Analyzing U.S. Global Tariff Policies Through the "5 Pirates Dividing Gems" Game Theory

Introduction

The "5 Pirates Dividing Gems" problem in game theory is a classic case of backward induction, used to analyze the strategic interactions of rational decision-makers under a power structure. This model perfectly maps to the current U.S. global tariff policies in international trade, helping us understand how countries respond to U.S. trade policies and pursue their own interests.

1. The Correspondence Between the Pirates Model and International Trade

In the "5 Pirates Dividing Gems" scenario, five pirates (A, B, C, D, E) must decide how to divide 100 gems under the following rules:

1. The highest-ranking pirate (A) proposes a distribution plan, and everyone (including the proposer) votes on it.

2. If the plan receives majority support (≥50%), it is approved; otherwise, the proposer is thrown overboard, and the next-ranking pirate makes a new proposal.

3. The pirates’ priorities are ordered as: survival > maximizing gems > killing opponents.

When applying this model to U.S. global tariff policies, the correspondence is as follows:

Pirate	International Actor	Characteristics
A (Top Pirate)	United States	Holds global economic dominance, can unilaterally set trade rules (e.g., tariffs).
B	China	The second-largest economy, capable of countering the U.S. but must weigh the costs.
C	European Union	Economically strong but internally divided; some countries (e.g., Germany) rely on U.S. trade.
D	U.S. allies (Japan, Korea)	Highly dependent on U.S. markets and security systems, easily influenced by the U.S.
E	Southeast Asia, South America	Smaller economies that may benefit from supply chain shifts.

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2. U.S. (A)’s Tariff Strategy and Backward Induction

As the "top pirate," the U.S. aims to achieve two core objectives with its tariff policies:

1. Maximize its own benefits (e.g., re-shoring industries, reducing trade deficits).

2. Prevent other countries from forming a counter-coalition (avoiding being "thrown overboard").

   
   

Stage 1: The U.S. Unilaterally Imposes Tariffs (A Proposes a Distribution Plan)

• The U.S. imposes tariffs on global goods (e.g., steel, aluminum, electronics) to pressure other countries into concessions.

• Risk: If most countries retaliate collectively (e.g., imposing retaliatory tariffs on U.S. goods), the U.S. could face economic losses.

  
  

Stage 2: Other Countries’ Voting Strategies (Support or Reject the U.S.)

• The U.S. needs at least 3 votes (a majority) to maintain the legitimacy of its tariff policies (e.g., through WTO or bilateral agreements).

• Buying Key Votes (C, E):

  • European Union (C): The U.S. may exempt certain European products (e.g., German cars) in exchange for the EU not joining a counter-coalition.

  • Southeast Asia (E): The U.S. offers trade concessions (e.g., textile orders for Vietnam) to prevent collaboration with China.

• Suppressing China (B) and Japan/Korea (D):

  • China will inevitably retaliate (e.g., imposing tariffs on U.S. agricultural products), but without alliances with the EU and Southeast Asia, its efforts are limited.

  • Japan and Korea may be forced to cooperate with the U.S. (e.g., reducing reliance on Chinese supply chains).

    
    

3. Equilibrium Outcomes: Winners and Losers

Using backward induction in game theory, the likely international trade landscape is as follows:

Country/Region	Role	Strategy	Outcome
United States (A)	Leader	Divide opponents, buy EU and Southeast Asia’s support	Short-term gains (re-shoring industries), but potential long-term weakening of global leadership.
China (B)	Main Opponent	Retaliate against the U.S., promote "internal circulation" and RCEP	Exports hurt, but accelerates self-reliant supply chains.
European Union (C)	Swing Player	Partial compromise, partial resistance (e.g., WTO lawsuits)	Some industries benefit, but overall trade environment deteriorates.
Japan/Korea (D)	Passive Followers	Align with the U.S., adjust supply chains	Increased economic costs, heightened geopolitical risks.
Southeast Asia/South America (E)	Opportunists	Take over shifted industries but face U.S. pressure later	Short-term benefits, but risk falling into the "middle-income trap."

4. Real-World Case: Game Theory Analysis of the 2018 U.S.-China Trade War

• U.S. (A)’s Actions: Imposed tariffs on Chinese goods but exempted some allies (e.g., temporarily suspending EU steel/aluminum tariffs).

• China (B)’s Countermeasures: Imposed tariffs on U.S. agricultural products and strengthened cooperation with the EU and ASEAN (e.g., the EU-China Investment Agreement, RCEP).

• European Union (C)’s Choices: Some countries (e.g., Germany) wanted to maintain ties with the U.S., but overall, the EU continued cooperating with China.

• Southeast Asia (E)’s Benefits: Countries like Vietnam and Mexico took over parts of the supply chain, though they later faced U.S. tariffs (e.g., on Vietnamese textiles).

  
  

This case demonstrates that U.S. tariff policies align with the "5 Pirates Dividing Gems" logic:

• The strong player (U.S.) leverages power to divide opponents but cannot fully suppress all countries.

• The weak players (smaller countries) may benefit in the short term but remain subject to the influence of major powers in the long term.

  
  

5. Conclusion: International Trade as a Game of Power and Strategy

The "5 Pirates Dividing Gems" model reveals a key insight:

• The top power (U.S.) can set the rules but must compromise to maintain alliances.

• Secondary powers (China, EU) may resist but will also look for opportunities to collaborate.

• Weaker nations (Southeast Asia, South America) may become pawns in great power games and must choose their strategies carefully.

  
  

In the future global trade system, the effectiveness of U.S. tariff policies will depend on:

1. Whether it can continue dividing the China-EU alliance (preventing B+C+D cooperation).

2. Whether smaller countries are willing to continue cooperating (or shift toward China-led economic blocs).

3. Whether multilateral institutions (e.g., WTO) retain their influence (or are replaced by bilateral agreements).

This game is far from over, and rational decision-makers will continue to seek optimal solutions between "confrontation" and "collaboration."

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