An exploratory study on trade war with reference to organizational learning: for MBA students (information from perplexity.ai)
My question 1: "What is trade war all about with reference to the organizational learning perspective?"
The reply: "From an organizational learning perspective, a trade war can be understood as a complex, dynamic conflict between countries that involves not just economic transactions but also strategic interactions shaped by incomplete information, evolving commitments, and adaptive responses.
Trade War Overview
A trade war typically involves countries imposing tariffs or other trade barriers on each other to protect domestic industries or achieve political goals. The U.S.-China trade war, for example, was initiated due to a mix of economic and political factors, including trade imbalances, political cycles (such as U.S. midterm elections), and competition for global economic dominance1. It is characterized by retaliatory tariffs and escalating measures that affect jobs, GDP, and global supply chains, but its impact is often less catastrophic than initially feared due to adaptive economic behaviors like shifting exports to other markets1.
Organizational Learning Perspective
From this viewpoint, trade wars can be seen as a process where involved parties (nations, industries, firms) learn and adapt based on the unfolding events, information asymmetries, and strategic moves of the adversary:
Information Problem and Learning: The outbreak of the U.S.-China trade war was largely driven by an information problem — uncertainty and misinterpretation of each other’s intentions and thresholds for economic pain2. This reflects a failure in organizational learning at the national or governmental level, where incomplete or inconsistent information leads to miscalculations and escalations.
Commitment Problem and Strategic Adaptation: Over time, as more information becomes available, the conflict persists due to a commitment problem — the inability of either side to credibly commit to not revising the status quo in the future2. This creates a situation where preventive measures (like tariffs or technology restrictions) are taken to secure current advantages. Organizations (governments, industries) learn to anticipate these moves and adapt their strategies accordingly.
Learning from History and Past Trade Conflicts: Historical trade conflicts, such as those between the U.S. and Japan, provide lessons that organizations (countries and industries) can learn from to better manage industrial transformation and market strategies during trade wars1. For example, Japan’s experience showed the risks of ad hoc industrial reforms without market-oriented approaches, highlighting the need for long-term planning and risk management.
Dynamic Interaction and Continuous Learning: The trade war is not static; it involves continuous interaction where each side learns from the other’s responses, adjusts its policies, and redefines its strategies. This iterative learning process shapes the trajectory and intensity of the conflict2.
Summary
In essence, from an organizational learning perspective, a trade war is a strategic conflict shaped by:
Initial failures in mutual understanding and communication (information problems),
Strategic distrust and inability to commit to lasting agreements (commitment problems),
Adaptive learning and strategic adjustments by the involved parties over time,
Lessons drawn from historical precedents to guide industrial and economic responses.
This perspective emphasizes the importance of information sharing, credible commitments, and strategic learning to manage and potentially resolve trade conflicts effectively.
References:
The causes and economic impact of the China-US trade war, with historical parallels and scenario analysis1.
Bargaining theory explaining the outbreak and persistence of the US-China economic rivalry, highlighting information and commitment problems2."
My question 2: "What are the academic theories to study this topic?"
The reply: "To study the trade war, especially from an organizational learning perspective and broader strategic interactions, several key academic theories and frameworks are commonly applied:
1. Bargaining Theory
This theory explains the outbreak and persistence of trade wars through two main problems: the information problem (uncertainty and miscommunication about intentions and thresholds) and the commitment problem (inability to credibly commit to future actions). The U.S.–China trade war exemplifies these dynamics, where initial tariff escalations were driven by information asymmetry, and later phases, including the technology war, were shaped by commitment issues and preventive strategies by the rising power and the incumbent1.
2. Game Theory
Game theory models strategic decision-making between countries as players in a game with competing interests. It explains trade wars as repeated games involving strategies like tit-for-tat tariff impositions, where Nash Equilibrium describes a stable but suboptimal outcome where neither side benefits from unilaterally changing strategy. Concepts such as the Prisoner’s Dilemma illustrate why mutual cooperation is difficult, and bargaining strategies (initial offers, counteroffers, concessions) shape negotiation outcomes3456.
3. Organizational Learning Theories
These theories focus on how organizations (including governments and industries) learn and adapt in complex environments:
Peter Senge’s Five Disciplines including systems thinking, personal mastery, and team learning emphasize the importance of continuous learning for adaptation and competitive advantage.
Adaptive vs. Generative Learning distinguishes between incremental improvements and radical innovation, both relevant to how countries and firms respond to trade wars.
James March’s Exploration vs. Exploitation theory explains how organizations balance using existing knowledge versus seeking new strategies during trade conflicts.
Chris Argyris’s Double-Loop Learning highlights how organizations can either reinforce existing assumptions (Model I) or challenge and revise them (Model II), which is crucial in overcoming defensive behaviors and enabling deeper learning during prolonged conflicts like trade wars27.
4. Credible Commitment Theory
This theory explains how a country may take costly or extreme actions (such as imposing high tariffs) to signal resolve and influence the opponent’s behavior. For example, the U.S. tariff policy under the Trump administration acted as a credible commitment to pressure China into negotiations, despite short-term economic costs16.
5. Rubinstein’s Bargaining Model (Game Theoretical Expansion)
This model, expanded to fit the trade war context, analyzes the negotiation process between the U.S. and China with variables such as market elasticity and discount factors, helping to predict equilibrium outcomes and strategic behaviors in tariff impositions and trade negotiations5.
My question 3: "What are the research gaps and research issues on this topic?"
The reply: "Research on trade wars, particularly the U.S.-China trade conflict, has advanced significantly but still exhibits several notable gaps and unresolved issues, especially when viewed through the lenses of organizational learning, international relations, and economic impact. Key research gaps and issues include:
1. Beyond Traditional Economic Explanations
Most existing literature focuses on trade deficits, balance of power, and hegemonic rivalry as primary causes of trade wars. However, there is a gap in exploring non-economic factors such as future expectations, leadership roles, and political motivations in triggering and sustaining trade conflicts1.
The role of innovation and R&D investment differences between countries (e.g., China’s lower investment in basic research compared to the U.S.) and how this shapes long-term trade competitiveness and conflict dynamics remains underexplored1.
2. Impact on Global Supply Chains and Multilateral Trade Order
While the bilateral impact on U.S. and China is well studied, there is insufficient research on how trade wars reshape global supply chains, including the creation of new trade alliances that exclude certain countries, and the broader consequences for global trade flows and multilateral frameworks1.
The long-term effects of trade diversion and the resilience or fragility of global supply chains under sustained tariff and sanction pressures are still not fully understood1.
3. Dynamic and Strategic Interaction Modeling
Although game-theoretic models have been applied to analyze trade wars, there is a need for more complex dynamic models that incorporate nonlinearities, innovation-driven capital accumulation, and strategic adaptation over time2.
Current models often simplify the negotiation and conflict process; more research is needed to include real-world complexities such as multi-sector interactions, political cycles, and asymmetric information2.
4. Organizational Learning and Leadership in Trade Wars
There is a research gap in applying organizational learning theories to national-level trade conflict management, particularly how governments and industries learn from trade war experiences to adapt policies and strategies.
The role of leadership decision-making, risk perception, and learning agility in escalating or de-escalating trade tensions has not been sufficiently studied1.
How organizations within affected industries develop business acumen and decision-making skills rapidly in response to tariff shocks and uncertainty is an emerging issue, with limited empirical research on effective learning interventions like business simulations4.
5. Measurement of Economic Impact and Price Effects
Empirical studies often focus on relative price changes within products or sectors but fail to capture the full distribution of price changes across products, sectors, and countries, limiting understanding of the comprehensive economic impact of tariffs3.
There is a methodological gap in linking micro-level tariff effects to macroeconomic outcomes, such as employment, GDP, and innovation capacity, in a holistic and dynamic manner3.
6. Political and Security Dimensions
The intersection of trade war issues with national security concerns and nationalist policies complicates cooperation and multilateralism, yet this political dimension is under-theorized in economic and organizational studies1.
Research is needed on how trade wars driven by security fears affect international institutions and global governance frameworks.
My question 4: "What are the public media-reported issues on this topic over the past 3 years?"
The reply: "Over the past three years, public media coverage of the U.S.-China trade war has focused on several key issues:
1. Escalation and Retaliation of Tariffs
The trade war saw dramatic tariff increases, with U.S. tariffs on Chinese goods reaching as high as 145%, and China retaliating with tariffs up to 125% on U.S. goods. These steep tariffs have been a central theme, highlighting the tit-for-tat nature of the conflict238.
In April 2025, President Trump further raised tariffs on Chinese imports to 125%, prompting China to respond with an 84% tariff hike on U.S. goods. This escalation included placing American companies on export control and unreliable entity lists, intensifying tensions3.
2. Negotiations, Truces, and Trade Deals
Despite escalations, there have been moments of de-escalation and negotiation. In May 2025, the U.S. and China agreed to drastically roll back tariffs for an initial 90-day period, which was hailed as a truce and led to a rally in global stock markets1267.
These negotiations are portrayed as complex political games where both leaders seek domestic political victories while managing international economic pressures5.
3. Economic and Political Impacts
Media reports emphasize the mixed economic impacts: while tariffs aim to protect domestic industries and manufacturing jobs (a key platform for Trump’s 2024 campaign), they also raise concerns about rising consumer prices, supply chain disruptions, and potential recession risks25.
Small businesses, truck drivers, and consumers have been reported as bearing significant burdens from the tariffs, with fears of long-term harm to the U.S. economy2.
4. Strategic and Security Dimensions
The trade war is intertwined with national security concerns, such as investigations into unfair subsidies (e.g., on battery materials critical for electric vehicles) and export controls on key technologies3.
The U.S. government’s moves to regulate or ban Chinese tech companies like TikTok, and China’s antitrust probes into American firms, have been widely reported as part of the broader strategic rivalry3.
5. Public Perception and Political Messaging
Media coverage highlights the importance of public perception, with both U.S. and Chinese leaders aiming to "save face" domestically while negotiating internationally. Each side seeks to portray itself as having compelled concessions from the other to maintain political support5.
The trade war is often framed as a “game of chicken” where neither side wants to appear weak, complicating efforts to reach a lasting agreement5.
My question 5: "What are the Hong Kong public media-reported issues on this topic over the past 3 years?"
The reply: "Over the past three years, Hong Kong public media have reported several key issues related to the U.S.-China trade war, highlighting the city’s unique economic and political position amid escalating tensions:
1. Hong Kong’s Economic Predicament and Trade Deficit with the U.S.
Hong Kong is caught in a difficult position as a major trading hub amid the U.S.-China trade war. The American Chamber of Commerce in Hong Kong (AmCham HK) described Hong Kong’s predicament as "unfortunate," noting that Hong Kong actually runs a trade deficit with the U.S., contrary to common perceptions. The U.S. enjoys a trade surplus of about US$21.9 billion with Hong Kong, supporting around 140,000 American jobs across various sectors.
Despite Hong Kong’s status as a separate customs territory under GATT and its free port status (no tariffs on imports), the U.S. tariffs on Chinese imports have been extended to Hong Kong products since the U.S. revoked Hong Kong’s special trade status in 2020 following Beijing’s imposition of the national security law.
Hong Kong’s Chief Executive John Lee criticized the U.S. tariffs policy as “madness” and “mathematically wrong,” emphasizing that Hong Kong has zero tariffs and thus reciprocal tariffs should also be zero1.
2. Impact on Hong Kong’s Economy and Trade Flows
Official figures show Hong Kong’s exports increased by 10.9% in the first quarter of 2025 despite the trade war, with imports rising by 9.8%. However, concerns remain about the longer-term impact on GDP growth, with some advisors predicting Hong Kong may not reach the previously forecasted 2% GDP growth due to the trade tensions and near halt in China-U.S. trade.
Small and medium enterprises in Hong Kong face challenges in finding new markets amid the trade war, although Hong Kong’s free port status and political stability are seen as advantages that could help mitigate some negative effects45.
3. Tariff Escalations and Retaliations Affecting Hong Kong
The U.S. has imposed high tariffs on goods from China and Hong Kong, with rates reaching up to 145% on many Chinese goods and 125% tariffs imposed by China on U.S. products. These tariffs also apply to Hong Kong exports due to the revocation of its special trade status.
The U.S. has started imposing duties on small-value parcels from both mainland China and Hong Kong, citing concerns about deceptive shipping practices and links to fentanyl trafficking, further complicating trade flows16.
4. Political and Strategic Dimensions
Hong Kong’s special trade status was revoked by the U.S. in response to Beijing’s national security law imposed on Hong Kong, linking trade issues with political and security concerns.
The trade war has contributed to a broader geopolitical tension affecting Hong Kong’s role as a global business center. However, some reports suggest the trade war may help reverse Hong Kong’s commercial decline, allowing it to regain ground lost to regional competitors like Shanghai and Singapore7.
These issues reflect Hong Kong’s complex position as a global trade hub affected by the broader U.S.-China rivalry, with economic, political, and strategic dimensions intertwined."
My question 6: "Please provide 4 related research objectives and 2 related research questions on this topic in the context of Hong Kong? Also comment on the originality, academic and practical values of these objectives and questions?"
The reply: "Research Objectives
- To analyze the economic impact of the U.S.-China trade war on Hong Kong’s trade flows and GDP growth from 2022 to 2025.This objective aims to quantify how tariff escalations and trade tensions have affected Hong Kong’s exports, imports, and overall economic performance amid its unique position as a free port and separate customs territory.
- To examine how Hong Kong’s small and medium-sized enterprises (SMEs) adapt their business strategies and supply chain management in response to trade war-induced uncertainties and tariff barriers.This focuses on organizational learning and strategic adaptation at the firm level within Hong Kong’s economy, addressing an underexplored area regarding SMEs’ resilience and innovation.
- To investigate the role of Hong Kong’s political and trade status changes (e.g., revocation of special trade status by the U.S.) in shaping its economic relations and trade policies during the trade war.This objective explores the intersection of geopolitics and economics, analyzing how political decisions influence trade frameworks and Hong Kong’s positioning between China and the U.S.
- To evaluate Hong Kong’s strategic opportunities and challenges in maintaining its role as a global supply chain and trade hub amid escalating U.S.-China tensions and regional competition.This forward-looking objective assesses how Hong Kong can leverage its financial and logistical strengths to sustain competitiveness in a shifting geopolitical landscape.
Research Questions
How has the U.S.-China trade war affected Hong Kong’s trade volume, sectoral export patterns, and GDP growth from 2022 to 2025?
What organizational learning mechanisms and strategic adaptations have Hong Kong SMEs employed to mitigate risks and capitalize on new opportunities during the trade war?
Commentary on Originality, Academic, and Practical Values
- Originality:These objectives and questions focus specifically on Hong Kong’s distinctive economic and political context within the U.S.-China trade war, an area less explored compared to bilateral U.S.-China analyses. They integrate economic, organizational learning, and geopolitical perspectives, providing novel insights into a complex, multi-layered issue.
- Academic Value:The proposed research bridges gaps in international trade literature by incorporating organizational learning theories into trade war analysis at the city/region level. It also contributes to political economy studies by examining the impact of changing trade status and geopolitical tensions on trade policy and economic outcomes. The SME focus enriches understanding of micro-level responses to macroeconomic shocks.
- Practical Value:Findings can inform policymakers in Hong Kong on how to better support SMEs and optimize trade policies to sustain economic growth amid external shocks. Insights into supply chain strategies and geopolitical positioning can guide business leaders and government agencies in strategic planning, helping Hong Kong maintain its role as a critical trade and financial hub in Asia."
A collection of blog notes on using chatgpt for research purpose.
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