By J. André Faust (March 27, 2025)
The markets reacted today after Trump moved ahead with hefty tariffs on auto imports, prompting a noticeable dip across the major indices. The Dow and S&P both fell, and the Nasdaq took the hardest hit. What’s going on here isn’t just about economics — it’s about strategy.
From a game theory perspective, Trump appears to be operating from a zero-sum framework, where gains for others are seen as losses for the United States. This is a departure from cooperative trade models that have dominated global economics for decades.
But it doesn’t stop there. His latest comments — threatening even larger tariffs on Canada and the EU if they "do economic harm" to the U.S. — suggest a brinkmanship strategy. This kind of move involves pushing tension to the edge of collapse, creating uncertainty in order to force concessions. It's risky, and it depends heavily on whether the other players believe you're willing to go all the way.
Markets don’t like uncertainty. Investors know brinkmanship can spiral if miscalculated. We're no longer looking at a simple negotiation — this is a game where credibility, bluffing, and escalation are all on the table.
The question now is whether Canada and the EU will call the bluff, or fold under the pressure. Either way, we’re seeing the global chessboard shift.
