The Economic Security Dilemma in US-China Relations

Abstract

China and the United States are caught in an economic security dilemma. In response to perceived economic aggression, both countries now feel impelled to bolster domestic economic security through protectionist and retaliatory measures that the other side perceives as threatening. In game theoretic terms, a mutually beneficial “Stag Hunt” coordination game devolved into an uncooperative “Prisoner's Dilemma” after the global financial crisis. In the economic security dilemma that emerged under Trump and Xi, both sides unsuccessfully attempted to coerce opponent behavior, further harming both economies. Using a game framework—as opposed to a structural or leadership-based account—helps demonstrate that China's recent reform reversal and revisionist approaches to the international economic order were not unavoidable parts of a long-term strategy, but rather developed partially as a response to perceived US aggressions.