Asymmetric Strategic Interdependence: A Repeated-Game Analysis of U.S.–China Bilateralism in Chips and Critical Minerals, with Implications for the European Union

This paper analyzes U.S.–China geoeconomic rivalry in advanced semiconductors and critical minerals through the lens of asymmetric strategic interdependence. We conceptualize the relationship as a bilateral monopoly in which the United States dominates high-end chip design and export-controlled technologies, while China dominates the mining and processing of critical minerals. We formalize this structure as an infinite-horizon repeated game in which each side can either sustain cooperation by maintaining cross-border flows or weaponize its chokepoints through export controls and sanctions. Using a discount factor δ = 1/(1 +R), where R is the interest rate or opportunity cost, we derive conditions under which cooperation can be sustained via grim trigger strategies and show that asymmetry in temptation payoffs creates a region of strategic instability. We then extend the model to incorporate the European Union (EU) as a third actor with strategic options to align with the United States, balance between both powers, or hedge toward China. The analysis demonstrates that the EU’s optimal strategy depends on the intensity of U.S.–China rivalry and the structure of global supply chains, and that European Open Strategic Autonomy can reshape the overall payoff structure. The paper concludes by discussing implications for global economic stability, industrial policy, and future research on strategic interdependence.