Stop Worrying About the BRICS Alliance

Photo of BRICs summit from earlier years

The BRICS alliance is like a clown at a five-year-old’s birthday party…terrifying when your five, but just kind of weird and sad for all the adults. And if you’re still scared of the BRICS alliance, I hate to break it to you, but you might be the five-year-old in this analogy.

BRICS began as a financial concept of grouping large emerging markets, but it’s evolved into a dull talk shop for the members rather than a real alliance. But of course, lumped right in with the other scared kindergartners, is President Trump. He’s threatened a 10% tariff on all countries that join BRICS. Once again showing his affinity for tariffs, regardless of what the situation is.

Should his power to impose tariffs be limited by the courts or Congress, his entire international strategy could unravel. And the threat on BRICS would be the least of our worries.

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Transcript

Hey, all Peter Zeihan here. Coming to you from Colorado, it is the 7th of July. You will be seeing this on July 8th. And the issue is BRICS, the, organization that was supposedly founded to cause a new world order shift away from the Unites States, whatever you want to call it. Anyway, Donald Trump today said that anyone who joins BRICS and forms part of this anti-American axis will be facing an additional 10% tariff on everything that’s done. 

This is both really interesting and kind of hilarious. So, quick Backdrop BRICS was formed. Well, the original idea of BRICS had nothing to do with geopolitics. It was just some guy up in finance in New York who said, hey, here are a bunch of largest emerging markets that have a lot of bonds. We can trade them as a group. 

And so that was Brazil, Russia, India and China. South Africa joined later. It was only in the year since then that BRICs has taken on any sort of a geopolitical hint, but really it’s been really minor. They do have a bank, but it’s run by China for Chinese interests, and nobody else puts money into it in any meaningful way. 

And this last summit that is occurring right now, the Chinese didn’t even show up. In fact, the Russians didn’t show up because there’s an international arrest warrant for the war crimes in, Ukraine. And the Brazilians are a signatory to the war crimes treaty. So they would have felt obliged to, you know, arrest the guy. Anyway, in the last couple of years, BRICs has started to admit new members India, Pakistan, the United Arab Emirates, Iran, Saudi Arabia. 

And that’s how you know, the BRICs means nothing because a lot of these countries are at each other’s throats in any meaningful way. So getting agreement on anything is next to impossible. And that’s certainly how it played out with this most recent issue, because issues between India and China and Saudi Arabia, Iran and Russia and everyone had basically led them to just kind of have this generic statement that doesn’t say anything about anyone or any topic. 

It really is a non organization. And if you go back a couple of years to the Johannesburg summit, in their opening statements, the finance ministers of China and India and South Africa all said we have no interest in forming a a BRICs currency. We have no interest in a non US denominated dollar system. And will people please stop asking us about it? 

So it’s a talk shop or maybe a way to caucus with the Chinese because they’re a bigger economy than everyone else put together. But it’s nothing more than that. It’s never been anything more than that. But it continues to live on in American circles as some sort of big thing. Enter Donald Trump’s threat that if you join BRICs or become part of this axis, that you’re going to be looking at supplementary tariffs. 

So two things here. Number one, it shows that, among the MAGA, right, the idea that BRICs is something really has resonated, an almost allergenic response to anything that is not led with USA, which is obviously coloring policy at the top on any number of levels. But number two, and perhaps more importantly, it’s a direct link of the tariff question to something that has nothing to do with economics whatsoever. 

Tariffs are clearly Donald Trump’s favorite policy tool. And if you go back for everything that he has done internationally since day one, there’s not a single example that I’ve been able to see, except for maybe the bombing of Iran. That is not inextricably woven together with tariff policy. So if for whatever reason, the White House’s ability to enact tariffs is impinged in any way, and keep in mind the Constitution makes it very clear that tariffs are congressional prerogative, not an administrative one. 

Then everything that the Trump administration has done with foreign policy just kind of goes up in smoke overnight. So, the focus is interesting, the vulnerability is interesting, the expansions, new vistas is interesting. There’s no part of this that I’m not paying attention to. It’s going to be really interesting to see I’m using that word too much is gonna be really interesting to see how it evolves in the weeks to come.

Here’s Why Inflation Isn’t a Solution

Photo of dollars behind American flag

Would inflation be good for the US? Sure, it could erode some of the federal debt, but if that’s the best we can come up with…yikes.

Technically inflation does reduce the relative burden of government debt, but only if economic growth and income outpace inflation. While the debt is shrinking, we’d also see all assets be devalued – including stocks, homes, bonds, and real estate. Basically, anywhere American have stored their wealth.

So, while it sounds appealing to reduce the $34 trillion of federal debt, everything else gets steamrolled in the process.

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Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. And today we are taking a question from the Patreon page and it’s specifically on finance. The person who’s been hearing that, some government decision makers and some folks, especially in the MAGA world, are talking about how inflation could actually be a good thing because it will inflate away the debt and make the overall level of payments of the US federal government has to make, relatively less compared to what they borrowed in the first place. 

And there is something to that. If you have a high inflationary period, then the relative value of the debt compared to what you actually got when you borrowed it does go down. And it does become easier to pay if, if, if, if growth keeps up. And so that income growth exceeds the level of the inflation. 

So problem number one let’s say that we get 10% inflation for four years. That comes out to a total of about a price increase. If income does not grow faster than that, you’ve actually dug yourself into a little bit of a hole. Some, careful how what you wish for here, because there aren’t a lot of people out there. 

Certainly countries that expand their income by more than 50% in four years. So the problem one, problem two, inflation doesn’t just whittle away at the federal debt, it whittles away at the relative value of everything. So think of a stock market that’s worth 50 trillion. Do you want to reduce that by half. Because that’s more than the US government owns in debt. 

Think about your house. Do you want that to be reduced? You know, that’s another $35 trillion for private single family homes, another 11 trillion for the bond market, not counting federal debt, of course. And another what is it, 15? 15 yeah, 15 trillion for say, commercial real estate, another 5 trillion for farm real estate. 

The point is that inflation doesn’t just hit one thing. So it raises the cost of living. And then if your income doesn’t keep up, life kind of sucks. So hurting all of these asset classes that pretty much all Americans have all of their savings in in order to whittle down the one debt class because, we can’t seem to get anyone in government who can do basic math. 

I would vote against this solution.

“Made in China” Becomes “Made in Vietnam”

A made in China tag crossed out. Photo by Envato Elements and licensed

Vietnam has been clawing its way up the American import leaderboard. With Trump’s July 9 tariff decision-day quickly approaching, let’s look at why Vietnam is next in line to China.

Vietnam is geographically close to China. It has a highly skilled and large workforce. And it has the industrial ambition that matches US needs. But if we already have Mexico, why do we need Vietnam? They scratch different itches. Think of Vietnam as V2 of China – made up of integrated industrial clusters like Ho Chi Minh City. Mexico has geographically isolated centers that focus on whole products, rather than sharing production across cities. Each valuable, but perhaps Mexico is better suited for a deglobalized world.

Vietnam will still have to navigate the tariff situation, which might be a cluster-f*** given the lack of personnel and systems in place. However, that doesn’t make Vietnam any less crucial, it just means there will be some hurdles to jump.

China’s Central Military Commission (CMC) has the combined power of that of the US Joint Chiefs, Secretary of Defense, and President. The Chinese military is run by party loyalists, rather than experienced strategists; this, along with the constant purging of leadership, shows just how deep the instability runs.

I’m not saying that the US should just ignore the Chinese, but maybe we should take their military capabilities with a grain of salt.

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Transcript

Hey, all Peter Zeihan here. Coming from Colorado today, we’re gonna talk about Vietnam. We are approaching July 9th, which is the self-imposed deadline for the Trump administration’s for setting tariff levels for the whole world. So if you remember back to April 2nd, tariff day, that kind of kicked all this off and set the world into trade chaos. 

He has paused that process, but it restarts on July 9th, so we’re going to have a show. But Vietnam is a country that has been discussed a lot in the last few days, and I think it’s worth underlining why and why this is one of the countries that really matters. Arguably more so than almost any other country that’s outside of NAFTA. 

So background, back before Covid, everything was trying to try to try to try to try to try to try to trying to China. And with Covid, when the Chinese obviously prioritize their own system for supply chains, everyone started to adopt something that was called a China plus one strategy, where we admit that we still have a lot of exposure and a lot of commitment to our investments in the Chinese system, and that we’re dependent upon the Chinese for everything. 

But we really do need at least a partial backup since then that is involved into what they call an anything but China ABC. And for whether it’s the China Plus one or the anything but China. Vietnam has always been at the top of the list for everyone. And so in the time from 2019 until 2025, the American trade relationship with Vietnam has exploded, in percentage terms, far more than anyone else. 

And the reason is pretty straightforward. Number one, it’s proximate to China. So whether the Chinese are investing in Vietnam or the Americans are investing in Vietnam, Vietnam is a logical place to move things either from China or through Vietnam, from China, or to simply replace the production capacity, from China. It’s just right there. Number two, the Vietnamese have been working very hard at making themselves very attractive. 

Roughly 40% of college graduates, from Vietnam are Stem graduates. So if you want to build something, especially if it’s talking about technical work, Vietnam is a logical choice. In addition, this is a country with a very large workforce, roughly on par to what we have in Mexico. So it’s been a good match for a lot of industries. 

And then third, the Vietnamese are very ambitious. They’ve invested a huge amount into their educational system, as opposed to the Chinese system where they’re trying to go more white color and design, the Vietnamese are going into more technical work, and they’re basically trying to leapfrog China from a technological point of view. And they’re doing a really good job of it. 

They’re not teaching rote memorization and intellectual property theft, of the Chinese style. They’re actually getting their people just in to do more of high value out of manufacturing. So it’s been a solid choice. It’s worth spending a minute talking about the difference between Vietnam and Mexico. However, because these are two very different economies that approach manufacturing in a very different way. 

And while to a degree they are competitors, really, it’s a more complementary system. So in China you’ve got your major population centers. And for the most part they are surrounded by a line of secondary manufacturing centers. It’s a very similar system to how we were set up in the United States before NAFTA. 

So for example, you have Detroit, which is obviously a hub for automotive, but Detroit draws upon other communities in the area going out to say, say, Milwaukee. In order to add value, add it reaches across the border to, to Ontario as well. And so you have your central node and a lot of secondary manufacturing that contributes to that primary node. 

That is similar to the system that we have in China that is similar to the system that we have in Vietnam. So you really can, with the right amount of capital, pick up the industrial plant in China and then go and drop it in Vietnam. And we have seen that happen at a significant scale. That’s not how things work in Mexico. 

All of the Mexican cities that are integrated with the United States through NAFTA are desert cities. So when you get to the edge of town, there’s nothing, with the possible exception of Monterrey, where you have a little bit more rainfall. And so there are secondary centers, you basically have places like Chihuahua City or to what do you want to that are unique to themselves and there’s nothing near them. 

So these places, instead of having a multi-step manufacturing system where product, intermediate product goes back and forth among the various cities on the cluster, you simply have a city with a bunch of industrial parks, and most of the steps have to be carried out locally. That generates a different sort of industrial profile, because when you’re around Ho Chi Minh City or Hanoi or Shanghai or Detroit or Houston, you have all these other places that specialize in specific things. 

And so you basically have a cluster of specialization that comes together to make a product. In Mexico, it’s different in Mexico, they focus on one product per urban center. And then that product start to finish is done. There and that product is shipped out. So an example, if you’re in Detroit and you’re making a car, you’re probably going to be drawing spark plugs from across the border. 

You’ll probably make the transmissions yourself. You’re probably bringing the engine blocks from somewhere else. But if you’re in Mexico, you do the whole seat assembly for an airline share. For example, whether it’s the seat belts, the fabric, the molding, the metal framing, whatever it happens to be, it’s all done in Chihuahua City. And then that semi-finished product is shipped somewhere else for inclusion. 

Same thing for engines, same things for engine blocks. It’s not that one is better than the other, it’s that they function differently because of the economic geography they have to deal with. So when you look at Vietnam and you look at Mexico, it’s not that they’re competitors in the traditional sense. They build things differently. And as we’re moving into a world with fewer connections where we have to do more locally, the Mexican strategy by default almost works better because they’re not as dependent upon inputs of various types from somewhere else. 

They’re not as integrated into a broader supply chain system as we are normally used to. Thinking of. That doesn’t mean that the system isn’t going to work. As China degrades with or without a trade war, we are going to need more places like China in order to keep product flowing. And Vietnam is a very solid contender for that role. 

But it doesn’t take anything away from American integration with Mexico. We’re moving from a situation where we have something like 2 to 3 billion workers linked up through free trade to something significantly smaller. We need different approaches, and these are two that work pretty well. 

One more thing about Vietnam that is different. There are charges, legitimate ones, that the Vietnamese are not simply engaging in normal manufacturing in a way that the United States can process, that they are also serving as a translocation point. So Chinese product is finished, it’s shipped to Vietnam, it’s stamped Made in Vietnam, or maybe had some very light value, had done. 

And the ship to the United States, that is happening. And that’s part of the reason why the trade, between the United States and Vietnam has expanded so much over the last several years. Most of it is legitimate. Some of it is this, pass through trade. So one of the things that the Trump administration seems to be doing, which I think is a good idea, is finding a way to tariff those things differently. 

Now, I am of the belief that tariffs to Vietnam overall aren’t the greatest plan, because it’s just the wrong tool for the job. But if your goal is to break down, Chinese trans shipment trade in order to break the link between the United States and China, which I think is a good idea, using tariffs and a two tiered system makes a certain degree of sense. 

So the numbers that are being thrown around today are 20% from Vietnam, which I think is ridiculous, and 40% for the trans trade, which I think is reasonable. The danger here, as always, with tariffs, is going to be administration because someone will have to look at every product that comes in from Vietnam and assign a category. 

So it then has a tariff level. Considering that the Trump administration still hasn’t staffed out over 80% of the positions at cleared out in its first month, it is unclear who is going to do this, because it would require a significant expansion of customs officials in order to handle what is basically tens of billions of dollars of trade. 

Now, if, if, if a way can be found to handle that, then we’re in a different game. But at the moment the administration has not developed the technology, the personnel, the procedures that is necessary to do that at the scale required. So A for effort, D for approach.

Why Do the Democrats Keep Losing Ground?

Symbol of Democratic party cut out of paper

The future of the Democratic Party in the US isn’t looking too bright. When strategy and targeting don’t change for over half a century, I suppose that’s what they get.

The Dems traditional coalition was made up of organized labor, ethnic minorities, and coastal elites…which accounts for nearly 70% of the population. On the numbers alone, they should be crushing it. Yet the Democrats continue to lose ground in elections. There are several things at play here.

The educated urban liberals aren’t as unified as assumed, so the issues they champion often fail to resonate with the working class. Minorities that the democrats once turned to for numbers, like the Hispanic demographic, are now gaining wealth and leaning conservative. And many immigrants come from religious and socially conservative countries, which contributes to the drift of previously reliable Democratic voters over toward the GOP.

Democrats are realizing that their coalition is too fractured to win. Demographics won’t cut it. And counting on enough people hating Trump clearly isn’t a viable strategy either. Something big needs to change if the Democrats want a future in American politics.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. Today. We’re taking a question from the Patreon page. And it’s about US politics. So we, specifically the question is, is there a future for the Democratic Party in the United States? And the short version is probably not. Just to review the Democratic Party is not what it used to be. 

It has been through several iterations since it was formed back in the 1800s. But in its most recent iteration, one that dates roughly back to, the post-World War two environment, the party basically formed around three big pillars of voters. The first is organized labor, with capital being on the Republican side of the equation. The second are ethnic minorities, with most white people edging towards the Republicans again. 

And then the third group is coastal elites, specifically of the White Tower crowd, people who live in cities and have a very different way of looking at the world than, say, rural voters who are more likely to be Republicans. Those three categories are the bulk of the system. And if you look at it just on the numbers, if you add up all racial minorities in the United States with all organized labor or blue collar workers, with everyone who’s living in the cities, it’s a super majority of the population. 

It’s pushing 70% of the total. It should, by the numbers, not only be the dominant party, but it should be the only party in the United States. And yet and yet and yet they keep losing elections by ever more impressive margins. Why? Well, a couple things to keep in mind. Number one, politics evolve. Remember, this isn’t the first form the Democrats have been in. 

I believe this is the fourth. And to think that it is static for all times is silly. Second, politics evolve in terms of the issues. Technology pushes people on different sides of the win loss ledger. Economic transformation can make some states or urban centers rise while others fall. Changes in technology change how we interact with the world. And all of these things have happened at scale in the last 35 years. 

I mean, just think about what we’ve been through since 1985. We had the nuclear scare of the Cold War than the collapse of the Cold War, than the rise of China. We’ve had the baby boomers being the predominant factor in American politics as they were entering their adult years, and now they’re all retiring, changing the financial and the budgetary shape of the entire country. 

We’ve had the onset of the digital revolution and the rise of social media, changing how we all interact with one another. Of course, we’re going to manage our politics differently, but for the Democrats, this has not been a gift. Three basic things have combined to make it nonfunctional in its current form. First, those liberal, coastal educated urban living elites are not nearly as united as you might think. 

And more importantly, they have a hard time resonating their ideas with the rank and file of the United States. Most Americans do not own six figures. Most Americans have not graduated from graduate programs. And so the sort of tunnel vision that you can get if you’re a part of this coastal elite, just doesn’t really carry out to others. 

And when you see people starting to protest for trans rights, that just doesn’t resonate for most of the country. The second issue is racial. One thing that defines your average American is race white, black, Caucasian, Hispanic, Asian, and Native American Islander mix however you want to call it. And it has been an important aspect of American identity. But it’s not the only one, and it often finds itself clashing with other aspects of identity. 

Your education level, your region, where you’re from, how you define your sense of self, whether you’re gay or straight. All of these things are muddled together along with economic issues to give us all our sense of self. And one of the huge mistakes the Democratic Party has made over the last 30 years is to simply bet that because birth rates were higher under Hispanics than they were under whites, the country was going to become more and more and more leftist, more and more democratic. 

And that’s simply one measure. Instead, we saw two things happening with specifically the Hispanic population. Number one, they became steadily and steadily more wealthy, which tends to put them over into the Republican camp. And second, Hispanics, especially first and second generation Mexican Americans, are very strong in blue collar work, specifically the trades like electricity and welding and similar items. 

Construction. Think, well, the United States is going through an industrial renaissance where those skill sets are massively in demand. And so if you want to look at politics through the lens of the economic haves and have nots, the Hispanics have become more and more in the category of the have moving forward. So for them, tax rates have become as important, if not more for most then things like racial equality. 

And so more and more of these people have shifted over in the general direction of Trump style Republicans. And the third issue is cultural. If you’re a first or second generation Mexican-American, a first or second generation, immigrant from any background. Odds are that where you came from is less organized than the United States and less wealthy. 

You came to pursue the American Dream, which means you have some first hand experience in your family. Of what? A system with weak rule of law looks like. One of the great things that we have forgotten in this country is that most migrants have a deeper degree of religious RCD than most Americans. And so when you get a Mexican immigrant or Nigerian immigrant and they come to the United States, they are far more likely to be socially conservative than, say, the social liberals of the coasts. 

So we have all of these things happening at the same time, changing our idea of identity. And the net result is a lot of factions that used to be core to the Democratic coalition are now Tossups. Hispanics were as likely to vote for Trump as they were likely to vote for Harris. Same for people under age 30. The youth are now in play as well. 

You pull this all together and at the moment it is absolutely impossible for the Democrats to win any big election unless there’s something else very big in play. Does this mean that the Democrats are dead forever? Not quite what I’m saying. What I’m saying is they can no longer count on winning by the numbers. There has to be another issue out there that motivates. 

And the general unpopularity of Donald Trump is something that the Democrats today are counting on. But as we learned in our last federal elections, that is not enough.

Xi Purges Chinese Military of Corruption…Kinda

Photo of Chinese military marching

Xi Jinping’s ongoing anti-corruption campaign has just found and purged its eighth CMC member, General Miao. And while the Chinese military is quite corrupt, this effort is more about consolidating political control than anything else.

China’s Central Military Commission (CMC) has the combined power of that of the US Joint Chiefs, Secretary of Defense, and President. The Chinese military is run by party loyalists, rather than experienced strategists; this, along with the constant purging of leadership, shows just how deep the instability runs.

I’m not saying that the US should just ignore the Chinese, but maybe we should take their military capabilities with a grain of salt.

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Transcript

Hey all, Peter Zeihan here. Coming from Colorado. Today we’re gonna talk about something that went down in China on the 27th. That was last Friday. We have had a arrest of General Miao. Am IA0, I think that’s pronounced Miao. Anyway, you know, he was one of the leaders on China, US Central Military Commission, which is kind of a combination of the Joint Chiefs of Staff, but also throw in the defense secretary and the American president. 

If you were put them all in one body, that’s the CMC. It’s a six person body. Yao is the eighth person that has been, arrested and fired, for nominally corrupt. And now the Chinese leader, XI Jinping, has been operating what he calls an anti-corruption purge now ever since he became premier back in 2012. Most of it isn’t actually about corruption. 

Most of it is about political control. Basically going through the system, getting anyone, who might theoretically stand against him. He started with political rivals and then just went into anyone who might eventually show the potential. And now that the CMC has basically been gutted over and over and over and over again, I think it’s worth pointing out two things. 

Number one, in the Chinese military, the anti-corruption angle might actually be a little bit more legitimate than it is with all of his other political purges. China’s military is one of the most corrupt parts of the society, and he actually waited until just 2 or 3 years ago to really start going after it. That doesn’t mean there isn’t a political angle. 

Of course, there’s a political angle. The CMC is not an independent state body. It is part of the Communist Party. The party runs the military, which brings us to the second point. It’s like you can imagine how effective I think the Chinese military is. I mean, number one, when all of the decisions are made by party ideologues as opposed to people with military experience. 

You know, there’s your first hint, second, when the ruling body of six people, which includes the chairman, has had eight people purged from it, it tells you what you need to know about the quality of the leadership. So I’m never going to tell the U.S. military to not take the Chinese threat seriously. 

All I want to do is kind of underline that when the leadership is this bad and rotates this much and is purged of this thoroughly, this often the idea that the Chinese order of battle actually matches what the Chinese state is capable of is kind of a stretch.

Rebuilding the American Industrial Base, Rare Earths Edition

Photo of rare earth minerals: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. Photo by Wikimedia: https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg

American reindustrialization was always going to be painful process, but there were several ways to soften that blow; the biggest of which was our trade relationship with China. At least, it was.

The tariff situation that began in April soured our relationship with the Chinese. Since then, they’ve halted exports of rare earth magnets, a crucial component in…well, basically everything important. A quick disclaimer/history lesson: rare earths aren’t all that rare, they’re just difficult and time-consuming to extract. The Chinese subsidized the sector beginning back in the 80s and made it illogical for anyone else to try and compete. Hence China’s dominance in this field.

Now, the Chinese are dangling that rare earth carrot in front of Trump. Unfortunately, the American industrial base must be rebuilt for a whole lot more than just rare earths. Something that a little strategic foresight would have helped with.

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Transcript

Peter Zeihan here, coming to you from Colorado. Today we’re going to talk about the status of the US-China trade talks and where the United States is with its re industrialization. And the short version is things going really badly. If you remember back to the first week of April, the Trump administration put a 55% tariff on everything coming from China. 

And then we got into a shouting match with the Chinese, and that number went up and up and up and up until I think we had 185%. And then a couple of months later, we had a bit of a truce and the numbers went back down to 55%. What’s the best way to go through this? So the issue at the moment, right now is that China is refusing to export rare earth products, most notably magnets, to the United States. 

And these magnets are used in any number of electronics, aerospace, and especially automotive parts. Rare earths are a group of materials that are relatively difficult to source not because they’re rare, but because they’re not present and particularly high concentrations. So if anyone says that there’s a rare earth mine coming online, that’s a good indication that you should just completely ignore that person because there is no such thing rare earths are produced as a byproduct of other metals purification and refining. 

So you have a silver mine, you extract the silver, you then use the tailings and go through and extract the rare earths. And the same thing for copper and gold and bauxite and all kinds of other things. There’s like a dozen rare earths anyway, extracting them and purifying them is not particularly difficult. It’s just that the concentrations are low. 

So it requires several steps, several hundred steps. And the rare earth materials themselves share a lot of chemical properties. So you have to basically separate them from one another as well, which is where most of the time takes. So you take these tailings, you grind them down, you add some chemicals to dissolve everything, and then you basically boil the whole thing in acid. 

And that separates a little bit out. And then you take that and you put it into the next batch of acid, and you do it again, and then up and again and again. And you do that a few hundred times. And at the end of the day, after usually 6 to 8 months of separation and acid treatments and starting with several tons of material, you get a couple of ounces of rare earth metals and a little goes a long way, for most uses, these things are really just doped rather than the core production level. 

So, you know, all the rare earths that are used by the entire world could probably sit in a garage, every year. Anyway. It’s expensive, from a minerals processing point of view. And it’s dirty because of all the material that is used because of all the acid and because the radioactivity that naturally comes from a lot of mining activity. 

So what happened was back in the 1980s, most of this stuff was done in the United States or in Europe. But the Chinese, who were early in their economic development, had decided that anything that you could throw cash at and anything where they could ignore environmental regulations, they would have an advantage in. So they threw a lot of money at this industry in order to dominate production. 

And in doing so, because of the subsidies, they ended up producing the rare earths for significantly lower price point than anyone else could. And because of that, we were able to use rare earths and things like rare earth magnets in order to make what we call computers today, specifically solid state drives. For those of you who are older and you remember the old spinning hard drives. 

Yeah, they didn’t use many rare earths, but the solid state drives did so the whole point was, now that we have this available, we’re going to move to a type of technology that uses much less electricity generated by far less heat, and sets the stage for the processing and computing revolution that we’ve known throughout the 90s and the 2000. 

For example, smartphones wouldn’t have happened without this. So the Chinese have honestly done this a solid. However, over the 2000s and especially into the 20 tens, the Chinese got into rare earth material manufacturing, which is a significantly more sophisticated step, and simply purifying the rare earths. And that’s where the magnet stuff comes into play. And over the last 15 years, they’ve basically dominated that space and they’re refusing to export the metals to everybody else so that they can do the manufacturing. 

And now they’ve dominated the manufacturing and they’re refusing to export the manufactured product. So this is a very real crimp, in the trading system and a very real point of leverage for the Chinese. Now, nothing that I have just told you is a mystery in the sector, whether that is computing or automotive or mining or metals purification. 

But it is all news to the Trump administration. Remember that normally when a president comes in, he brings somewhere between 1300 and 3000 people in with him to stock the senior government. Trump’s brought no one. He just fired all the people who were there before, because he really doesn’t like anyone to remind him, even indirectly, that he might not be the smartest person in the room on every single topic. 

So if anything that I just told you was news, that’s because you’re not an expert in metals refining a computer manufacturer. Neither am I, but I talk to a lot of people I know what I don’t know, and I seek out that information. And Trump is not a person like that. So what happened with the trade talks is Trump on April 2nd made these big announcements with those big game show boards and then just assumed that everything would magically happen the way he had dictated, regardless of what the situation on the ground was or the interests of other parties. 

It was very Obama asked. Honestly, the two of them are very similar from their management style. Anyway. What this means is that even though the United States holds probably 90% of the cards in any meaningful trade talk, the Trump team is so small and is so siloed in what they do now. And then, of course, is hobbled by their boss that they can’t develop the staff. 

It’s necessary to keep them informed on things like this. And so the Chinese system, even though they hold very few cards, they know where those cards are and they’ve played them very effectively against the Trump administration and basically brought American auto manufacturers to the brink of collapse by metering out this one little product, which is a point of leverage that they have. 

The smart play is if you’re going to pick a trade fight, the first thing you do is start building up the alternative infrastructure that you need. When stuff on the other side goes away. And so in this case, luckily some of that work has already been done. So about 15 years ago now, the Chinese tried a similar trick with restricting rare earth exports to Japan when they were having a spat over something, and the Japanese figured out over the course of the next nine months how to use three quarters fewer rare earths. 

Because, you know, for the last 20 years, the Chinese have been dumping it on the market below cost. So everyone just kind of gorged on it and no one really worried about using less. While the Chinese figured out ways to use less, they did the same thing with the Russians when it came to Palladium anyway. 

Well, the Japanese were doing that. Everyone else realized that there could be a supply shock here. And so they built out a lot of the physical infrastructure that was necessary to process rare earths. We did it here in the United States. The Australians did it, the Malaysians did it, the French did it. And what’s happening now is some of that infrastructure is spinning back up because this is now an issue of the day. 

Again, we didn’t operate it until now, because the Chinese were subsidizing it. So there was no point now that it’s a national security issue, that the math has changed and people are turning all that old infrastructure on. But the next step is going to take a little bit more work. Turning the finished material into manufactured intermediate products like the magnets. 

That will probably be a little bit more involved than simply turning on some metals refining. I can’t give you a timeframe for how long that will take, because this is not something that has been done in the United States in a while. And unlike the, metals refining, where it’s an issue of no more than a year, we don’t know what the time horizon will be for bringing it on online, but this is one of probably 3 or 4 dozen things where the Chinese have done some version of this that needs to be rectified. 

If the United States is going to prepare for whatever is next. If you’re one of those people who would like to think that the trade situation is going to revert to how we were 15 years ago, I mean, I think you’re wrong, but we would need this in order to prevent any sort of regression or long term fights with any partner, most notably China. 

And if you’re like me, you’re pretty sure that the globalized system is never coming back. Then we need to do this regardless if we’re going to have stuff like, I don’t know, cars or we need to invent technology to get along without the rare earths one of the two. Anyway, this is all stuff that should have been done before we picked a trade fight and before the Trump administration demonstrated that they really don’t have a good grip on the core issues that are necessary to invent the next world, whatever that happens to look like.

The Art of Trump’s Trade Deal

Official White House Portrait of Trump for 2025

Robert Lighthizer, the former US Trade Representative during Trump’s first term, declined to return for a second term? But why?

Well, Lighthizer had all the credentials and strategy, but he saw the s*** storm he was about to walk into. Between the federal bureaucracy breakdown, the hollowed-out trade office, and the pure chaos of navigating hundreds of Trump’s trade deals at once, it wouldn’t take a genius to know to sit this one out.

The current USTR, Jamison Greer, walked into this storm on his first day and, to no fault of his own, hasn’t made any meaningful trade progress. Frankly, I’m not holding my breath for any new deals.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here, taking a question from the Patreon page today. Specifically, it’s about Robert Lighthizer, who was the trade representative under the first Trump administration, but who declined to accept a trade role in the second. The question is, if Lighthizer had come in with his general strategy of isolating China been successful. For those of you who don’t remember, Lighthizer has been an old hand in American trade law going back 40 years, and has always approached it from a far more bare knuckle approach than some of the more, shall we say, genteel negotiators. 

He was really, really, brass tacks when it came to say, the Plaza Accords during the Reagan administration or trade deals with the Japanese. This time around, his general approach was to strike meaningful trade deals with all of America’s allies first, and then basically bring everybody together into a solid block to force concessions out of the Chinese. 

Now, do I think that would have been a better strategy than what the Trump administration is doing, which is basically picking a trade fight with everyone at the same time? Well, yeah, but there’s really no point in crying over spilled milk because Lighthizer did not take the job. Now the question is why not? And what does that mean for the trade authority? 

Now Robert Lighthizer is getting up there. He’s, I believe early, late 60s, early 70s. Now, I’m really not sure. Anyway. It’s not spring chicken. He’s been doing this since the Reagan administration. So it makes sense that he wouldn’t want to work Washington hours for another four years. But more importantly is the structure of what is happening at the federal government and how that limits what the trade representative can do. 

Two things here. Number one, when Trump came in, he cleared out the entire upper echelon of senior civil servants. Only about 5% of the men have been replaced. Normally when a president comes in, they just take out the top layer and leave all the people with the institutional knowledge. But Trump just fired everybody. And so all of the federal bureaucracy is basically having a problem functioning because the upper middle and upper management are simply empty. 

So there’s no one to carry out Trump’s orders. He’s got some people at the top with the secretaries and maybe a few undersecretaries. And that’s just it. And all of those people are political appointees that are basically new to the industries. So there’s no one to make sure that the president’s orders can be followed. Problem one. Problem two. 

It’s worse for the U.S. Trade Representative Office. Joe Biden was only the second president in recent American history to negotiate no new trade deals. And his trade representative, Katherine Tai, was good at her job. But she focused on enforcing the previously negotiated deals and having a bunch of memorandums of understanding. So during the four years of the Biden administration, the USTR office was slimmed down considerably. 

And now under Trump two, it has not been re expanded. So not only is the USTR missing its upper leadership, it’s missing a lot of the rank and file people who would normally negotiate trade deals. So that’s number two. Number three trade deals. They take a lot of time. There’s a lot of details. The fastest trade deal the United States has ever negotiated was with Singapore. 

That took ten months. And that’s because Singapore is a city state. It doesn’t have an agricultural sector. So there weren’t a lot of sensitive topics that really need to be ironed out. Most trade deals take in excess of three years. Some of them take significantly longer. And so if you were Robert Lighthizer and you’re looking at this and you realize you’re going to have no staff, no assistants, no deputies, and the Trump administration is going to want you to negotiate 200 trade deals at the same time. 

He was like, I’ll pass. Thanks. the person who is the USTR now is basically a former protege of Robert Lighthizer. His name is Jamison Greer. He was actually served in USTR during Trump one as Bob Lighthizer chief of staff. The guy is far from incompetent. 

He’s pretty good at what he does from my point of view. But he has those three problems. He has no deputies. He has no staff. And he’s expected to negotiate 200 trade deals at the same time. So the end result is we’re not getting anything. Of the two deals that have been agreed to so far, the two deals, the first one is with the Brits, where they basically they were planning on buying a number of Boeing jets over the next eight years. 

So they cut that order in half, said announced it. And Trump’s like it’s a deal. And that’s all that happened. And with the Chinese deal all it was was an agreement to talk. Of course there’s no one in Washington to speak with. Because there’s no staff. So, we’re kind of stalled. And I don’t blame Lighthizer for saying pass on this one.

Finally, a Productive NATO Summit

Flag of NATO

I don’t know what was in the water at the latest NATO summit, but something got Trump to be cooperative. Perhaps it had something to do with Mark Rutte greasing his wheels.

Mark Rutte, the former Dutch PM, wasn’t just working his magic on Trump, he secured buy-in from several other leaders with his flattery and strategic diplomacy. This helped pre-summit defense spending agreements get formalized and saw countries like Germany step into a leadership role.

Even if all that comes from the summit is that the US stays (minimally) committed to NATO and Europe continues to ramp up defense, Russia is in trouble. The balance of power in this region is shifting, and should Europe continue navigating this diplomacy game effectively, the Russian position gets muddy quickly.

Prefer to read the transcript? Click here

Transcript

Hey, Peter Zeihan here. Company from Colorado. And today we’re going to do a bit of a recap on the recent NATO summit in Europe. Donald Trump went there and everyone was concerned that it was going to be a blow up, like most of his international, events. And it was not, all of the pre-summit agreements that have been made on defense spending increases were basically codified. 

Basically everyone in NATO has agreed to double or triple the defense spending, bringing it up to a new threshold of 5% of GDP, up from the old number of 2% of GDP, with the Germans, who have long been one of the biggest laggards. Basically, picking up the baton and running with the topics, saying that we know that a war with Russia is coming in one way or another. 

We need to prepare, with Trump specifically, in past NATO’s summits, he’s basically blown up the alliance and said he doesn’t plan to defend anyone. And this time, I don’t mean to suggest thatTrump wasn’t on display. I mean, let’s not get crazy here. But most of the discussion about it was how he came as a friend and he left as a better friend. 

The person who was singularly responsible for everything going so well as former Dutch Prime Minister Mark Rutte. Who? Sorry, I’m not Dutch. Can’t roll my eyes. He was prime minister basically, since, what, 2010? Like, like from back when Biden was merely old and now is the secretary general of NATO. And he has spent the last few months courting not just Donald Trump, but all of the leaders of the alliance to get them to preemptively agree to this sort of defense increase. 

And while Trump was in town and in the lead up, he went out of his way to basically cozy up to Trump, saying all kinds of wonderful things about how nice he was and how powerful he was, and how decisive he was and how good his hair was and, how sometimes daddy has to be strong. 

During a European leader talk about the American president as a daddy, was a little disturbing, but whatever. Basically, the Europeans, ten years in are finally figuring out how to manage Donald Trump. You don’t do it with honesty. You don’t treat him like a friend. You don’t treat him like an ally. You stroke his ego, you kiss his ass, you slob as knob. 

You tell him whatever he wants to hear, and then you get your way. The Chinese leader XI Jinping figured this out years ago. Vladimir Putin of Russia figured out years ago. And this time around, an increasing number of Europeans are figuring it out as well. Italian Prime Minister Meloni is probably the first one that really got it going. 

And if you do that, Trump says wonderful things about you and he turns his attention somewhere else. Clearly the Canadians have not figured that out yet. 

Rutha was famous for this, dur for the last 15 years in European politics, for being the marriage counselor to make it all work. The Netherlands sits in a spot equidistant between London, Berlin and Paris. And while it is actually one of Europe’s major countries, it’s like the seventh most populous country. 

It’s a small chunk of territory that is in a very invasion prone zone. And so the Dutch have always had to figure out how to manage all the neighbors around them. And they do so by being efficient and easy to work with and very, very direct. So if you’re German or French or British and you don’t want to deal with the Germans or the French or the British, you go through the Dutch and they’re kind of the middleman and Rita specifically has been very, very good at being the marriage counselor among these three countries and helping them reach agreement before then going to the broader European Union and 

selling whatever the deal happens to be. Doesn’t mean that the Dutch always get their way. Doesn’t mean that the Germans always get their way. But there’s always made sure. Ruto has always made sure that the conversation continues on at multiple levels, so that it doesn’t have a chance to evolve into a crisis. And if there’s one thing we’ve learned about the American press that he loves a good crisis, and so he really deserves credit for kind of lassoing this all together because the Europeans are not fans of Trump. 

Trump is not fans of the European. And lo and behold, we’ve just had an amazingly successful summit. 

What this means for the Alliance. If all that happens with the United States is a continuing verbal commitment to defend Europe in time of a war with the Russians, if we can hold that level of commitment, even if the rhetoric goes a little off the rails time to time, then the Russians are really in a pickle. 

Because if the Europeans double and triple the defense spending, if the Ukrainians keep pushing for a completely new type of warfare with drones, and if you start to marry Western economic strength to those new technologies, then the Russians aren’t simply outnumbered and outgunned, but they’re outclassed now. A lot can go on between now and then, and the influence of the Russian state and intelligence operations within the white House remains strong and is still growing. 

But if the Europeans have figured out how to play the game two, then it’s a different game.

The Revolution in Military Affairs: Ditching Artillery

Military vehicle shooting artillery

Next up in our series on the changes in military tech, we’re looking at artillery.

Gone are the days of endless artillery barrages. The Russians have relied on this tactic for years, but drones and acoustic detection are changing that. When a cheap drone is capable of quickly spotting, targeting, and eliminating artillery, something clearly needs to change. And no, a “shoot and scoot” strategy isn’t sustainable.

There’s still a case to be made for artillery, but it is quickly waning. In future conflicts, new systems that prioritize speed, precision, and decentralization will be essential.

Prefer to read the transcript? Click here

Transcript

Okay. Peter Zeihan coming to you from Arches. We’re continuing the Revolution military affairs series, and today we’re going to talk about artillery. Artillery has been one of the three most important military breakthroughs of the last couple of centuries because it allows, a force to assault another force from literally miles away. The artillery that the Russians, for example, areas in Ukraine generally has a range, between 10 and 20 miles based on what piece of hardware they’re using. 

But you throw drones into the mix where a single first person pilot a drone costs less than an artillery shell. You change the math. So I am no artillery expert here. And the technology is changed very quickly. So the purposes of today’s video is basically just to talk out loud through what we’ve seen and where it might lead. 

Countries that rely on artillery really do fire on it. The joke in the military is that Russia is an artillery force. It just happens to have some tanks. Hold on. 

Okay. Where were we? Right. Russia. So in the Napoleonic Wars, France, which had the most technologically advanced military at the moment, invaded Russia, made it all the way to Moscow. And the Russians kind of got their asses handed to them. And if it wasn’t for some very stubborn defense and Partizan attacks, and especially a very, very rough winter, Moscow probably would have fallen. 

And the Russian lesson from that was that they needed to do an upgrade for their military. However, this is a country that was basically entirely serfs. There were no technical skills among the population. They didn’t have much of a intelligentsia from a technical point of view. And so they settled on artillery because aside from the guy who was like pointing and aiming, everything else was just kind of like looking around. 

And that Russian serfs could do and that the Russian, Crown would trust them with. Because artillery is really not the best weaponry for. So, you know, taking on Red square. Anyway, so they invested heavily in that and that is basically dominated Russian and then Soviet military planning ever since. Very low value added soldier base and just focus on obliterating anything in front of you from miles away. And don’t advance until there’s nothing but rubble. 

So the problem the Russians are facing now is that it’s not that the artillery is irrelevant. It’s just it’s incredibly vulnerable. And they basically have to do something that called shoot and scoot, because between, acoustic detection and radar, they really can only get one shot off before counter battery fire starts. 

The Ukrainians, in order to detect drones coming in, basically built an acoustic detection system around the perimeter of the country and all over the front lines so that as soon as the drones are coming in, they can translate the sounds for what kind of drones are coming on, what vectors, so they know what air defense to activate. 

It works for us as artillery too. So it used to be that once an artillery shot fell, you’d use radar to basically track it back and then shoot back. But now with the acoustics, they can figure out when it fires and so the kind of battery fire can actually happen before the shell is even hit. So artillery an order of magnitude less useful than it used to be. 

So the Ukrainians and the Russians are discovering that what they were trained on during the Soviet periods is no longer how war works, because the technology has left the artillery piece behind for the most part. This won’t necessarily be true everywhere. When you consider things like the Paladin system, for example, that the US has, not only is it self mobile, but it can fire multiple shots at different angles and then hit the same target at the same time. 

It’s kind of cool, mobile being the key thing there. But for most artillery, you know, it’s in the past, it’s no longer cost effective for what it can do. Which brings us to a different sort of problem. So a big attraction, for artillery, for the Russians. Was that anyone, any idiot, any village idiot could operate? 

Most of it because it’s just lugging stuff from point to point with drones. It’s first person shooter. You basically have to fly it manually and direct it, and that’s all. Well and good. And that doesn’t require a huge amount of skill either. Outside of, you know, the Tendo, the problem is in manufacturing, you can produce, artillery shells and artillery back in your industrial plant and then send to the front line. 

And you need a limited source because, you only make a few of the tubes and you make a lot of ammo. Well, with drones, the Russians and Ukrainians are both using thousands of these things a day. So it’s a very different workforce. It is much more technically skilled. It needs to be an a lot larger number. In Ukraine, which was the heart of the old aerospace industry back during Soviet times, this has not been too heavy of a pull. 

And based on whose numbers you’re using, the Ukrainians have gone from producing about 5 to 20% of the parts for their drones at home to now 70 to 90% based on the style. The Russians are nowhere near that good, because the Russians don’t have anywhere near that sort of technical skill within the country. And most of the people with those skills left, either in the 1990s or the 2000 or more recently to avoid the draft. 

So they’re bringing in talent and technical skill from places like Iran and North Korea, and especially China, where you can use the Chinese industrial plant to produce the parts that then flow into Russia and then make it to the front line. Anyway, bottom line of all of this is this is very much a work in progress. We’re only three years into the war. 

have a secondary power. Russia fighting a tertiary power, Ukraine. And the rules are changing every week, every month. So to think that we have a firm idea of how this is going to play out is silly, but to think that the weapon systems that we’re used to seeing on the battlefield are the weapons of the future is also silly.

The Revolution in Military Affairs: USS Nimitz

The aircraft carrier USS Nimitz. Photo from Wikimedia: https://en.wikipedia.org/wiki/USS_Nimitz#/media/File:USS_Nimitz_(CVN-68).jpg

This video was recorded back in April of this year, hence the snow.

The Nimitz is making its final voyage (with a recent detour to the Middle East), before it’s set to be decommissioned and replaced by the more advanced Ford-class carriers. However, a shiny new toy isn’t enough for the US to maintain global influence.

While these massive carriers are a significant component of US power projection, the true strategic advantage lies in the global alliance network. This network provides basing rights all around the world, enabling the US to get around quickly and affordably. If the US continues this current trajectory, the logistical backbone of US power projection would go limp.

Prefer to read the transcript? Click here

Transcript

Hey all, Peter Zeihan here coming to you from snowy Colorado. And today we’re going to talk about a major change that is going to come to the U.S. armed forces and most notably the Navy in the years to come. It all has to do with the USS Nimitz, which was the first of the Nimitz class, a super carriers, of which ultimately we have ten and have been the backbone of American military power projecting throughout the world for really since the 1960s. 

But it’s been a hot minute, Anyway, at last, Bremerton, Washington, on the 28th of March for what is intended to be its last sail. The Nimitz are being replaced by a new carrier class, the Ford class, which are larger, can carry more, planes, can launch and recover them faster. All that jazz? Definitely superior platform. 

Not that the Nimitz is anything to sneeze at. Anyway, the whole idea is these things have been in service for well over a half a century, and it’s time to start taking them out of circulation. As technologies change, and we can move to a military force that is more lethal and faster, and that is not going to happen. 

One of the things that people forget when they start talking about how we don’t need this country or that country is arguing the single greatest advantage that the United States has right now is its alliance network, and not necessarily because in a fight, we get to take over their armies and navies and control them ourselves, although we do have that, and that is a big deal. 

But it’s basing rights. The United States is one country, and part of our security comes from the fact that we have oceans between us and everyone else. But that means if we want to influence things somewhere outside of North America, we have to get there first. And that means a long logistical chain linking up, not just soldiers and sailors and ships, but tanks and men and ammunition and supplies and diesel all around the world. 

And with the basing network that we have right now, there are very, very few spots on the planet that we can’t reach in a very short period of time with a lot of firepower, but if the United States leaves NATO like it sounds like it’s going to if the U.S. breaks the alliances with the Japanese and the Koreans, which it looks like it’s going to, then America alone has a very different force posture. 

And one in which it can’t get much of anywhere. So what we’re going to see is, on a very large scale, the recreation of a tactic that the United States use during the early months on the war on terror. We needed to get to Afghanistan, but we didn’t trust the Russians and we didn’t trust the Pakistanis. So what we ended up having to do is take one of our older carriers, the USS Kittyhawk, and park it off the Pakistani coast and use it as a mobile base. 

It was by far the most expensive way we could have possibly done it. But in the early days after nine over 11, it was considered worth the cost. Well, with the direction that the Trump administration’s foreign policy is taking us now, any time we want to deploy anywhere, we’re going to have to do something like that. And that easily cost ten times as much as simply having an ally with a patch of ground that we can squat on. 

When you lose your alliances, you lose the ability to project power cheaply. And yes, we spend a lot on our military, but it’s nothing compared to the budget line. Items were going to be seen in the future, as we have to take things like the Nimitz and repurpose them from being some of the world’s best warfighting assets and basically being floating rafts.