Understanding the evolving trade dynamics and financial implications

The global trade landscape in 2025 is poised for significant shifts, particularly as protectionist measures, national interests, and multi-lateral alliances converge. Tools, like game theory, offer a robust framework for assessing the strategies at play among nations. This article explores three inter-related aspects: the impending tariff war led by the US, the potential responses from key global players, and the lessons for strengthening institutional frameworks such as the World Trade Organization (WTO), International Monetary Fund (IMF), and other economic bodies, to mitigate disruptions in both real and financial markets.

- BY FEDERICO M. MACARANAS

This article can be the basis of a position paper and action programs for the Management Association of the Philippines’ CEO Academy for continuous learning on Game Theory and the 2025 Tariff War, with actual applications to individual firms or industry groups designing practical steps to avert disastrous consequences of non-collaboration.

THE US’ BLANKET TARIFFS

The US has intensified its stance on trade imbalances, insisting on blanket tariffs against nations with significant trade surpluses. This unilateral approach reflects a zero-sum framework in trade relations, where the US seeks tangible benefits by penalizing surplus-holding economies, such as China, the EU, Japan, and Canada.

However, the dilemma between serving US selfish interests versus its desire to continue as a leader in global economic stability or shared growth, has converted the problem into one of purpose, for looking at the common good. That is what 21st Century leadership should be all about as humanity's existence is challenged by humanoids, climate change, and networked disinformation.

STRATEGIC ALLIANCES, COUNTERMEASURES

Countries targeted by these tariffs have begun exploring avenues for collective action. Two distinct groups have emerged:

• Canada and the EU plus Japan: These nations are reportedly discussing a coordinated sell-off of US Treasuries. Such a move, if executed, could destabilize US financial markets, serving as a counterweight to the economic pressures created by the tariffs. Its implications on the role of the US dollar may trigger responses, such as when Nixon moved the dollar from the gold standard to the more freely convertible currencies of its economic partners.