get high benefits. Let's start with 60 billion, and we can talk about 40 billion down. If we only mention 35 billion, can we talk about 30 billion? Even if it can, the former can get 40 billion, the latter only get 30 billion, the difference is only the starting price - the anchored price.
How does China respond? It is not to recognize the anchor price, nor to set a price for the other party's price to prevent blackmail . As you can see: China is strongly worded and resolutely opposed. The official media even uttered a voice - to fight a trade war, China will be accompanied by the end, but it is not specific how to deal with the price.
Trick 3:
The United States made a move: seeing the opportunity to act, leaving room for manoeuvre
Chinese demolition: adhere to the principle, dispel the US thinking
In the process of repeating the game, it is impossible to say the words and leave room for manoeuvre - raising the anchor price is to increase the room for manoeuvre.
After Trump signed the presidential memorandum, he saw that China’s reaction was so firm and strong. The US side said: “This is not a trade war†and “China is a friend†to appease and retain the possibility of continuing the game. In addition, US Treasury Secretary Mnuchin also telephoned Liu He and hoped that both sides will remain rational. Mnuchin said in an interview with Fox News that he is "optimistic about the US agreement with China." The process of the game is to make new changes based on change, that is, to act on the plane.
How does China respond? Adhere to the principle, change in order to change, leave room for peace talks, and dispel the other person's deceitful thoughts. In the first round of Sino-US friction, China is only expressing its opposition. There is no specific move. The purpose is:
1. Deterrence to the other party, making the other party unpredictable, and the consequences are highly uncertain;
2. There is room for negotiation and change, and both sides have steps to create possibilities for continued cooperation;
3. Dispel the idea that the US will take more benefits, lower expectations, and create a new anchoring effect for each other.
Between people and people, between the state and the country, is a series of repeated and repeated games. Research/experiments show that the best game is: on the matter, not on emotions, each game is not affected by the last game, only The game reacted. Namely: I first maintain the goodwill of cooperation, you are good to me, I am good to you; if you are bad to me, I am bad for you; you have been bad for me before, and I have been punished by me, this time I am looking for I cooperate (game), I accept the same, not vengeance.
Therefore, there is a famous saying: there is no eternal friend, no eternal enemy, only eternal interests; children are right or wrong, adults only have advantages and disadvantages.
4
result
Although Sino-US trade friction has not officially begun, it has not completely ended, but we can predict the outcome through the perspective of game theory. There may be small friction, but it will be based on cooperation, and there will be no comprehensive trade war. .
why?
Because according to the game theory, the closer the two sides of the game are, the more times the game is repeated, the more likely it is to cooperate. Because of repeated games, it is possible to return a tooth, so the amount of loss will become larger and larger. When the loss is greater than the income, the game will go to cooperation.
How big is the relationship between China and the United States? Our chart below:
As can be seen from the figure, the United States is China's second largest trading partner. China is the United States' largest trading partner, and its GDP accounts for nearly 40% of the world. It is called the G2 combination and the relationship between the two parties is very close.
Whether it is a person or a country, if you want to continue to cooperate, you must have a good reputation. A good reputation not only conveys the signal of willingness to cooperate, but also has the ability to punish others for betrayal . Therefore, when the United States announced trade retaliatory measures against China in 1996, Cui Tiankai, then a spokesperson for the Ministry of Foreign Affairs, responded with a slightly tragic "equality-negotiated settlement." Today, Cui Tiankai, the ambassador to the United States, responded with a hard-pressed in the end".
why? You have to admit that China is no longer the same.
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