The New Rules of Power: How Ultimatums Are Reshaping Global Trade.

Lessons from the Mexican Peso, Trump’s 100% Tariffs, and the Fragility of Cooperation

Part I: The Golden Balls Dilemma

In 2007, a British game show called Golden Balls aired an episode that became a cult classic. The final round pitted two contestants against each other. Each could choose to “split” or “steal” a cash prize. If both chose split, they shared the money. If one stole while the other split, the stealer took everything. If both stole, neither got a penny.

The optimal strategy, according to game theory, is to always steal—it maximizes potential gain. But humans rarely behave optimally. Contestant Nick Corrigan knew this. When his opponent vowed to steal, Nick did something radical: He handed her his “steal” ball before the choice was locked in. “If you want to steal, I’ll let you,” he said. “But I’m choosing split.” She burst into tears, split the prize, and Nick walked away with half.

This is the paradox of cooperation. Rational self-interest demands defection, but trust—however irrational—can rewrite the rules.

Donald Trump’s Mar-a-Lago Accord attempts to do the same for global trade: rewrite the rules by replacing trust with ultimatums.

Part II: From Prisoner’s Dilemma to Ultimatum Game

For decades, trade operated like a Prisoner’s Dilemma. Countries faced two choices:

1. Cooperate: Lower tariffs, accept some short-term pain for long-term mutual gain.
2. Defect: Impose tariffs, sparking retaliation and collective decline.

The dilemma is that defection is individually rational but collectively disastrous. This is why the World Trade Organization (WTO) emerged—to nudge nations toward cooperation through rules and reciprocity.

The Mar-a-Lago Accord discards this model. Instead of a Prisoner’s Dilemma, it imposes an Ultimatum Game on the global stage:

• Proposer (U.S.): “Accept our terms—dollar dominance, aligned supply chains, border policies—or face 100% tariffs and economic exile.”
• Responder (World): Take it or leave it. No negotiation. No middle ground.

In this framework, the U.S. isn’t just a player. It’s the rule-maker.

Part III: The Mexican Peso Precedent

To understand the Accord’s potential, look to the Mexican peso.

In 2019, Trump threatened 5% tariffs on all Mexican goods unless the country cracked down on migration. Mexico faced a classic ultimatum:

• Accept: Deploy troops to its southern border, averting tariffs but inflaming sovereignty concerns.
• Reject: Trigger tariffs, tank the peso, and risk recession.

Mexico chose compliance. The peso, which had dipped 5% during the standoff, stabilized. But the episode revealed a deeper truth: Smaller economies’ currencies are hostages in trade wars.

The peso’s 15% plunge during 2018-2019 U.S.-China tensions showed how ultimatums weaponize currency markets. Investors treat emerging-market currencies like a referendum on geopolitical risk. When the U.S. issues threats, the peso isn’t just a currency—it’s a barometer of Mexico’s desperation.

Part IV: The Ultimatum Economy

The Mar-a-Lago Accord scales this dynamic globally. By threatening 100% tariffs, the U.S. transforms trade from a negotiation into a binary choice:

• Green Zone: Nations that align with U.S. goals (dollar trade, tech restrictions, defense pacts) retain market access.
• Red Zone: Those that resist face financial Siberia—cut off from the dollar’s liquidity and the world’s largest consumer market.

This isn’t protectionism. It’s coercive localism. By reshoring critical industries (semiconductors, pharmaceuticals) and stockpiling commodities (oil, rare earths), the U.S. reduces its dependency on others while maximizing others’ dependency on it.

The Accord’s architects learned from the peso’s fragility: If Mexico—a country sending 80% of exports to the U.S.—buckles under tariff threats, why not apply the same pressure to Brazil, India, or Vietnam?

Part V: The Dollar’s Double-Edged Sword

Trump’s ultimatum—”BRICS won’t replace the dollar”—isn’t just bluster. It’s a recognition that the dollar’s dominance is the ultimate bargaining chip.

Consider:

• 88% of global trade is invoiced in dollars.
• 60% of foreign exchange reserves are dollar-denominated.
• The U.S. can freeze adversaries out of the financial system with a keystroke (see: Russia’s $300B in frozen reserves).

But dependency flows both ways. If the U.S. weaponizes the dollar too aggressively, it risks accelerating the very de-dollarization it fears. This is the paradox of the Accord: Its strength relies on the dollar’s ubiquity, yet its tactics could hasten the dollar’s decline.

Part VI: The Human Factor

All trade theories share a flaw: They assume rationality. Humans aren’t rational—they’re emotional, vengeful, and prideful.

In 2019, Mexico’s president could have rejected Trump’s migration ultimatum on principle, even if it meant peso chaos. Similarly, BRICS nations might accept economic pain to defy U.S. coercion.

History shows that ultimatums often backfire. The 1930 Smoot-Hawley Tariff Act, which hiked U.S. duties on 900 imports, didn’t protect jobs—it deepened the Great Depression. The 1973 OPEC oil embargo, a response to U.S. support for Israel, didn’t weaken America—it sparked innovation in renewables and nuclear.

The Mar-a-Lago Accord bets that modern nations are too addicted to dollar liquidity to resist. But addiction can lead to desperate choices.

Part VII: The New Rules

The Accord’s legacy hinges on three questions:

1. Can the U.S. maintain dollar dominance while wielding it as a weapon?
2. Will emerging markets find alternatives faster than the U.S. can isolate them?
3. What happens when two ultimatums collide? (See: U.S.-China tech wars.)

For now, the rules favor the U.S. But as Nick Corrigan showed in Golden Balls, power isn’t just about leverage—it’s about perception. If enough nations call the U.S. bluff, the game changes.

Conclusion: The Illusion of Control

In 1944, the Bretton Woods Agreement established the dollar as the world’s reserve currency. It was a system built on mutual gain—the U.S. provided stability; the world provided growth.

The Mar-a-Lago Accord swaps mutual gain for unilateral control. It’s bold, disruptive, and laden with risk. But as Mexico’s peso reminds us, desperation breeds compliance—for a time.

The lesson? Ultimatums work until they don’t. And when they fail, they fail spectacularly.

Thanks for reading,

Guillermo Valencia A

February 3th , 2025