I have the same issue. As far as I can tell, it's an issue with High Sierra. and DisplayLink that's not fully resolvable other than through downgrade to an earlier version of the OS. Here's the notice from DisplayLink:
Important Information about macOS 10.13.4 and later
DisplayLink has
worked for many months to maintain support for its users during the
transition from macOS High Sierra to Mojave. While functionality such
as Ethernet and audio or charging, where implemented, is unaffected on
all releases, display connectivity has been limited on macOS releases
from 10.13.4 through 10.13.6.
Developers/users with access to Apple’s fifth developer preview of
10.14 Mojave, released on 30th July, will see full support has now been restored for multiple extended DisplayLink displays where
DisplayLink driver v4.3 beta 5 is installed. We are doing wide scale
testing of v4.3 beta against this preview and will release a new
driver upon general availability of 10.14.
Users of 10.13.4-10.13.6 should also use v4.3 beta 5 as it contains a
workaround to enable one extended USB display (720p or 1080p). An FAQ
details how to enable Apple AirPlay with DisplayLink display for
extend or mirror mode.
Their workaround kind of works, but it messes up the resolution of the primary monitor and causes periodic flickering. Here's a direct link to that workaround: support.displaylink.com/knowledgebase/articles/1854724.
After updating to MacOS Mojave version 10.14 Beta (18A384a) and DisplayLink v4.3 beta, I can confirm that the "Arrangement" tab comes back and that my laptop recognizes both external monitors and the laptop display at the same time. However, both monitors are always black. The cursor still moves across all three screens, but that's about it. In other words, functionally multiple monitor capability is still broken as of the above MacOS version.
If you select mirror mode, then select "Gather Windows," and then change the external monitors' "Optimize for:" option to "Built-in Retina Display," you can get mirror mode to work nearly properly (there's occasional minor flicker), but there's still no solution for other modes (e.g. where each display is independently able to host windows).
Best Answer
You cannot use your MacBook Pro in Target Display Mode nor achieve the same result via a ThunderBolt 3 (USB-C) cable to connect it to the other MacBook Pro.
However, there are other options you can investigate, but I have no personal experience with them. Two of these options are listed below:
In summary, they promise to allow users to share their Mac screens on a variety of devices, including other Macs.
Another option which may be worth investigating, is using VNC to share the screen from one MBP to the other - but this may not give you what you want.