In game theory the Tit for Tat strategy is considered successful. There are two players who, like in chess, move one at a time. Every move can be hostile or cooperative. The strategy suggests to the player who chooses to adopt it to always be cooperative when the first move is his turn or when the other player's move has been cooperative. However, if the other at a certain point becomes hostile, the response will be vindictive, that is, hostile. After this response, if there isn't a new hostile move on the other side, the strategy suggests returning immediately to cooperation, ie not trying to counterattack.
As seen the Tit for Tat is not much different from the law of retaliation, an eye for an eye, a tooth for a tooth, and historically it has always worked quite well as a deterrent to attackers, while never blocking them completely. His philosophy is that attacking does not pay, while collaborating leads to a positive sum result for the parties. In nature, the law of the jungle tells us that Tit for Tat is not always applicable (one is born predator or prey and one cannot change one's destiny), but within a species (and between symbiotic species) the collaborative attitude , in general, is biologically successful.
The Tit for Tat has a gentle variant, the Tit for Two Tats, in which the first attack immediately responds by turning the other cheek (once only), counting on the fact that the other player, satisfied that he got what he wanted and got away with it, will start collaborating again. Obviously, if the other player gets caught up in the sense of his omnipotence (or our impotence) and continues to attack, the law of retaliation will be immediately restored.
Anyone who uses BitTorrent to exchange files within the peer-to-peer community is familiar with the Tit for Two Tats. Taking without giving is punished by the software, which puts the selfish into a brief quarantine but then offers a second chance to those who have understood and intend to resume collaborating.
Trump's America is the attacker in the trade game. In the minds of Trump and his advisers, the attack is actually the response to an injustice suffered over the course of seventy years during which the rest of the world took little advantage of the American willingness to asymmetric free trade.
Actually, in the two versions of the Tit for Tat that we have mentioned, it doesn't really matter who attacked first, if the rest of the world that has done its own thing from 1947 to today or America that out of the blue overturns the table. What really matters is that now it is Europe and China that have to move.
The Tit for Tat strategy involves a perfectly equal and opposite answer. If Trump imposes tariffs on 34 billion goods from China (medical technology, auto parts, machinery) China, at the same time, is preparing to impose duties on an identical value of agricultural commodities imported from America. Pride is safe, and for a country that now considers itself a power equal in size to the United States and knows it will soon be the number one superpower, pride is important.
Even the European technocracy leans towards the Tit for Tat and threatens tariffs on 200-300 billion of imports from America in case it really intends to hit German cars. European technocracy has assumed more and more power over time and has become accustomed to treating its domestic interlocutors down. It is natural that her instinct leads her to have a contemptuous attitude towards Trump.
However, the Brussels technocracy is not the only European entity to decide trade policy and the response to give to Trump. There are also nation states, much more sensitive to pressure from industry and trade unions. For Germany, car tariffs would be a national emergency with effects on growth and employment.
Germany knows it would lose across the board by going head-to-head with Trump and that is why, while Brussels plays Tit for Tat, Berlin rehearses the Tit for Two Tats behind the scenes. And that is dealing with the attacker.
To do this, he clings to Trump's most radical idea, which is not to raise tariffs but to abolish all tariffs or, at least, to lower them all together. Maybe one sector at a time e with bilateral negotiation rather than multilateral.
As Karl Rove writes in the Wall Street Journal Europe must decide whether to cooperate and deal with an attacking Trump and give him the benefit of the doubt as to whether he is a sincere fair trader or whether to consider him a protectionist tout court and strike back in a big way.
In the first case, there are all the margins to find an agreement. Europe is more protectionist than America on cars but the opposite is true on trucks and SUVs. There will certainly be some losers in lowering tariffs across the board, but overall the damage will be less than closing markets.
Trump has no sympathy for either Germany or the European Union but, after having opened an impressive dispute with the rest of the world, he needs to bring home at least one success before the November elections. China, paralyzed by its nationalist pride, will hardly make concessions in the short term while Europe, which right now needs everything but a major trade problem, could prove more malleable.
After all, Europe has a long straw tail. It is defended militarily by the United States by spending a third of what they put on defense and now that the United Kingdom is leaving, the American protective umbrella is even more necessary. As for cars, even including trucks and SUVs, Europe is far more protectionist. Meeting American demands is practically inevitable.
The mere news of concrete negotiations with the participation of the major German automakers has revived the euro and the European stock exchanges. An agreement with America, which will still take some time anyway, would be a great tonic for European cyclicals and could give a 5 percent recovery to the stock exchanges.
We would have a few more American SUVs on our roads, but if this were the price to pay to avoid a widespread malaise on the markets and a weakening of a growth that is already losing speed in Europe, it would really be worth it.
