IDEAS home Printed from https://ideas.repec.org/p/cuf/wpaper/774.html
   My bibliography  Save this paper

Strategic Trade, Industrial Power, and Geopolitical Rivalry: A Two-Country Differential Game of the U.S.–China Conflict

Author

Listed:
  • Heng-fu Zou

Abstract

This paper develops a dynamic two-country differential game model to examine the long-term economic and geopolitical implications of the trade war between the United States and China. Departing from classical com parative advantage theory, the model incorporates national preferences for industrial self-sufficiency, trade balance, and strategic power accumulation. Each country is represented as a national agent optimizing intertem poral welfare based on consumption, production, trade, and geopolitical rivalry. Endogenous capital accumulation, productivity growth through learning-by-doing, and disutility from foreign dependence are central to the analysis. Strategic power is derived from both capital stock and trade surpluses, reflecting their role in underwriting technological leadership and military influence. Through simulations, we demonstrate how persistent trade surpluses allow China to accumulate strategic advantage, while sustained U.S. deficits weaken industrial capacity and global leverage. The framework challenges the orthodoxy of free trade and provides a basis for evaluating nationalist economic strategies and decoupling policies in a multipolar world.

Suggested Citation

  • Heng-fu Zou, 2025. "Strategic Trade, Industrial Power, and Geopolitical Rivalry: A Two-Country Differential Game of the U.S.–China Conflict," CEMA Working Papers 774, China Economics and Management Academy, Central University of Finance and Economics.
  • Handle: RePEc:cuf:wpaper:774
    as

    Download full text from publisher

    File URL: https://down.aefweb.net/WorkingPapers/w774.pdf
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cuf:wpaper:774. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Qiang Gao (email available below). General contact details of provider: https://edirc.repec.org/data/emcufcn.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.