Tariff spotlight: Vietnam

Photo of flag of Vietnam with tourists on top of a mountain

One of the countries who got caught up in the ‘Liberation Day’ crossfire was Vietnam. Through an arbitrary and poorly informed process, Vietnam was slapped with a 46% tariff.

Trump’s team is filled with loyalists that lack any semblance of expertise in their designated areas, so these inflated tariffs are more about pleasing Trump than logic. Which doesn’t make for great economic policy in case you were wondering.

Vietnam has been a key ally in reducing US dependence on China, but since Vietnam doesn’t import enough from the US due to the income disparity, Trump and his lackeys sniffed a trade deficit and bibbidi, bobbidi, punitive tariffs.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

Hey all, Peter zine here, coming to you from a snowy Colorado. Don’t worry, it’ll be 70 degrees tomorrow. Any who, one of the countries that Donald Trump put tariffs on or. I mean, I guess, but not on all countries. But one of the bigger ones was Vietnam, who got a 46% tariff increase. There’s three things going on here. 

All of them are pretty stupid. So first of all, there’s the method. I have it from good sources that as of noon, the day that the Trump administration put the tariffs on everybody, which was at 4 p.m. on April 2nd. As of noon on that day, they still hadn’t really figured out the numbers or anything. And what they did is they took the trade deficit, divided it by how much the US exports. 

And that gave us the number. It had no indication that they had even glanced at what actual real tariff levels were. They certainly hadn’t done a study of non-tariff barriers. They just took the one measure that Trump is obsessed with and made it a penalty. And so Vietnam got a 46%. Now, why did it go down this way? 

Well, the first and most important thing to understand is that Trump has no help. It’s just him. Normally when someone spend some time out of power, they go through and recruit people who know things that they don’t know so that when they get back into power, they can hit the ground running, do some legislation, build up a system that will last beyond them. 

Trump’s done none of that. He actually fired everybody in his inner and his outer circle who had anything to do with anything, including everyone within the Republican Party, within the apparatus, and just built a nice little cult of personality around himself. And now that he’s in the Oval Office, he’s built an Obama esque shell of incompetence around him, surrounding himself with people who literally don’t know what’s going on. 

The two people who are most relevant to this conversation, we have a trade adviser for manufacturing called Peter Navarro. Navarro is an academic. He’s never actually worked with a company at any level. So everything that is in his mind on tariffs and trade and manufacturing is all stuff that he’s thought up and maybe studied, but never actually done in the real world. 

And he has a particular bone to pick with Canada. So that explains where a lot of the vitriol has come from on that front. The second person is the Commerce secretary, a guy by the name of Howard Ludwick. And how, geez, did a little looking into this guy. A lot of people have a lot of strong opinions. 

I think the nicest thing that I’ve ever heard anyone say about him is that he’s a Venal and craven. Anyway, he has earned a lot of enemies within even the upper echelons of the movement as being completely inflexible and completely immune to reality. And he has spent most of his time at Trump’s side basically telling Trump whatever he thinks Trump wants to hear. And so since he thinks Trump wants to hear about tariffs, he’s talking to Trump about how tariffs are such a great idea and how you have to make the numbers as large as possible. 

They don’t have to be rude in actual relationships and everything like that. And then of course, remember below, these people, especially a lot like Donald Trump, cleared out the entire Commerce Department. So there’s no one who can even try to inform the president, through the Secretary of Commerce, about what is actually going on in the world. As to Vietnam, specifically, Vietnam’s tariff rate on average, product by product is about 9.5%. 

And if you do it on a trade weighted basis. So whatever we trade more with, give that one more weight. It’s actually closer to 5%. It’s nowhere close to the 45%, that it is now. The reason it’s this high is because of the way the Trump administration manufactured the data that was necessary to give a high number. 

And the reason it’s so high is because of a huge success in American economic and national security policymaking. You see, the Vietnamese hate the Chinese way more than we do. And when Covid hit, and we found ourselves with a lot of supply chain disruptions that were Chinese related, American firms went into Vietnam in a very big way to build industrial plant, to diversify supply chains away from China. 

So in the last four years, we’ve seen a significant boost in exports out of Vietnam, specifically designed to cut China and Russia out of the loop. And the projects have been pretty successful. But in the short term, the Vietnamese aren’t wealthy yet, so they can’t afford to purchase American products. That manifests as a trade deficit. And the way that the Trump administration has made up the data, that means that they come in, looking pretty red. 

So this is a great example of where you take a country, Vietnam, that is going to undoubtedly be part of the American economic and security future and make the process of making that reality as complicated, as painful as possible. Hopefully the Trump administration and the Vietnamese government are going to find a way to get through this real quick. 

The problem, of course, with declaring success there is because the Trump administration’s data is literally manufactured. It can go whatever direction Donald Trump’s mood goes, and he’s got a couple of people whispering in his ears things that are both wrong, and are wildly misrepresented of the reality of the situation. So will it work? God knows. 

This isn’t based in fact any more. It’s just a fantasy, and it is already causing an extreme amount of pain and unwinding several years of very successful efforts to move away from the Chinese system.

¡Ostia! Spain’s Economy Is Booming

Photo of Spanish flag over a building

The Spaniards have been on an economic hot streak as of late. So, what have they been doing right, and will this streak continue?

Spain has seen strong economic growth, a balanced budget, and business-friendly policies all contributing to the recent economic success. Actively seeking and welcoming immigrants has helped offset demographic decline, and the people entering the county have had an easier time integrating since they mostly hail from former Spanish colonies.

However, there’s a bulge in Spain’s demographics. This means that the economic boom they are seeing now will only last for another decade unless they can drive a million youths into the country each year. If Spain wants to secure its long-term future, it might have to start thinking about integrating with alternative systems, like NAFTA.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

Hey everyone. Peter Zeihan here coming from a chilly morning in Colorado. Today we’re talking about Spain a little bit. Spain is a country that has been in the news in a good way. That’s a nice change. For having relatively robust economic growth. Fairly good balance, getting this budget under control and a series of good, national policies that they’ve been put in place over the last 15 years that are actually serving it. 

Well, economists kind of named it the country of the year, last year for the country that seemed to be doing the best. I don’t want to. 

I don’t want to rain on the parade. But we need to put things in context. The two things that, the economist pointed out that the Spanish had done. Right. I broadly agree with number one. They’ve done a series of macroeconomic forms that have made it much easier to do business in Spain than it is in France or Italy or the United Kingdom or Germany. 

And in doing so, it’s really unleashed the population to do more. And then second, they have a relatively open door immigration system. And so they’ve been able to, flush out their demographic structure in a very useful way. The country, based on whose statistics you’re using is somewhere around 15%, foreign born, with most of those people having moved in in the last 15 years. 

That is pretty significant for a European nation state. These are real things. These do have legs, but I need to put that in context so you understand that this is not a long term fix. Number one, the Spanish demography is based like everyone else is on when they started to industrialize, when you move off the farm and into town, kids go from being free labor to an expense and you have fewer of them. 

Well, the Spanish really got serious about industrializing in the 70s. And so they’ve got this population bulge among people who are in their 40s, and then it drops off precipitously below that. Part of the reason that the Spanish opened their doors to immigration was try to round out that lower section as much as they could. It was the right call. 

Also, there’s the issue about whether or not this is replicable, and it probably isn’t because Spain used to have a hemisphere spanning empire. And so there are Spanish speakers of Spanish descent living throughout the Western Hemisphere. And it’s fairly easy for the Spanish mainland. The Spanish government, Spain proper, to import people from these former colonies with a minimum of cultural fuss. 

This isn’t like France, where they’re bringing in Arabs. It isn’t like the United States, where we’re bringing in Hispanics. They are Hispanics who are bringing in other Hispanics. And the cultural lift for that is a lot less. Just keep in mind that if the Spanish want to continue to repair or just maintain their demographic structure, they’re going to have to bring in just shy of a million people a year who are under the age of 30 from now on. 

And you do that for 2030 years and you change the culture quite a bit. In Spain, you don’t change it as much as everyone else. So that’s kind of piece one. Piece two is the nature of that demographic bulge itself. As a country ages as its demographics get older. It’s not all bad. It used to be when you have a lot of people that were 0 to 25, all those young people, there was a lot of consumption from the raising of the children. 

And that generated a lot of inflation. That’s not Spain’s problem. Spain’s bulge is now in the late 30s to early 50s. So these are people who are, for the most part, childless. And all the money that they would have spent on their children are instead being spent on consumption. And so you’re going through basically a 25 year consumption boom in Spain that’s going to last at least another decade. 

And that is very real. And it feels great because you get industrial growth, you get production growth, and you get consumption growth, but it’s a one shot deal. If anything happens to that lower age bracket that is now fueled almost entirely by immigration. We’ve seen things like this before. It’s happened in China, it’s happened in Korea, it’s happened in Germany. 

And if you can’t round out that bottom tier, it’s a one shot deal. Now it’s a one shot deal. The last 25 to 30 years in the Spanish are in the middle of it. They should enjoy it. But the trick for them will be preparing for what’s next. Now, like the United States, that is 18 much more slowly than the European countries. 

We are going to be able to look at everybody else who is so much more advanced on this and learn from their mistakes and their successes moving forward, and the Spanish are in a decent place to do that. But at the end of the day, they’re part of a currency union and a political union that is demographically spent, and they will need to find another path forward, not just in terms of their economic model, but their economic grouping. 

Luckily, there is a potential answer on Dec. The Mexicans, from time to time of flirted with the idea of Spain joining NAFTA, and I got to say it would be a pretty clean fit. The demographics line up, the industrial bases are complementary and having a foothold in mainland Europe would not be a bad idea for the NAFTA countries.

India Complicates the US Fentanyl Crisis

Flag of India

The 2025 US threat assessment has revealed that India is now a significant source of precursor chemicals used in fentanyl production, alongside China.

Fentanyl is a synthetic and much easier to produce then cocaine, meaning just about anyone can do it. Trying to pressure supplier countries and crack down on drug labs doesn’t work with a substance like this. Since fentanyl precursors are legal, regulating them is tough and inspecting shipments is a losing battle. So, a new strategy will be needed.

The only effective long-term solution to this crisis is addressing demand and consumption within the US and given historical American drug policy…it’s going to require a lot of work.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

Hey, all. Peter Zeihan here coming to you from a snowy, foggy morning in Colorado. Today we’re gonna talk about something that came out in the new 2025. And that’s American, threat assessment. And basically it says that some of the precursor materials that are being used for fentanyl are now not coming necessarily from China, but from India. 

So quick backstory. Fentanyl, unlike cocaine, is a synthetic. It is manufactured rather than grown. And because of that, it takes about four man hours, 4 to 6 man hours to make a single dose of cocaine. Because you have to clear land, you have to grow the crop, you have to harvest the crop, you have to dry the crop. 

You have to then process the crop and eventually ship it north. A lot of involvement because it’s an agricultural product. Not so with fentanyl. With fentanyl you get your pre precursor materials. You process those into something called a precursor material. Fancy. And then you basically cook the stuff in a lab for a week. And then you have several thousand, probably several tens of thousands of doses that you ship north. 

It only takes a few man seconds to make a dose of fentanyl. The problem is twofold here, the way the United States has chosen to go after fentanyl is, number one, to try to put pressure on the countries that are providing the precursor materials. The issue is that one of these countries is China and the precursor materials are legal. 

You use them in any number of things, from making installation to medicine. So you can’t like, not produce them. And it’s very easy for you to siphon off a very small amount to ship to the United States. So you’re talking about things that are measured in liters here. In fact, all of the precursors that were used to make all of the drugs, all the fentanyl that was intercepted at the U.S. border could fit into 33, oil drums. 

It’s not a lot of material. Once this stuff gets to the United States, it’s repackaged and sent into Mexico, typically by just a pickup truck. And then it’s distributed to the drug labs, which are just little facilities about the size of your average garage, typically in your average garage, where the processed into the final drug and it’s shipped north. 

And so what the U.S. does is it tries to convince the countries that are producing the precursors to not and it tries to convince the, countries that are have the drug labs to have better security. And it’s not that these are stupid plans, but they’re not going after the low hanging fruit. The low hanging fruit is how you shipped the stuff from China, the United States. 

And that’s the post office. If you’ve got a decent scanning system for small parcels, you’d probably be able to cut that link. But even that isn’t going to do very much because the precursors are legal and they can come from anywhere. And this is where India’s getting on it. One of the things that we see whenever we’re fighting the drugs is we don’t get good data until it’s two years out of date. 

And so two years ago, India didn’t make the radar at all. And the Biden administration and now the Trump administration are talking to the Chinese about trying to find out which Americans are doing this to crack down on the personnel. It’s probably the better way to do it. And in the meantime, you squeeze the balloon, it just pops up somewhere else where it’s legal. 

And then, of course, the border crossing from Mexico to the United States isn’t really something that we can lock down. And even if we could, one liter of finished fentanyl is enough to create somewhere between 50 and 100,000 doses based on the purity. So all you need is one dude in a backpack to get through to supply the entire country for a couple of days. 

And at the end of the day, there’s no reason that those labs need to be in Mexico any more than the precursor materials need to come from China. The stuff is ubiquitous. It doesn’t take much of a capital investment to set up operations, and you can do it in Kansas and just as much as you can do it in Mexico. 

And for the precursors, you can do it in China, you can do it in India. You could do it in new Jersey. So, the only real way to get fentanyl under control, it would be to address the consumption side of the equation. And that has always been a flaw in American drug policy.

Turkey Takes a Break from Democracy

Flag of Turkey being flown in front of a building

It appears that democracy has fallen in Turkey, as Erdogan has arrested his only major political challenger – Istanbul’s mayor, Ekrem İmamoğlu. With Erdogan’s suppression of his (only) political opposition, he has signaled the transition from a democracy to an autocracy.

Protests have broken out but given Erdogan’s control of the military and security forces…meaningful change is unlikely. As the Middle East becomes a distant thought for the US, I wouldn’t expect any semblance of an American response. Similarly for European powers, since economic and security ties run deep with Turkey, challenging Erdogan would be a major faux pas.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

Hey, all. Peter Zeihan here coming from a foggy, snowy Colorado morning. Today we’re going to talk about protests in Turkey. The issue is we’ve got a power struggle at the top. You’ve got the sitting president, a guy by the name of Erdogan who has been in charge of all things in Turkey for almost a quarter of a century now. 

Started out as prime minister when that was an important position. Eventually became president. And change the constitutions of the presidents is more powerful. Anyway, the challenger is a guy by the name of. Let’s see if I get this right. Akram Imamoglu, apologies to Turkish speakers out there. Anyway, he is the mayor of Istanbul. And who is going to run for president? 

Had a decent chance of winning. And anyway, Erdogan has arrested the guy and then arrested his lawyer, to make sure that, nothing can happen, that Erdogan doesn’t want to happen. The issue here is that Turkey is no longer a democracy. Everyone is destroyed that system over the last 25 years. It’s definitely an autocracy. It’s not that there aren’t elections and it’s not. 

Those elections don’t matter. They just really don’t matter at the top. Everyone is kind of absorbed all the political space. And while there might be some space, down below in offices that would never threaten him when it comes to national leadership, he just doesn’t tolerate any sort of dissent that’s meaningful. So we’ve got protests in Istanbul over the weekend with hundreds of thousands of people protesting. 

And it’s probably not going to lead to much, because Erdogan controls the entire military, the security services. There’s really two things to keep in mind here. Number one is that Turkey is politically unified. Now in a way that it just hasn’t been since the time of the Ottoman Empire, when we were going through the 30s, 40, 50, 60, 70. 

Well, sorry. Let’s start with the 50s. In the aftermath of the fall of the Ottoman Empire, a guy by the name of Ataturk, took over and basically ran the place as a benign dictatorship. And then as he was dying, he basically declared that Turkey would now be a democracy. He left the military as the stewards and allowed elections. 

And then he passed on, and we had a real, true democratic elections. But if they ever resulted in anything that the military thought broke with the out of Turkey and tradition, we had a coup, with the most recent one being in the late 80s, early 90s. A little fuzzy now. Anyway, other one emerged out of that mess in the 2000 and then started to unify the Islamist side of the country with the democratic leaning side of the country, with the military side of the country, and eventually brought all three factions under the same political roof. 

And he’s basically ruled without opposition for the last 10 to 15 years. Imamoglu would be basically looking to take one of those three traditions, the Democratic contrition and, relaunch it as an independent poll. And it doesn’t look like it’s going to be successful. So it’s kind of one. Number two is how the Europeans and the Americans think about this, under Trump. 

Democracy is not a priority. And so there’s really no pressure as long as we get a few basic things from Turkey. Unclear what those are going to be because the United States is now out of the Middle East for the most part. With the Iraq War finally wound down and the war on terror finally won down. There’s just a few holdovers and places like Syria where the Americans are probably going to be leaving in the not too distant future, something that Donald Trump has been looking forward to and something that Erdogan has been looking forward to. 

The second group, of course, are the Europeans who are integrated with Turkey much in the way that the United States is integrated with Mexican manufacturing. Much more robust relationship there, a lot more going on, whether it’s with migration or drugs or crime, or today, military alliances. Because with the United States going in a screaming retreat from confronting the Russians as part of the NATO alliance and probably leaving the NATO alliance fairly soon, the Turks all of a sudden become critical. 

They have the largest military in NATO outside of the United States, certainly the largest army. And because they sit on the Turkish Straits, they control the access for about 40% of Russian exports, that are waterborne. They go through the Black Sea, through basically downtown Istanbul, through the Turkish Straits and up to the Mediterranean in the wider world. 

The Turks have kind of kept one foot in NATO and one foot in neutrality when it comes to the Ukraine war. They haven’t supported the sanctions regimes that the Europeans have put on, but they’ve also acted to block the Russians from expanding in other directions and continue to sell a lot of very useful weaponry, most notably, more advanced drones, to the Ukrainians constantly throughout the entire conflict. 

And if Ukraine were to fall, Turkey knows that its own national interests would be severely impinged. So we’re looking at the Europeans and the Turks starting to agree on more things at a time when the Americans are pulling back. And the price of that agreement from the European point of view, will mean basically not throwing up a fuss about the degradation of democracy in what is arguably their second most important neighbor. 

So Erdogan is likely to get a pass here. The protests are almost certainly going to fail, and if there is going to be democracy in Turkey, it will have to be something that is forged by a different generation.

The Death of US-China Trade + LIVE Q&A Starts Soon

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The Live Q&A Is Here!

Our next Live Q&A on Patreon is here! In a few hours Peter will join the Analyst members on Patreon for question time! In order to get in on the fun, join the ‘Analyst tier’ on Patreon now.

You can join the Patreon page here

This is a bonus video that Peter recorded this AM!

Trump and Xi got into a pissing contest with their tariffs and you guessed it, everybody lost…

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

Peter Zeihan here it is April 9th. Yesterday, the Trump administration added another 50% to the tariff on China, which brings the official total to 104. And we’re probably only days away from a secondary sanction being placed on China for its trade with Venezuela, which will bring it to 129%. Also overnight, the Chinese raised their retaliation on tariffs to, for imports from the United States from 34% to 84%. 

So the largest bilateral economic relationship in human history is, for all intents and purposes, over now. And the decoupling is going to proceed with massive pace on the American side. This is highly inflation here because there just isn’t enough industrial base elsewhere on the planet. Even if we had good trade relations with everyone else to replace the manufacturing capacity that is in China. 

And if we’re going to build it here, we need all of the raw materials steel, aluminum, lithium, cobalt, all of it that China is the primary processor of. And all of those now does cost twice as much. So we’re looking at a minimum 10% inflation for the remainder of the year. And hyperinflation is something we need to start considering as a possibility. 

We’re also looking at a recession, because the increase in costs for the basic things that allow your life to function is now beyond the point that the lower third of the American population can afford without significant external support. And the federal government is already in a massive debt situation that Donald Trump has promised to make worse, with additional spending and tax cuts on the Chinese side, they just lost their largest customer, their largest source of capital, their largest source of technology. 

And, the implicit support of a country that provides the military security, that allows their shipments to move. We now need to start considering what happens when the US military is tasked to economic issues, which will disrupt Chinese shipping to the rest of the world. And that very quickly leads not just to a recession and a social breakdown in China, but something potentially far worse that could technically include things like military conflict, and is a disassociation of the Chinese system and everything goes with it. 

It is a very quickly evolving and degrading situation. We have to cult of personality on both sides of the Pacific, who basically ignore what few advisors they have left. It is now a battle of egos, with the rest of us caught in the middle, and it will not end well. There is no one who can mediate here. This is no one who can talk either side down. 

This is going to go until something breaks. And what is going to break is the current economic expansion in the United States. We are firmly in recession territory now, and probably the Chinese system as a whole. And there’s no way that those two things don’t happen without a cavalcade of additional issues. Now, at very we’re having our question time here on Patreon for subscribers. 

If you haven’t signed in already, I suggest you do it because we’re starting at 10 a.m. mountain. Noon eastern. And for those of you who are not in Patreon, we’re sending this video out to everyone. So you have some idea of what’s coming down the pipe. We’re going to be answering questions for a good long time. 

I’m going to do my best to be ready for everything you’ve got. Sign up. Links are at the end of this video. See you soon.

The Tariffs Stalk at Midnight + LIVE Q&A Starts Soon!

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The Live Q&A Is Here!

Our next Live Q&A on Patreon is here! In a few hours Peter will join the Analyst members on Patreon for question time! In order to get in on the fun, join the ‘Analyst tier’ on Patreon now.

You can join the Patreon page here

Well, the fat lady ain’t singing yet. Late yesterday, more updates on Trump’s tariffs were released. The gist is that North American trade is taking a huge hit, auto manufacturing and its ancillaries will face severe disruptions, and steel and aluminum costs will soar. Again, we’re just seeing the tip of the iceberg, so we may all want to keep those tariff notifications on for a while.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

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..

Trump’s Tariffs: Reciprocal Edition + Live Q&A

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Trump has announced his first big batch of tariffs (that’s right, what’s happened until this point is fairly small compared to the new stuff). Here’s a snapshot of where this one round will take us…

Note: Without more clarity from the administration on how tariffs will be administered, we’re left to do a bit of quick back-of-the-envelope math.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

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.

Why I’m Okay with Some of the Secondary Tariffs + You Mess with the Don, You Get the Tariffs

Why I’m Okay with Some of the Secondary Tariffs

On March 25, President Trump announced a new 25% tariff on purchases of Venezuelan crude. There’s a lot going on with this one, so let’s cover the micro and macro.

According to how the framers wrote the constitution, authority over tariffs—like much of trade—sat with Congress. Second, Venezuelan crude typically hits the US to be processed by our specialized refineries. So, this tariff is just raising costs for US refiners instead of directly hurting Venezuela. Unless of course you ignore all that and simply apply the tariff wherever you want.

Regardless of how many holes can be poked in these moves, the broader reality is that globalization is ending, and the US will need some new economic tools to face that change. As clumsy and unstructured as it is, at least the US gets to put some new tools through the ringer before they have to take the big stage.

You Mess with the Don, You Get the Tariffs

Well, it finally happened. Word got back to President Trump that Putin and the Russians were making a fool of him in their negotiations and peace talks, so the obvious next step is to throw some more tariffs at them…

This would be accomplished with 25-50% secondary tariffs placed on the US exports of countries who still buy Russian crude – primarily China. Total up all of the tariffs coming down on China after April 2nd, and they could be looking at over 100% tariffs. So, those Chinese electronics and other imports risk becoming a lot more expensive in the near future. There’s no quick replacement for China’s supply chains either, which means high prices and tariff-driven inflation will be hitting consumers hard for a while.

The worst part of all this tariff minutiae is that it won’t change how the Russians interface with the world. It just ups the pressure on Russia’s key suppliers, like China, Iran, and North Korea. As I said in my secondary tariff video the other day, at least we’re going to see if secondary tariffs can be an effective tool for us in the coming deglobalized world.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript #1

Hey. Peter Zeihan here. Coming from Colorado. We’re going to a quick one today about something that happened on the 25th of March. Specifically, Donald Trump announced in a bit of a surprise to everyone on his team that there’s yet another tariff coming. This one specifically is a 25% tariff on anyone who purchases Venezuelan crude oil. The idea is that Venezuela is a horrible place, led by a horrible team that is doing horrible things to its people in the United States, thinks horribly of it, and therefore no one should deal with it. 

Three things here. Working from least to most important. First, this is blatantly illegal. The Constitution is very clear that the authority for tariffs is, lies with Congress, not with the presidency. Whenever the president wakes up with a hair up his ass. That obviously does not matter to this administration at all, as we have seen over and over and over again, and especially since the American Senate has basically abdicated all responsibility for policymaking and just defer to Trump on everything. 

Legally, this is obviously an issue. And moving forward, it could be an interesting series of topics in domestic politics, but I really don’t see anyone calling the president on it. So, you know, bygones. Second most Venezuelan crude ends up in the United States. So this is technically a tariff on us. Venezuelan crude is super heavy, and it’s super, contaminated with things like sulfur and mercury and there are very, very, very few refineries in the world that can process it unaided. 

And almost all of them are in the United States. Actually, I would argue all of them are in the United States. However, Venezuelan, the United States don’t get along. So what happens is Venezuela produces the crude, they export it to a broker, and then that broker sells it to U.S. refineries. And so even though Venezuela and the United States have really not gotten along now since 1998, it’s been that long. 

We’re still the end destination for most of their stuff, and everyone just agrees to participate in a little bit of, paperwork, in order to make relationship still functional. Now, a little bit does go to China, and even less and it more regularly does go to India. But really, it’s all here. Now, the brokers who do this, those are primarily Chinese. 

So there could be an interesting, legal approach here to go after the brokers as to the United States. But, you know, ultimately, the people who are paying the tariffs or the people who are importing the stuff, or at least that’s theoretically going to work. Donald Trump is really not concerned with the details. So it feels like it’s just going to be a flat tariff on all things China of another 25%, which I believe brings us to almost 100% at this point. 

It’s been a moving target keeping track of that. That’s a lot. Anyway, far more importantly is, Trump’s right. Globalization is gone. It’s not coming back. And the series of tools that were developed to regulate the American economy and its interface with the rest of the system from 1945 until 2015, the at a minimum, need an update, much less things like saying that tariffs are the purview of Congress, which is enshrined in the Constitution. 

That certainly needs an update to. And so while I can make fun of the specifics of what is really a clownish attempt at economic policy, I have to admit that if we’re going to develop new tools, I would rather have them battle tested under an incompetent administration, in a short period of time than done the right way, using legalism and acts of Congress under a more capable president. 

So I’m actually okay with this. We’re moving into a world where it’s less based on rule of law and more based on whatever you define. Your national interest in the moment happens to be. So Venezuela clearly is a country that indirectly, indirectly has worked against American national interests for a couple of decades. And, basically hit him with a baseball bat in the shins is going to cause them a lot of problems. 

And the Chinese are not our friends. And so if you want to put an arbitrary tariff on them and just see what happens, you know, this is as good of a time as any to try this out. It’s all about experimentation. We need to develop a fundamentally new toolkit. And while Trump is obsessed with tariffs, tariffs will be at least one of the tools in that kit. So at least for the moment.

Transcript #2

Hey, everybody. Peter Zeihan here coming to you from a sloppy Colorado. It’s the 31st of March and the news is over the weekend, Donald Trump gave an interview when he talked about how angry he was with Russian President Vladimir Putin. The term pissed off was used a couple of times. The issue is that the Russians have absolutely no intention of agreeing to a meaningful cease fire, much less a long term peace agreement. 

And they’ve been deliberately going out of their way to humiliate the American delegations and all of the peace talks, because they can’t go back to Donald Trump with nothing. And they’ve actually been upping the ante trying to embarrass Trump himself. And apparently it finally sunk in, that there is not going to be a deal that the Russians would possibly ever agree to. 

And, Trump is starting to get angry now. You guys know my feelings on how the Russians negotiate. You know, my feelings on why the Russians do what we do and we’ll put links to why there will never be a ceasefire. At the end of this video. But the key issue, of course, is how Trump feels. 

Trump deliberately chose his national security team like he did most of his team, to not be competent, simply to be loyal and so just getting basic information about what’s going on in the talks back to the top is a simplistic issue because nobody’s communicating anything that they don’t think their boss is going to want to hear. 

Well, apparently it has gotten back to him that he’s being made a fool of, and it’s not going over well now. I might not think very much about Donald Trump’s negotiating tools and his negotiating record. However, he is the US president. He is the most powerful person in the world, and that gives him an array of options to implement, even if imperfectly. 

And the one he has decided to settle on, at least at the moment, is something called secondary tariffs, which is something he just made up last week when talking about Venezuela. We’ll link to that one as well. The idea is that anyone who purchases crude from the country in question Venezuela last week, Russia this week faces a 25 to 50% tariff on anything that comes into the United States. 

Now, this hasn’t been implemented yet versus Venezuela. So we don’t exactly know how it would work, but it would be potentially crushing. Now, the Russians themselves wouldn’t care. They’re not the ones paying the tariff. And even if they were, this war from there is about long term national security needs. They feel until they can get Ukraine completely into their territories, plus Estonia, Latvia, Lithuania, Finland, parts of Romania and Poland and Moldova. 

That they won’t stop. They can’t stop. They’ve already paid the price of a major war. And if they stop now, that was paid that price without actually getting the strategic benefit of having a more secure, able external frontier. Now, until Trump came along, there is no way that the United States was going to send by and let this happen, because it would mean basically 100 million people, roughly half of which are allies, being on the wrong side of a new Iron Curtain. 

But Donald Trump had a different view of things until apparently Sunday. So now the question is what happens next? The Russians won’t do anything different. In fact, the Russian view going back to the beginning of the war is that even if the Europeans had stopped taking all Russian exports and energy cold turkey, the Russians would have still done this. 

It’s that important to them. So something coming out of the Trump administration now really isn’t going to change their math. However, the Russians are not in this war alone. Iran is providing drones. North Korea is providing troops and artillery. And the Chinese are providing basically all the technical stuff that the Russians need to build everything that they can build. 

So secondary sanctions on Russian crude would apply to China primarily. Well, secondary sanctions from Venezuela would partially apply to China. So we are in a position here where we might have a 50 to 75% tariff on China just because of secondary sanctions. That’s on top of the 20% that Donald Trump has already put on. That’s on top of whatever number he’s going to make up when it comes to Tariff Day, which is April 2nd, which is just two days from now. 

So it’s entirely possible, but by the end of this week, the Chinese will have over 100% tariff, maybe even a lot more than 100% tariff on anything that they sell under the United States. And that is going to change a lot. I don’t want to say what the end result will be, because there’s a lot of other tariffs that are supposed to hit on the second, and it’s I know where they are relative one versus the other. 

What I can tell you, if it does get that high versus China, anything that you use that you plug it into the wall, it’s going to get very, very expensive almost overnight. 

And because there are no alternative supply chains anywhere in the world to the manufacture and assembly of electronics, this is something that’s going to stick for years. It took 40 years to build out electronics processing and manufacturing in the China centric system that we know now. If we did a breakneck process here in the United States, just the United States, that’s easily another 15 years. 

If we include everybody within NAFTA in character, we could probably shave that down to seven. But it is a big step. And in the meantime we still need stuff. So we’re going to get a very, very breakneck lesson in two things here. Number one the impact of tariffs on inflation on a very grand scale from just this one country. 

And number two, we’re going to find out if secondary tariffs are an interesting idea that is destined for the dustbin of history or something more. And while the stakes are high, I got to say I’m looking forward to figuring out if this works or not because we are definitely moving into a globalized world. Trump is absolutely right on that, which means we will need different tools and more tools than we’ve been using these last 80 years of globalized trade. 

Secondary tariffs are potentially one of them, and we’re going to find out really soon if it works at all, or if it just screws us all over.

Signalgate. It’s Worse Than You Think.

Photo of a phone opening the Signal App
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Signalgate. Well…Shit.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript

Hey, everybody. Peter Zeihan here, coming to you from Colorado. We have to talk about this whole signal gate thing. Oh, my God, so many, so many, so many things going wrong. Signal gate is this little scandal that has popped up in Washington because a number of top Trump administration national security officials had a chat on a third party unsecured platform about tactical military operations involving the strike on Yemen in mid-March, I think was the 12th and 13th of March. 

Anyway, reason we know about this is a reporter from the Atlantic was accidentally keyed on the conversation and basically had the whole thing. So we’re going to talk a little bit about classifications then, and secrecy issues and operational security. And then we’re going to talk about more of the implications of this and what it actually means for us as a country. 

And it’s not a happy story. So, from my brief and limited experience in the government, both in the State Department and the Defense Department, it’s drilled into you as an intern, operational security, the things you don’t talk about, the things you do talk about, where you talk about them with, who you talk about them. And the key thing is that every topic has its own set of rules. 

So if you have a certain level of security clearance, that doesn’t mean you can just go into the archives and read everything. There has to be a certain need to know. And if there’s a conversation on a certain topic that is sensitive, those conversations can only happen on specific locations or on specific platforms, none of which involve third party software. 

Which is very vulnerable to hacking. More on that in a minute. Anyway, so the fact that this conversation happened at all is bad. The idea that it happened with the people who were involved is worse, because one of those people was in Russia at the time using his personal phone, and one of those people was the Treasury secretary, who had no business being on a communication about tactical military operations at a place like Yemen. 

And then, of course, this was tactical military operations. What pushes you way above the, you know, the classic classification of top secret and is the ultimate of the need to know. Now, anyone who is a rival to the United States, or honestly just curious, is going to be targeting our Treasury secretary, because he apparently is involved in these conversations that have nothing to do with the Treasury Department, and there nothing in his background, and there’s no one in his circle that suggests he has any experience in operational security. 

So we just identified our top finance individual as being a leaker and intelligence target for intelligence operations for the rest of his term. That is a disaster in of of itself. But now let’s talk about the actual format here. Signals a third party app for communications. No third party apps are allowed anywhere in the State Department or the Defense Department or the intelligence agencies specifically because it’s illegal. 

It’s a bad idea to be communicating outside of government channels. When you’re talking about information that should be classified, part of it is illegal, because the little simple thing of the Freedom of Information Act, so that decades from now, we know how things happen on the inside. Part of it is to help future administrations see inside the decision making process for the current administration. 

All that information will be lost, but most importantly, it’s because it’s fucking hackable. And specifically with signal. The week that this went down, the Defense Department warned everyone in the defense Department that the Russians were actively circumventing the security measures on signal. So Pete Hegseth, who was the defense secretary, is the one who set this up. And he should have known better at every possible level. 

And every person who was involved in the chat should have known that everything about this at every level was not just a bad idea in poor statecraft, but illegal as well, for all the right reasons. That all of that is part one. second issue is the general mismanagement of information in the public sphere of the Trump administration at this point. Now, when this story broke, the smart play, the national security conscious play would have been to contact the reporter and make sure that information got wiped. Instead, they did what they always do, and they went on the attack saying that, nothing was shared. 

That was a war plan or classified information. And it is the fault of the reporter who doesn’t even have a security clearance, that this information was out at all. In fact, it got so bad that Tulsi Gabbard, who is the director of national Intelligence, even went to Congress and testified that this is no big deal. Now, I have an opinion. 

Most of the intelligence community in the defense community are of the opinion that Tulsi Gabbard is a Russian agent that is actively working against American interests, right at the very top. Little professional tip, Miss Gabbard. If you don’t want people to think you’re a Russian agent, quit acting like a Russian agent. So, for example, lying to Congress about the use of the platform at the use of security, about the use of commercial information, and then actually what was in the conversation in the first place, because within hours of her doing that nonsense, the reporters like, well, if you don’t think this is classified information, I guess I can release it. 

And he did. And holy shit, it talked about specific assets, specific attack vector, specific times and locations. This is as high as it gets in terms of operational security needs. Which brings us to the third question why? Why is the Trump national security team so moronic? Two things going on here. First, Trump himself. When most leaders spend time out of power, they reflect on what went wrong and they build a team that fills in the gaps of what they don’t have. 

And they put together legislation so that when they get back into power, they can actually make their vision reality and make it last beyond their term. Trump didn’t do that. Trump fired everyone from his circle, inner and outer, who knew anything about anything. Because people who know things share what they know. And that means that Trump can’t be the smartest person in the room. 

He instead surrounded himself with loyalists, people who, you know, the recruiting process, competence didn’t make the list for anything that he wanted. So we have a DNI who works for a foreign power. We have a defense secretary that is a former TV host, and it shows. The second issue is when you’re first asked, when you get into the white House, is to pardon the people who protested and rioted on January 6th, complete with those who had attacked law enforcement personnel. 

Anyone who knows anything about national security won’t work for you because they’re like, fuck that noise. So the pool of people that Trump could draw from self-selected out, leaving only the people who would be personal, loyal, loyal, and really didn’t know anything about the process. Trump then went on to gut the upper echelons of every single department, not just the undersecretaries and the deputy secretaries, but everyone down as far as he possibly could fire. 

Removing all the knowledge base of everyone throughout the entire federal government and then replacing them with lackeys. And so we have people like this who literally have no idea how to keep information secure, who are making policy on behalf of all of us. And so, of course, it is all going horribly wrong. And that’s before you even start talking about the specifics of what those policies are.

Half A Million Immigrants Get the Boot + Auto Tariffs and the Art of Routine Vehicle Maintenance

Photo of an Audi dealership

Half A Million Immigrants Get the Boot

The Trump administration has decided to rescind legal status for over half a million immigrants from Venezuela, Nicaragua, and Haiti. If you’ve listened to any of my videos, you’ll know there are some glaring holes in this decision.

First, the labor impact. The US is already facing a labor crunch, and the problem will only be exacerbated as we shift away from manufacturing in China. These immigrants had already been vetted and were ready to contribute to the workforce…there goes that.

There are legal and social consequences as well. Since these immigrants were fully integrated in the US system, stripping them of their legal status forces them into the cash economy and makes them targets for crime and exploitation. This also signals to future migrants that following legal pathways is futile, leading to more illegal crossings.

It’s just another notch in the undermining of trust by the Trump administration.

Auto Tariffs and the Art of Routine Vehicle Maintenance

The Trump administration announced a 25% tariff on imported cars and car parts. While this tariff isn’t as severe as the others expected on April 2, it will still increase the cost of vehicles in the US by $2-3k on average.

There are some NAFTA exemptions for this tariff, but any vehicle containing 50% imported parts will still face a 12.5% tariff. This will impact all the manufacturers across the industry a bit differently, with the European manufacturers feeling the most heat.

Prices start to get spooky when you begin stacking tariffs. Between the 25% tariff on steel and aluminum and the reciprocal tariffs coming soon, I would keep driving your vehicle for as long as you can.

Here at Zeihan on Geopolitics, our chosen charity partner is MedShare. They provide emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it, so we can be sure that every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence.

For those who would like to donate directly to MedShare or to learn more about their efforts, you can click this link.

Transcript #1

Hey, Peter Zeihan here. Coming to you from a hotel room. I don’t have a lot of time today, so packing up while I do this. Okay, so, the issue is, I see today is the 25th of March, and yesterday, the Trump administration rescinded legal, status for about 530,000 immigrants, specifically from Venezuela and Nicaragua, some from Haiti. 

Two big problems here. The first is that we are in a labor crunch. We have record low unemployment in poorly and a half a million people who are participating in the labor force. The kind of problem, you see, these were not your normal people who cross the border. These are people who got legal ization from the Biden administration not just to come here, but for them to come here. 

They had to register with authorities, have an interview with Department of Immigration, have a financial sponsor. And so they were integrated to the system. They had passed checks. So we’ve basically done all the work necessary to make them citizens. And then at the last segment, like say so, unless they’ve already proceeded on to the next step, they now have to go home. 

That’s problem one. Remember, we need to double the size of the industrial plant if we’re going to be ready for the Chinese collapse. That means a lot of construction. That means a lot of people building things. And as a rule, construction is a sector where most American citizens don’t want to work. So this is a real problem for the labor force. 

So to invest all of this time and effort and money and man hours in making these people ready and then kicking them at the last second, that’s just a waste. Second problem is legalities. And not the legalities of doing this. President obviously has the authority. The problem is on the other side, you see, when you’re legal, when you’re in the system, you can get a bank account, you can own property, you can register for health care. 

You can send your kids to school without having to worry about pulling them out the next day. And when you’re in that sort of environment, law enforcement is a resource you can draw upon. So, for example, if you’re a legal, illegal, you’re in the cash economy. And that means that everyone in your area who knows you’re not a legal migrant knows that you basically deal with cash. 

And as a result, you’ve identified yourself as someone to rob. And if you are Rob, you don’t go to law enforcement because you’re afraid you might get deported. So for these 530,000 people, we weren’t in that category. They were, for as far as we can tell, law abiding immigrants. 

And that means that now the Trump administration has basically penalized a half a million people for following the law, which means that the next half a million that come will probably not make the same mistake. 

This is an issue that we have had pretty chronically, since the 1980s, when the Reagan administration was the last administration to go through and change the legal structures for migration. We haven’t really given would be migrants an incentive to participate with the system? And this sort of thing is definitely going to accentuate that problem. 

Keep in mind that within the last month, the Trump administration has, started arresting, would be migrants that have also participated with the system through the, the, CBCp, arresting them on their way to their court hearings where they were supposed to be ruled upon, whether or not they were legal or not, and just grabbing them and send them home. 

So the next wave is definitely going to cross illegally and form an underclass in American society. And as we’ve seen with the phase one of the Trump administration. And, you know, four years ago, the wall did wonders for encouraging illegal migration, made it a lot easier because the Sonoran and the Chihuahuan Desert are the greatest natural barriers in the hemisphere. 

And by building 50 construction roads across the desert to build the wall, we basically obviated half of the barrier. This is definitely going to take advantage of that when we get our next big wave, which will probably happen as soon as the migrants can figure out how to navigate the new system, which, historically speaking, takes about a year or two, so we won’t have to wait too long.

Transcript #2

Hey all, Peter Zeihan here. Coming to you from Colorado. It is the 27th of March and late yesterday. Donald Trump initiated yet another tariff. I think this is the 87th tariff policy that we’ve had in the last six weeks. Oh my God. Seven weeks. Seven weeks. Anyway, 25% tariff on all imported cars and car parts. This is not the one that I was dreading. 

This one is actually not too bad, considering the scope of all of the others. Because if the car or the car part is produced within Canada, Mexico, in the United States, and is registered as a NAFTA product to import lifts, then it gets a bypass. So if your car is made out of one half content that comes from somewhere else. 

You now have a 12.5% tariff on the vehicle. It’s still going to drive up the cost of vehicles in the United States on average by about 2000, maybe $3,000 in some cases. But, because most of these imported parts don’t go back and forth across borders, in the NAFTA system. It’s not nearly as bad as what a NAFTA tariff would have been, which is what Donald Trump is threatening for April 2nd anyway. 

This will kick in on April 2nd as well. Not all vehicles are made equal. And just because it’s in a U.S. company does not necessarily mean that they don’t use a lot of import content. Automotive is unique among the world’s manufacturing sectors in that everyone produces some of everything because almost everybody needs cars at some level. 

So the Germans make the good transmissions, the Mexicans make the mediocre transmissions, and the, Chinese make the crap transmissions. Just to pick one. So just because it’s a Ford or a Chevy doesn’t mean it doesn’t have a lot of imported content. As a rule, the Big Three American automakers do have more. The the changes model by model. 

And as a rule, the Japanese, most notably Toyota, also have a lot of North American content because they have this concept of build where you sell and they put their money where their mouth is, and they’re trying to get on the right side of tariff and political issues. Once you get into Korean cars, it drops quite a bit. 

And once you get into the European cars, it really drops. Most of the European and manufacturing centers that are in North America actually use almost 100%, in some cases, 100%, imported content from Europe. And then, of course, if you’re getting a Beamer that comes from Bavaria, it’s probably 100%, European content as well. Anyway, we’re putting up this handy little chart so you can see of the top 25 models, which ones or which. 

Generally, the closer you are down into the red towards zero, the more your vehicle is going to cost. And a quick reminder that this is just one of the tariffs that is hitting automotive. We’ve got another one that’s in place already. And that’s the 25% tax on imported aluminum and steel, which you know every vehicle has a lot of both of those. 

And then once we get to April 2nd, that’s when Donald Trump is going to be announcing a lot more tariffs, something he calls reciprocal tariffs, probably NAFTA tariffs and then additional tariffs on everybody on the outside that he doesn’t like. He calls them the dirty 15. And they’re really just our 15 largest trading partners. So you put those three together. 

Remember these all stack up with one another. They’re cumulative and could easily see the cost of automobiles in the United States going up by $10,000 a vehicle, or maybe even a lot more based on where they come from. 

Now the data in this graphic is from 2021. There is more recent data available from the Department of Transportation. Unfortunately, because of the bonfire of staffing that is occurring in the federal government right now, it is not in an easily absorbable format. So it’s going to take us a couple days to process it. And we will get that out as soon as is feasible. 

Which reminds me. We’ll be covering all of this and all of its, and to severe effects when we do our quarterly briefing, our question time when people can ask me questions in real time on April 9th. 

It is for our Patreon subscribers at the top tier. So sign up now and learn about all these tariffs as they happen. And then we’ll pull it all together for you and show where it’s going to take the American and the global economy over the long run. See you soon.