Trump’s Trade Tariffs and the Zero-Sum Fallacy

Where is the world heading? It’s the question asked by many. The ongoing trade war, and 'Trump Tariffs' - a part of Make America Great Again (MAGA), has all the trappings of a ‘great economic recession’, having worldwide impact. In the battleground of global trade, Donald Trump didn’t just impose tariffs—he advanced a mindset. Maybe borrowed from game theory.

Let’s unpack it further. The idea was simple: it looks like a zero-sum game. For instance, if America wins, then someone has to lose. In all probability, the aim is to put China and the rest of the world in a Catch-22 situation—and they must lose. As the sum here is zero, there is no mutual benefit, nor shared prosperity. Then what’s the logic of tariffs?

One is forced to ask: is it strongman politics or an ego trip, devoid of the complex ecosystem on which trade is built? The fundamental being the global supply chains, which run like well-oiled machinery, now on the edge. In this backdrop, the zero-sum thinking is not just flawed—it’s dangerous. And why a game theory mindset is hurting global trade—and everyone in it.

The Tariff Trap: America’s Win, or Everyone’s Loss?

Just a recap: Trump’s administration did the unthinkable and hit Chinese imports with tariffs—starting at 25%, and then scaling it up to 125%. The idea seemed to be: penalize China, reward America. Then came a 90-day pause, excluding China, and the an exemption for certain electronics like smartphones and computers. A classic case of self-inflicted injury and taking one step forward and two steps backward. But reality bites—or bytes.

The very fact that at the eleventh hour a crucial exemption was granted—for electronics. Phones, computers, semiconductors—all spared. Why? Because American giants like Apple and Dell rely on China not just for parts, but for entire production lines. Slapping tariffs here wouldn’t just hit Beijing. It would hit Cupertino, Austin, and millions of U.S. consumers.

As CNBC reported: “The exemption is a significant relief for tech giants like Apple and Dell, which rely heavily on Chinese manufacturing.”

As experts put it: “So much for making China pay. In trying to hurt a rival, the U.S. nearly wounded itself.” The dragon revealed its power—and how much the U.S. is dependent on its manufacturing prowess.

Zero-Sum Thinking Is a Cold War Relic

Let’s go back in history. What’s happening now is a Cold War in a new bottle. This kind of strategy borrows from the same playbook as Mutually Assured Destruction (MAD)—a Cold War doctrine that assumed if one side launched a nuclear strike, the other would retaliate, resulting in total annihilation. The threat itself was meant to be a deterrent.

Did anyone notice that Trump’s tariffs followed similar logic: hurt the other side enough, and they’ll yield. But just as MAD revealed the insanity of total conflict, trade wars reveal the madness of applying zero-sum thinking in a globally interdependent economy.

The Global Supply Chain Isn’t a Battlefield

We need to understand that the deeper problem wasn’t just the tariff—it was the speed at which it was done. For instance, the zero-sum logic treats trade as a tug-of-war, where every gain must be someone else’s loss. But that’s not how the 21st-century economy works.

As we look at some examples of impact, and the jitters it created in the Valley—take the iPhone for instance. It’s designed in California, assembled in Zhengzhou, with parts from over 40 countries. Is it American? Chinese? Or simply global? Think about it.

It clearly drives home the point that tariffs don’t just punish a competitor. They ripple—affecting businesses across the world. The ecosystem is interconnected; so many components sourced from multiple geos make up one finished product.

Even India, touted as the next manufacturing hub, isn’t immune. U.S. officials complain about India’s higher electronics tariffs—7.64% compared to 0.41% on exports to the U.S.—but companies like Apple still need India as part of a larger, diversified ecosystem. If you target it, it only has the boomerang effect—it hits you back.

Prosperity Isn’t a Poker Game

Well, the zero-sum logic works in poker, maybe in political theatre. Makes for great chest-thumping rhetoric, and thunderous applause from those who do not understand global trade. One needs to understand pride is often powered by prejudice. But in global trade—a living network, a hub and spoke—break one spoke, and the entire wheel gets wobbly.

Here is a data point: Research by the Peterson Institute for International Economics and other institutions shows that the vast majority of Trump-era tariffs were borne by U.S. consumers and importers, with little evidence that foreign exporters significantly lowered their prices to absorb the costs.

Compete with Innovation, Not Isolation

Where do we go from here—tariffs, a pause, and now exemptions? First, the current U.S. establishment needs to be grounded in the reality that the world is no longer siloed. You can’t operate on fixed outcomes, rigid borders, or the pursuit of singular winners. It’s like a circuit board—every transistor plays a specific role, and one wrong connection can short-circuit the entire system.

The message on the wall to the U.S. is clear from the rest of the world: We win by building smarter—through partnerships, not penalties. Trump’s trade war didn’t rewrite global economics. It revealed how little zero-sum thinking belongs in a non-zero-sum world. In a truly connected era, prosperity isn’t a tug-of-war. It’s a team effort.