How asymmetric power, election cycles and national incentives shape the new North American trade wars
Abstract
This analysis applies game theory to the current North American trade conflict involving the United States under Donald Trump, Canada under Prime Minister Mark Carney and Mexico under President Claudia Sheinbaum (pronounced “SHANE-baum”). By comparing earlier trade tensions with the new developments in 2025, recurring patterns become visible. The interpretive framework used is the Unified Theory of Probabilistic Connections, which treats geopolitical actions as linked probability pathways rather than fixed or predetermined choices. Key events include Carney’s withdrawal of the digital services tax, Doug Ford’s anti-tariff advertisement that unexpectedly halted negotiations, Trump’s public threat to let the United States-Mexico-Canada Agreement (USMCA) expire, and the recent meeting of all three leaders at the World Cup. Together, these events show how planned strategies, external disruptions and shifting probabilities continually reshape the trade environment.
1. Introduction: A three-sided strategic game
North American trade tensions do not follow a simple Canada versus United States narrative. They form a triangular game where each government brings different incentives and constraints.
Trump has revived tariffs as a central negotiation tool. Carney responds with strategic stability rooted in his background in global finance. Mexico, under President Sheinbaum, maintains its familiar position between cooperation and autonomy, supported by deep structural leverage.
All three players are operating inside a repeated non-zero-sum environment. None can achieve a complete victory without harming themselves. For that reason, the earlier patterns matter. They help us understand how this new phase is likely to unfold.
2. Why game theory helps explain this moment
Three-player systems rarely settle into stable equilibria. Each decision changes the incentive landscape for the others.
- The United States has unmatched leverage due to its market size.
- Canada has high exposure but also strong institutional resilience.
- Mexico holds irreplaceable manufacturing and supply-chain advantages.
Game theory provides a useful structure, but the Unified Theory of Probabilistic Connections offers a deeper way to understand how these decisions interact.
UTPC views geopolitical decision-making as a series of interconnected probability pathways, not as fixed or predetermined choices.
Desired outcomes and absolute outcomes are not the same
A common misunderstanding is that governments sometimes achieve exactly what they want. Under UTPC, that is not the case. UTPC distinguishes between:
- Desired outcomes
- Absolute outcomes
The desired outcome is the ideal the actor hopes to reach. The absolute outcome is the result that actually forms when all interacting probabilities collapse into one path.
No actor ever achieves an absolute outcome. They achieve something close to it.
The JND effect: why differences look invisible
Often, observers believe an outcome is identical to the desired one because the difference falls below a Just Noticeable Difference threshold. The human mind cannot detect small deviations, so similar outcomes appear identical even when they are not.
Planck-scale branching: why absolute outcomes do not exist
At the smallest physical levels, branching occurs continuously. Planck time is roughly ten to the power of minus forty-four seconds. Planck length is the smallest measurable distance.
At this scale, micro-variations in timing, perception, communication and environment create new branches long before they reach human awareness.
These micro-branches accumulate and shift the final trajectory. This is why UTPC does not recognise absolute outcomes at all. Every outcome is simply the one that emerges after countless small branches converge.
3. Trump’s strategy: volatility as a tool
Trump’s approach follows a clear pattern:
- create uncertainty
- escalate quickly
- threaten structural change
- force others to react
Recently, he signalled that he might allow the United States-Mexico-Canada Agreement to expire in favour of separate deals with each country. This expanded the uncertainty in the negotiation environment and shifted the incentives for both Canada and Mexico.
In UTPC terms, Trump increases system volatility to expand his bargaining space. Predictability decreases for his counterparts, which gives him leverage.
4. Carney’s strategy: stability as counterplay
Carney’s method is almost the mirror opposite. Where Trump increases volatility, Carney focuses on reducing it.
His decision to withdraw the digital services tax was widely interpreted as a concession, yet when seen through his financial background it becomes clearer that it was a strategic move.
Removing the tax:
- lowered tension at a critical moment
- strengthened Canada’s credibility
- reassured investors
- opened more cooperative pathways
- reduced the likelihood of escalation
In game theory terms, this is a minimax strategy. Carney tries to reduce the worst possible outcome while maintaining room to manoeuvre.
In UTPC terms, Carney works to stabilise the probability network so fewer branches lead towards destabilising outcomes.
5. Mexico’s strategy: structural leverage under Sheinbaum
Mexico’s advantage lies deep in the structure of the continental economy.
- It is the manufacturing centre of North America.
- US industries rely heavily on Mexican labour and proximity.
- Punitive tariffs often harm American firms as much as Mexican exporters.
Mexico typically absorbs the initial shock, then negotiates from a position that cannot be easily undermined.
In game theory terms, Mexico plays a flexible tit-for-tat strategy. In UTPC terms, Mexico benefits from a dense network of entangled supply-chain vertices that make it costly for the United States to escalate too far.
6. Doug Ford’s anti-tariff advertisement: a rare external shock
One of the most unexpected events in this cycle was Ontario Premier Doug Ford’s anti-tariff advertisement on American television. Trump’s reaction was immediate. He terminated ongoing talks with Canada.
Ford did not intend to interfere with federal negotiations. Yet his action created a new and unanticipated branch in the probability network.
In UTPC terms, Ford introduced a new vertex that reshaped the negotiation landscape. It is a textbook example of how external actors can disrupt a three-player game.
7. Trump’s bilateral threats and the World Cup pivot
After threatening bilateral deals and implying that the current continental agreement might expire, the public saw a different image only days later: Trump, Carney and Sheinbaum speaking informally at the World Cup.
The optics were significant:
- relaxed posture
- no visible hostility
- open space for discussion
Trump appeared more willing to consider trilateral dialogue than his earlier statements suggested.
In UTPC terms, the probability weights shifted again. The system moved away from fragmentation and closer to renewed cooperation.
8. A recognisable pattern: the first trade war reappears
When the events of 2017 to 2020 are compared with the events of 2025, the pattern is familiar:
- Trump escalates.
- Canada stabilises.
- Mexico negotiates quietly with structural leverage.
- An unexpected event disrupts the process.
- A pivot leads back to dialogue.
The pattern repeats not because the actors are predictable, but because the incentives remain structurally similar. This is consistent with UTPC, where recurring patterns emerge from probability rather than certainty.
9. Possible pathways forward
Scenario A: managed conflict
Tariffs continue. Negotiations continue. North America absorbs the shocks. This is the most probable scenario.
Scenario B: partial realignment
Some companies diversify supply chains to reduce risk. Canada and Mexico deepen ties outside North America.
Scenario C: breakdown of the continental agreement
Still possible, but less likely after the World Cup meeting. Would require an extreme escalation.
10. Conclusion: outcomes shaped by probability, not certainty
The North American trade trilemma is shaped by dynamic interactions. It is not chaos, and it is not predetermined.
- Trump uses volatility to expand his bargaining space.
- Carney uses stability to narrow harmful pathways.
- Sheinbaum uses structural leverage to protect Mexico’s interests.
- Ford unintentionally demonstrated how external actors can shift the game.
In UTPC terms, these interactions form a connected system of branching vertices. The final outcomes emerge from interacting probabilities, not from the actors’ intentions alone.
Governments do not achieve absolute outcomes. They achieve outcomes that appear close enough to meet their objectives, shaped by countless micro-branches hidden beneath perception.
The trade war continues. The next sequence of decisions will determine which pathways stabilise and which collapse.
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