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Game of Chicken (as I put it) or Liar’s Poker? @izakaminska thoughtfully argues for the latter. But in a game of economic MAD (or MAED), the game of chicken metaphor where one side pretends to be crazy (Art of the Deal Trump style) and the other refuses to blink (Xi who isn’t facing elections and has many policy option to wait out the “crazy”) is a better metaphor than Liar’s Poker. When you have true MAD as in a game of chicken on trade/economic wars the stakes are much higher than in a poker game, even a high stakes one. Also, as i argued this is a 3-ways game of chicken including Powell on top of Trump and Xi. Since, as I expected, Powell hasn’t blinked the way Trump hoped for (as the strike price for the Powell pus was lower than the Trump put) Trump had to blink versus most trade partners when bonds and credit markets started to plunge on top of equity ones. That was made easier by most trade partners partially blinking too (ie being willing to start negotiations with Trump). Since Xi didn’t blink as his out strike price is the lowest of all , Trump was forced into an escalation to sustain his bluff that he is really “crazy” and unpredictable. But Xi is calling his bluff and doubling down . So we are into a tot-for-tat retaliation that over time is severely damaging for both sides given risk of MAED. Issue is now for both sides how you de-escalate and jointly blink without losing face. The “known liar” can’t easily do it having high stakes bluff revealed. So for now MAED continues till one side blinks. Paradoxically the sharp rise in bond yields and credit spreads leads Trump to hope that the Powell pit comes in play and help him in the game of chicken with Xi. So far Powell has not but , as I argued , the relevant market for the Powell put is the bond/credit market rather than the equity one. Those are also the markets that debt-king Trump cares about. But unless there is evidence of systemic financial risk - and there isn’t so far - Powell will not act. And if he acts it will be fist by providing liquidity to the financial system (like 2019 and in 2020 via backdoor QE) rather than cutting the Fed Funds rate. Btw if the Chinese were dumping Treasuries (and that is a big if so far) that is more likely to trigger the Powell put and thus partially help Trump . So, for now the tit-for- tat standoff between Trump and Xi remains. How to stop it and reverse it? Not clear it is possible as even negotiations may not lead to a Grand Bargain as the set of concessions acceptable to both Trump and Xi is likely to be an empty/null set . So for now the baseline is one of an unmanaged and disorderly decoupling.