Tariff the World. Save the World.

Trump announced “reciprocal tariffs,” but it’s only an executive memorandum instructing the relevant agencies to make the appropriate policies and preparations, not an actual implementation. This is not the outright protectionism of the steel and aluminum tariffs announced earlier this week. This is more like the tariffs against Canada, Mexico and China two weeks ago, diplomatic threats designed to change the behavior of other nations. In this case, nations can avoid tariffs by lowering their own tariffs. Trade is a prisoner’s dilemma, in which both players win by cooperating, but individual players are tempted to win more by defecting. The game-theoretic optimum in an iterated prisoner’s dilemma is “tit for tat” – first cooperate and keep cooperating, but punish an opposing player who defects by defecting if he does. This move, which superficially seems like protectionism, could catalyze a golden age of global free trade if other nations recognize the threat and match the US’s low trade barriers.