The Trump administration’s latest move against China is being interpreted as a prime example of the “escalate to de-escalate” theory—a high-stakes bet that risks the stability of the entire global economy. By threatening an extreme measure like 100% tariffs, the White House is gambling that it can force a faster, better deal out of Beijing.
The logic of this strategy, as outlined by market analysts, is to create a crisis so severe that the opposing side is compelled to negotiate seriously to avoid it. The “outlandish” threat of 100% tariffs is the manufactured crisis. The goal is not to actually fight a trade war but to use the fear of one to “focus minds and extract concessions.”
The “escalation” phase has been brutally effective in one sense: it has certainly gotten everyone’s attention. A $2 trillion loss on Wall Street, plunging global markets, and wall-to-wall media coverage have made the U.S.-China dispute the single biggest issue in the world economy overnight.
The “de-escalate” phase is where the gamble truly lies. The strategy depends on the other side choosing to back down rather than call the bluff. China’s response, however, has been one of defiance. Its promise of retaliation suggests it is not intimidated and may be willing to endure the crisis rather than concede under pressure.
This puts the world in a perilous position. If China refuses to de-escalate, the U.S. will be forced to either follow through on its devastating threat or back down, a move that would damage its credibility. The administration is betting the house, and the chips are the health and stability of the global economy.
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