Hey all Peter Zeihan here coming to you from Florida. And while I was on my way here, the Trump administration issued a clarification of the tariffs on China that they’re actually not 125%, the 145%, because some of the tariffs that were on earlier are stuck with the ones that are here now. And that’s before you apply, the tariffs for China using, Venezuelan crude, which would take it up to 170. 

So I thought it would be useful to give a little bit of a technical update. Paired with a bit of a public service announcement. So the whole goal for what Donald Trump is trying to do here, which I broadly agree with, the goal is to bring manufacturing away from the Chinese space and into the US space. The problem is that, you don’t do that overnight, especially for more technical things. 

So when you see the Commerce secretary saying nonsense about having Americans work in factories screwing iPhones together, I mean, that’s just stupid, because that’s not how it works. The iPhone, for example, has 1100 supply chain steps, and they’re scattered across East Asia with about 90% of them either starting, ending, or being centered in China. So it’s not like you move one factory, you move 1100 plus all of the logistical and labor support that goes with it. 

And before you say the US can do this quickly, keep in mind that it took Apple 25 years to develop the iPhone and then another 20 years for it to turn into the product that it is today. Those supply chains are the end result of 40 years of breakneck industrialization and industrial development that was ultimately funded by debt driven investment funds, that it’s a combination of capturing all of the spare savings of the population over the course of the last 50 years, combined with a huge amount of currency printing. 

You’re talking about a combined industrial plant in China of roughly 40 trillion U.S. dollars equivalent. Even if the United States was to put $2 trillion of federal spending towards this project a year at the soonest, you would be expect the United States to be able to build an iPhone. It’s somewhere around 12 to 15 years from now, which means that no matter how high the tariffs get under the 45 right now, you should not expect to get meaningful American manufacturers with the next two years. 

In fact, Trump has said himself personally that we should see the first fruits of this project within two years. Two years is when we start to see the benefits. And honestly, that assumes that we have partners in this in Mexico and Canada. That is very clearly not clear right now because the Canadians and the Mexicans are under tariffs just like everybody else. 

So no one even wants to start building the industrial plant until there’s some clarity. And the announcement today that said that China is now up to 145. That is the 92nd tariff policy that we have had in this country in the just the last six weeks. And until things settle down a little bit, I don’t expect anyone to start investing hundreds of billions of dollars. 

Now what else? What we’ve been seeing in the last six years, roughly, is an evolution in the understanding of manufacturers about how reliable China is as a place to manufacture. So during Covid, everyone started diversifying away from China. They called it a China plus one strategy. And then about 18 months ago, well before Donald Trump had even won the primaries, there was a realization that China is no longer the low cost producer. 

There’s the sunk cost of the industrial plant, and that is a massive motivator. But Chinese labor now costs roughly two, two and a half times as much as Mexican labor, and it’s not as highly skilled. So we were going from a China plus one strategy to an anything but China strategy. Well, in the last six weeks, what Donald Trump has achieved has gone from an US only strategy for consumption to a US plus one strategy in the mind of all of the world’s major global manufacturing companies. 

So until we get clarity on the regulation, on what federal support might look like on the power grid, on the ability of the United States to produce the base materials like steel and aluminum, copper and wood and all the rest. No one’s putting anything here for the last two years, we have set regular records for industrial construction spending in the United States as part of the diversification away from China and the reshoring from China. 

But because we’ve had policies changing, oftentimes hour by hour, everyone is just stalled. And for the first time since Covid, and for the second time since World War two, industrial construction spending has basically gone to zero. Until we have clarity, that’s where it’s going to stay. Now, if I can take a flight across the country and we don’t get a new tariff policy by the time we land, then we can start the conversation about how we can begin the 12 to 20 year process to achieve what Donald Trump really wants, which means that your average low end iPhone is going to cost a shade under $3,000 if it’s originating in China, because while China may not be the most advanced manufacturing power, they are the assembly power. 

And so all the parts circulate around East Asia, are centered into China and then shipped from China to the United States, all of them qualifying for that 145% tariff. Which means that effective. Now, if you want electronics, you want your iPhone, you want your computer. Without that massive markup, you have to buy something where the inventory already exists. 

In the United States, because anything new coming in has that price markup. So Apple flew apparently 60 tons of product into the country a couple of days ago to get in under their wire. And that’s all that’s left. So you want to save a few thousand bucks, buy your new computer, buy your backup computer, buy your new phone, buy your backup phone. 

Now, I bought three of each.

Peter Zeihan here. Coming to you from Colorado on a bright, sunny, shiny, snowy morning. Anyway, taking a question from the Patreon crowd today, and it’s with all this terror fun and games that’s going on in Washington at the white House. Is there any institution? Is there any person? Is there anything in the United States that could make it stop and maybe unwind it? 

So we aren’t in a stagflation era environment so we don’t face down a protracted recession, and that we can actually keep the industrialization that we already have. It doesn’t look great. We’re at a time of political transition here in the United States, where both of the political parties have broken down. The Democrats basically collapsed in the last election, and it’s reasonable to think that they won’t come back. 

And the Republicans have been so subsumed in the cult of Trump that all of the business leaders and national security leaders and so on. That used to be the bedrock of the Republican Party. How are I best being called rhinos at worst, are being called Democrats or something else? Anyway, so the normal political things that could, shape a president’s behavior are gone. 

In addition, Donald Trump is a nonstandard president, and he’s made sure that there is no one in his circle who knows anything. His chief manufacturing trade adviser has never manufactured a thing in his life. His commerce secretary is craven, and there is no one in the upper echelons of any of the departments that really knows anything about their purview, because Trump fired everyone and replaced them with political lackeys. 

So he only accepts into his circle the information he wants. And one of the few bodies that actually has access to that circle are the Russians. And anything that destroys American long term economic vitality is something they’re going to be enthusiastic about. So you can expect a steady drip of that sort of misinformation going right to the top. 

As for the other levers of government, the judiciary never touches trade, or at least only obliquely. So there’s no one you can sue in order to get a court ruling that might make this better. The only body that matters, the only body that has really ever mattered when it comes to hemming in a president who’s gone off the rails is the Senate. 

And I’m not talking here about impeachment, although that is obviously, something that they’re famous, infamous for based on your politics. But, the Constitution very, very clearly lays out that interstate, intrastate and tariff policy is a congressional purview, not one of the executive branch. The executive has no native powers to regulate international trade at all. What happened is we had something called the Trade Act back in 1974 that gave the president tariff authority. 

So this is power that has been granted to the president decades ago, a half century ago. And so if Trump is going to be stopped or reined in or mollified or something, it has to come from the Senate basically initiating a repeal of that act. And that process has begun. Something called the Trade Act of 2025, which a couple of senators, one Republican and one Democrat, have co-sponsored, and it’s starting to get traction. 

If it were to pass, however, it would still then have to pass the president’s desk, and he would undoubtedly veto it. So it would have to pass by a veto proof majority. We’re nowhere near the political forces that be shifting in that sort of direction. We will have to have a more severe economic downturn than just a stock market crash like we’ve seen in the last few days. 

We’re talking about something that puts a lot of people out of work in a lot of red states. Keep in mind that Republicans have 53 of the 100 and Senate seats. You would need at least 67 senators to vote against the president for this to work. And even then, we’re just at the start of the process. Then we have to unwind a lot of stuff. 

Anyway, the person to watch is, the senator from my home state, Iowa. Chuck Grassley, he’s the senior member of the Senate now, I believe he’s like 185,000 years old, almost as old as Biden and Trump. Anyway, he’s been in the Senate for 35, 40, 60 century since the US was founded. Years. Long time. Anyway, what Chuck Grassley is known for more than anything else is he’s a rule of law fanatic. 

And while he has gone along with Donald Trump’s plans on pretty much everything, he’s done so with a wince, the whole way, because he knows that these are not conservative values. These are not good for the United States. But the party has shifted, and he feels he has to shift with it. 

But he was one of the co-sponsors for this bill that would repeal, presidential Tariff Authority, basically, if, if, if, if the bill in its current form were to become law after 60 days. You have to convince the Senate, that, the tariff is a good idea, otherwise it goes away. 

So you can use it as a negotiating ploy, but it doesn’t make it into policy. Whether that’s good or bad or indifferent is really not the point. The point is, is that the, the champion of rule on the Senate has been roused, and things are starting to move nowhere close to a resolution. But the process has started.

Hey all, it’s early in the morning, April 3rd. I set my phone to ping me, when the tariff policy changed. And that was an error. With changes overnight, we’re now on our 86th tariff policy in the last month. Today, I just wanted to talk very briefly about what’s going on with the Canadians and the Mexicans, which are at the heart of the US trading system. 

And basically there isn’t an manufacturing supply chain that we have that isn’t reliant upon steps in both countries. According to the newest changes. Effective immediately, we have a 25% tariff on all automobiles, on top of a 25% tariff on all trade coming from Canada and Mexico, on top of a 25% tariff on imported aluminum and steel, on top of a 10%, tariff on imported energy. 

So the baseline rate for Canada, Mexico is technically only 25% for our number one. And our number two largest trading partners. But then we have these additional, tariffs, that really hit integration issues. So just running through the battery real quick. Energy, most of the crude that comes from Alberta is refined and used in the United States. 

Basically, we’re the only refineries in the world that can process this stuff. In most cases, if the Canadians were to build an alternative piece of infrastructure, which would cost $30 billion minimum and take at least five years, all that would get them to do is tidewater. And then they have to build a refinery, helps them build a refinery somewhere else. 

So this is, energy that basically just became more expensive, and is really going to push U.S refineries to change the way they refine it, especially with the distillation column. So they can use lighter, sweeter crude. I’d argue that was probably a good idea anyway, but now there’s a very strong financial impetus to do it. And in the meantime, we’re gonna have a significantly more expensive gasoline and diesel, particularly in the Midwest and particularly in agricultural regions. 

That’s one number two, automotive, at the moment, the automotive tariff only applies to finished vehicles with a partial discount if there are parts in that vehicle that are, made in the United States. So if you have a car that’s assembled Mexico, but three quarters of the parts come from the United States, you get a 75% exemption from the tariff. 

Of course, most vehicles, made in North America are very heavily integrated. Whether it’s the Detroit area with Ontario or Texas, with Mexico. So this has an immediate impact to the tune of about. It’s going to average based on type, somewhere between 2 and $12,000, a vehicle with the 12,000 being more appropriate for cars that are imported from Europe. Within 30 days, this tariff will expand to cover not just finished vehicles but all car parts. And when that happens, it will absolutely shatter the manufacturing supply chains of, the United States, Mexico and Canada, which we’ve spent the last 30 years building to make it the most efficient car industry in the world, because most of these parts cross the border four and five times. 

And so doing this will basically break the entire system, because this is on top of the 25% tariff that now exists for Mexico and Canada. So 50% charge every time something crosses, even for a cheap car, that will add at least $10,000 per vehicle, and will absolutely make the United States completely dependent on imported vehicles from places with lower tariffs. 

Assuming nothing else changes, something else is certainly going to change. Like I said, this is the 86th tariff policy. And then finally steel and aluminum. The Chinese are collapsing right on schedule. Their demographic disaster is well past. The point of no return has been for years. They probably have no more than eight years left. And we need to double the size of the industrial plant, assuming we do that in league with Mexico and Canada. 

If we’re not going to do it in league with them, we’re probably talking more about a tripling in. That is a lot of steel and a lot of aluminum that we’re going to need. And now that, is more expensive, keep in mind that Canada was our number one supplier of aluminum. And now that costs 50% more and none other than the president of Alcoa, not a Canadian company has said that this is one of the most economically devastating things that could ever happen to his industry, as well as construction in general is worse in manufacturing in a broader sense. 

So, yeah. Last video I gave to you guys last night suggested a recession, for about a year and inflation about 6%. This new stuff that happened overnight suggests it’s going to be significantly worse. And I would be asked if this was the end of it, because Trump hasn’t even started announcing things like sectoral tariffs on things like semiconductors or medications. 

We know that there’s $1 million tariff minimum that’s going to come on all port visits by Chinese vessels. That’s just around the corner. We’ve got the car tariffs, car part tariffs that kick in in a month. We are just getting started on this dislocation..

Peter Zeihan here coming to you from a hotel room because I’m traveling. It’s tariff day at the white House, so lots of news, but honestly, not the level of detail we need yet. So we know there’s more information that will be coming up from the white House in the next day or week or so. But where we are right now is that Donald Trump has listed what he calls reciprocal tariffs. 

About how 50 countries, he indicates that more will be coming. And there is no information at the moment on sectoral tariffs. So specifically on agriculture or semiconductors or anything like that. So working with what we now know, the ones for the Western hemisphere aren’t too bad. Most of them are about 10%. That is enough to drive up the cost of integrated supply chain systems, but probably not enough to get most people to move production. 

So that just turns out to a flat cost on everything that comes in as part of America’s existing trade deals with Chile, with Colombia, with Central America, with Mexico and with Canada. This is an inflation issue rather than a re industrialized or a movement issue at this point. I also need to underline that this is not the end of the story. 

And we also, on top of that, have a 25% tariff on all automotive products, unless they were built in the United States from American parts. So if, for example, if Ford was to bring in parts from Mexico and then do value out of the United States and ship them to Canada for final assembly, most of that would still be taxed twice, probably more like 11 times, because every time you cross the border, you get that tax again.So we’re now looking at combined with this new 10% tariff, probably increasing the average cost of a vehicle really depends upon the vehicle. But somewhere between 4 and $14,000 based on where you’re getting it from. The second big chunk is when you’re looking at Europe. I don’t want to say they got off easy, but they only have a 20% tariff. 

That, again, is not enough to rewire supply chains. It’s just enough to crimp the trade relationship and raise the cost of products. Keep in mind that we don’t get a huge amount of stuff from Europe. That is not what I would call, you know, finished value added stuff. So it’s not that back and forth stuff like we have in NAFTA, where even a low tariff number can have a real crushing impact, it’s more finished products or luxury products or cultural products that are coming up. 

They just get 20% more expensive. Third, and my biggest concern is Southeast Asia. I really all of East Asia, the biggest numbers that he allotted for countries that were in like pipsqueak like 

Cambodia is like 45% anyway. Japan, Korea, Taiwan, all the Southeast Asian countries, almost all of them, they’re pretty big numbers, 25% and up. 

And this is a real problem moving forward. Not only is the United States really technologically intertwined with the Northeast Asian countries, Japan, Korea and Taiwan, and that makes everything with the semiconductor supply chain really problematic because those like with NAFTA products are going back and forth and back and forth and back and forth all the time. And the United States provides the most value added parts of that product. 

This blows that up from the inside and really incentivizes other countries to fill that gaps if they’re technologically able. And that will really help out Japan, Switzerland and Korea and Taiwan over the long run. Assuming there’s not another step, there will be another step. I don’t want to play that, but what I’m really worried about is Southeast Asia, because in a world where China breaks, Southeast Asia is the part that’s going to play the most constructive role hand-in-hand with NAFTA, I might add, for picking up the pieces and building whatever is next. 

And now there’s basically a 25 or more percent tariff on almost everyone who was involved in Southeast Asia in case of Vietnam specifically, which is the country that’s probably going to do the best out of this and be America’s strongest partner in the area. It’s now a 46% tariff. That’s enough to wreck the relationship overall. So all the progress that we have made in the last ten years and moving away from China, these new tariffs just punch in the gut and we’re going to have to start over. 

And that is going to be incredibly expensive. And then finally there’s China itself. 34% is the starting number that appears that that is on top of the 20% that Trump already did in the last two months. And that’s before you consider the additional price on agricultural products or automotive products or what are being called secondary tariffs from, Venezuela. 

So at a minimum, we’re now looking at, see, 3454 or 6474. We’re looking at 79 and then modified by product. So if it’s car parts for example, 79 becomes 104. That blows up the single largest bilateral economic relationship on the planet that is not within NAFTA. And then of course, we’ve got a couple of grenades in the room of NAFTA as well. 

Anyway, talking about all of this put together, we are easily looking at a recession that is going to last a year. If everything that Trump hopes comes to pass, and this leads to an absolutely massive explosion of investment in the North American sentiment, let me rephrase it. In the American system, that’s a 12 to 20 year process. 

So a 12 to 20 year process with much more expensive goods and eventually a part system that has to divorce itself from everybody else that could get really bad really fast. Again, about the only saving grace here is that, within the Western Hemisphere, the base tariff is only 10%, which will mean everything is more expensive, but it probably won’t break down. 

So recession for about a year, much higher inflation that we needed it to be, will probably break 6% this year in a conservative basis. And never forget that this is phase one. And Trump has made it very clear that more, much more is coming down the pipe.