East Asia, After America


Today, we’re looking at another region that the US will continue to keep tabs on – East Asia. This is one of those regions that will be plenty exciting in coming years, so let’s jump in.

Let’s start with the regional allies – Japan and Australia. Together with the US, these three countries have formed a trilateral alliance, which will help shape the power balance in the Pacific. Australia has been a close ally for decades and will continue to be just that. Japan is a more recent member of Washington’s inner circle and has joined for one big reason – China.

Japan, Australia and the US partnership has struck a strategic balance of power with Russia and China. This region’s future will depend upon where other regional powers decide to place their allegiance. Given China’s internal challenges and Russia’s apparent problems, it could (will?) turn chaotic very quickly.

We’ll be watching the dynamics unfold in East Asia over the coming years, and I expect no shortage of excitement.

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know 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. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

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Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.


Hey everybody. Peter Zeihan here, we are continuing our Post American series about what the world will look like, where the hotspots will be after the United States for trenches from its current position. Coming to you from the Eagle’s Nest wilderness just below Gore Lake. And today we are going to discuss the East Asian rim. This one is a little bit of an anomalous issue considering the series.

But whatever in that, this is an area that the Americans are going to remain very engaged in. Part of it, it’s about managing the Chinese decline, but in part it’s because the United States has a couple of very powerful, creative, capable allies that Americans appreciate. The first one is Australia, which is arguably the staunchest ally of the United States has, and it is always for two years at least served as a bit of a a deputy for American interest in Southeast Asia, which is a region that the United States is interested in, but has never really had the time to give the amount of attention that it deserves.

And that’s where the Australians come in. They’ve got excellent relations with most of the countries in the region, most notably Singapore and Indonesia. And then of course you’ve got New Zealand. There is a sidekick. Anyway, part of the reason that the United States has given nuclear powered submarines and a free trade deal to the Australians is because they’ve been so loyal and so long in areas that are out of theater.

They participated in Vietnam and Korea, they participate in Iraq and Afghanistan. They’ve always been there because they know at the end of the day, if they don’t have a partnership with the Americans, then they are on their own and they can read a map and they realize they’re wildly outnumbered in the region. So it is a strategy that they’ve been following for decades, the strategy that has borne a lot of fruit and is a strategy that will continue to serve them well into the future.

The other country is more of a newcomer, and that’s Japan. Now, throughout the Cold War, the Japanese were a bit combination of seething and shell shocked. They had been defeated soundly in World War Two. They had been nuked twice, which was something that didn’t happen to Nazi Germany. And the postwar settlements were, if anything, harsher on the Japanese than they were on the Germans.

And so there’s always this lingering nationalist ideal in Japan that wanted to move beyond the American Alliance network of the Cold War. But between the defeats, the occupation, American military force and the Soviets and the Chinese right there, they never really had that choice. Well, over the last 15 years, politics in Japan have evolved. It’s not that the nationalism has gone now, but the Chinese have become a much more clear and present danger than they thought the Chinese could ever be.

And the Russians, with their weakness in the Ukraine war, are showing themselves to be wobbly, which means that the Japanese have become very thoughtful about what their possibilities might become, that some things may not be what they thought. Some might be harder. Some might be easier. And in that sort of mindset, when you’re dealing with a demographic that is in terminal decline, you realize you probably are not going to be able to go it alone.

So it’s best to look for partners who are going to see the world through a similar lens, and that has led them willingly back to the United States over the course of the last 15 years. The Japanese have built a pair of very large carriers, quite super carriers, but the aircraft that operate from them are the Joint Strike Fighter that is made in the United States and the Japanese getting closer and closer and closer and managed to strike a deal both with the Trump and with the Biden administration on the future of bilateral relations.

So it’s not that Japan is not capable. It’s the second most powerful navy in the world by most measures. It’s that Japan has chosen that rather than going it alone, it’s opening the door on a protracted partnership with the United States and with Australia, and that puts major American power at three points of the Pacific bracketing nicely where the Russians are and where the Chinese are.

So for the future of this region, it’s going to come down to how powers do or do not get along with the Trilateral Alliance. Some, like the Chinese, are destined to break not probably because of military confrontation, but because of their own internal issues, which means this is going to be a zone of chaos. Opportunity carpetbagging for those of you who bothered to learn Mandarin or something like that.

It’s going to be impossible to put troops on the ground and stabilize something the size of China, even if you wanted to. So it’s probably just going to be a security black hole for a good long time. And then there’s other powers like Taiwan or Korea that get along pretty well with the United States and to a lesser degree, the Japanese, but are going to have to decide just how hand-in-glove they want to work.

This is one of those things that popped up earlier this year when the Biden administration had the Japanese and the Koreans to Camp David to basically hammer out a peace deal that dates back not to World War Two, but to 1905 when the Japanese occupied and colonized the Koreans. If if if the Japanese and the Koreans can agree to get along, then we can have a mini globalization in East Asia, because Taiwan’s almost a rounding error at that point that also involves Southeast Asia.

But if the Koreans decide to go a different direction, then there’s a very big security problem because the Japanese will never be secure so long as the Koreans are a hostile power. So a lot of this remains a an act in progress. But we’re starting to see the outlines of a post Russia, post Chinese Asia already. And it speaks with an Australian in the Japanese accent.

All right. That’s it. By.

Demographics Part 8: Optimism for Southeast Asia

We’re starting the day off with a bit of optimism thanks to the demographic outlook of Southeast Asia. This region of the world is primed and ready to boom; all it needs is a bit of money and tech to get the party started.

Why am I so bullish on SE Asia? It’s one thing to have a single country with solid demographics, but throw a whole bunch together, and their strength amplifies. Myanmar, Cambodia, and Laos are child-heavy and can handle the low-skill jobs for years to come. Vietnam and Indonesia are a bit older, have fewer kids, and have the time and ability for the medium-skill jobs. Singapore and Thailand are the oldest of the bunch but have developed the technical skills to handle the high-skill jobs.

Southeast Asia is like the neighborhood we all want to live in. No animosity between neighbors (since geographical barriers prevent wars). Everyone brings something unique and valuable to the table (differentiated workforces). What more could you ask for?

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know 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. Then we give what we can.
Today, our chosen charity is a group called Medshare, which provides 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. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
And then there’s you.
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.




Hey, everybody. Peter Zeihan here. Coming to you from Ojai, California. And as promised today, I wanted to talk about demographics in Southeast Asia. A portion of the world that I think is going to do very well in the decades to come.

Now, if you remember correctly, when I did the first issue of this series, we talked about how different population structures make for different economic structures. So if you have a lot of people age 20 to 40, you tend to have a really strong workforce and a good consumption base because those are the people who are building their homes and raising kids. If you have a lot of people aged roughly 45 to 65, you tend to have a very productive worker base because these are people with decades of experience behind them. And if they don’t have a lot of kids, all the income of the society, all the taxes generated can be focused on infrastructure and on the job training making for a very, very, very skilled workforce. One of the reasons I’m so bullish on Southeast Asia is because it’s got both of these in balance.

So on the bottom you’ve got countries like Myanmar and Cambodia and Loas who are very child heavy and they can be a workforce not just now but decades into the future. So if the money is made available, if the regional demand for the services is there, you have a very large, low skilled workforce. In the middle you’ve got a lot of countries like say Vietnam particularly, but also Indonesia and to a lesser degree Malaysia, who are a little bit older, don’t have a lot of kids relative to the overall population structure, but a lot of people who are age 20 to 45. And these are countries that, as a rule, are kind of having their day right now. The more problems that the Chinese have with keeping investment, the more diversified folks are looking to make their supply chains globally, the better these countries look. Vietnam in particular, is getting in on this in a very big way with education. And about 40% of their college graduates are in STEM. You know, that’s like four times the global average. And then at the top, you’ve got a number of societies like Singapore and Thailand, which are aging pretty quickly. They had their day as a low cost wage destination a couple decades ago. And now you’ve got a lot of people who are in their forties, fifties and even early sixties. They’re aging quickly. Looks a lot more like Northeast Asia than the rest of their neighborhood. But the accrued technical skills in these populations is huge. And plus, especially in a place like Singapore and Thailand, punches well above its weight as a mid-range destination. And having these all in the same neighborhood really helps with manufacturing.

So one of the things you want to do for the more complex manufacturing products, whether it’s cell phones or electronics or computing, is not everything requires the same skill set. The person who does the injection molding is not the person who does the wiring harness, is not the person who does the chips, is not the person who does the assembly. Each of these has a different wage structure, and in that sort of environment, variety is everything. And proximity is everything. And this is the world’s most differentiated workforce, all within the same region. So you throw a little bit of Japanese or American technology in there, maybe some Chinese assembly on the back end. And this area is set to boom.

Best part yet because this region is made up of mountains and peninsula shores and islands and jungles. They’ve never had a history of going to war with one another because they can’t get to one another. So they don’t have the history of animosity that we see in, say, Europe or Northeast Asia. Add it all up. And this is the part of the world that I expect to grow the most rapidly in the 30 years to come with demography at its heart.

Alright. That’s it for now. See you next time.

Where in the World: Crater Lake, and Semiconductors

So, what keeps me up at night?

The current global semiconductor supply chain. Distinct capabilities exist in separate supply chains and manufacturing bases—lower end supply from China, higher-end chips from places like Taiwan and South Korea. And a critical middle-ground from Southeast Asian suppliers like Thailand and Malaysia.

Shortages in the supply chain—whether related to COVID-19, drought, or shifting consumption patterns—can take months to resolve. This is due as much to the actual process of silicon wafer and chip manufacturing as it is the nature of the supply chain itself. Northeast and Southeast Asian suppliers do not compete in the same arena or possess analogous skill sets. China cannot step in to produce the mid-tier chips Malaysia and China supply to global automakers (with many auto factories currently idling due to a lack of supply) and even if the Koreans and Taiwanese wanted to retool their entire factories to supply the automotive industry there is a dearth of global capacity to step in to offset the drop in high-end chip manufacturing. And this doesn’t even begin to consider the fact that regardless of where the chips are made, most are designed in the US.

The global semi-conductor industry is one of the biggest success stories, and thereby one of the most dependent, of the Global Order. If my forecast about a collapse of the global trade order is correct, it will realistically take years for countries like the US to recreate a multi-layered semiconductor manufacturing base domestically. The rest of the world will struggle to maintain any output on their own.

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Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.

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The State of the Pandemic: East Asia

You can also read the State of the Pandemic series’ take on the United StatesLatin America, the Persian Gulf, East Asia, and the BRICS

Some good news:

Melissa Taylor (ZoG’s Director of Research) has been tracking the coronavirus epidemic – particularly in East Asia, which was COVID ground zero – with her usual precision and attention to detail. She’s brought us some (mostly) good news! In much of East Asia, the numbers have moved firmly in the right direction. Australia, Malaysia, Taiwan, and New Zealand all look great. Even Asia’s more heavily populated states look impressive.
The news isn’t all sparkling, of course, but the fact remains that on a region-by-region basis, East Asia is firmly in the best position globally.

(We continue to be huge fans of the Financial Times for providing the data interface that makes this graphic possible. You can visualize your own data pulls here.)
Now for the details.
Singapore is not a normal place. Roughly five million people are crammed into a single city. It would seem to be the perfect sort of place for the virus to spread. But these are five million highly educated people who appreciate their government’s wildly competent track record for good governance. When the government outlined how to crush the coronavirus, everyone did what they were told.
The government did not blindly make its policies. The Singaporean government understands the central position Singapore holds in global finance, manufactures, and energy trade. Part of that understanding is an acknowledgment that every major power spies on Singapore incessantly. As such, the government maintains a track-and-trace program for foreigners as a matter of course. Retooling the country’s standard counterintelligence programs for coronavirus monitoring was an easy switch that generated outsized results.
For a while.
As mentioned previously, the Singaporean population is highly skilled. But not everybody’s job requires a master’s degree. The country maintains over one million migrant laborers. Sure, some are stockbrokers, but most handle the nuts and bolts of daily urban life: cleaners, drivers, construction workers, and so on. They live in cramped dorms, not corner penthouses.
Singapore’s government is very effective, but effective is not the same as perfect. Simply put, the migrants slipped the government’s collective mind. Nearly three months after Singapore thought it had beat coronavirus, the city-state is suffering the world’s worst secondary epidemic as the virus rages through the country’s support workers.
For a country that borders the pandemic’s ground zero, Vietnam has suffered shockingly little from coronavirus. The country has two things going for it:
First, Vietnam’s fractured geography provides a couple of natural viral firebreaks. The country is shaped like a barbell: Ho Chi Minh is in the far south, Hanoi is in the far north, with a very thin strip of lightly infrastructured land connecting the two. Travel between the two “bells” is thin, so containing any outbreaks within a specific part of the country would be relatively simple.
Second, the Vietnamese government does not mess around. Vietnam is not a democracy. It benefits (suffers?) from extensive monitoring of civilians, but unlike the Singaporean techno-state, Vietnam’s system is more akin to an authoritarian neighborhood watch. This system of internal monitoring literally lets state agents go door-to-door demanding answers to invasive questions. 
A bit…fascist? Definitely. But this sort of near-total political command enables the government to stop outbreaks in their tracks, enabling rapid re-openings. Vietnam’s (disturbingly) aggressive tactics stopped COVID in its tracks. Now the country is aggressively seeking gaps in the manufacturing supply chains of other, harder-hit countries for Vietnam to fill.
South Korea earned plaudits early on for their deep, early tracing and quarantine systems, which enabled the country to beat virus cases down to nearly zero without a system-wide lockdown. But the Koreans aren’t perfect.
singular early case was missed. A woman who went to church triggered a megacluster that took over a month to get under control. While South Korea has mostly reopened, individuals continue to slip through the country’s mesh of testing and tracing. Recently, a bar-hopper triggered dozens of follow-up cases, thus raising concerns of a second wave.
For a wildly wealthy first-world country packed with retirees, Japan has generally received poor reviews for its COVID response. The consensus is that Tokyo downplayed all things coronavirus in an attempt to preserve its hosting of the 2020 Summer Olympics. Only when it became clear that no one was going to show up, and the Olympics were postponed, did the government begin basic anti-COVID measures. There has been no lockdown, and businesses like karaoke bars remained open. Testing was, and remains, thin.
And yet, Japan’s caseloads never rose to mirror those of other late responders. As always, much in Japan remains a mystery, but we know that three things helped:
First, family sizes in Japan are tiny. Most parents have only one child, if that. The interfamily transmission that so characterized outbreaks in Iran and China wasn’t an issue in Japan. Second, while the country normally lives on mass transit, there are small grocery stores in almost every residential building, and everyone has lightspeed internet connections. Self-isolation in Japan is easy, and as regards quarantining, effective.
Third, the Japanese are absolutely, positively, the world’s most intense health freaks. Even before the outbreak, there was a culture of wearing face masks in Japan. All it took was a whiff that there might be a virus scare, and everyone immediately put one on. Everyone. They haven’t taken them off yet. They probably won’t until there’s a vaccine.
We include Indonesia, not because they have a documented case explosion, but because they don’t. We know cases in the capital and largest city of Jakarta have only been going up, but the city is now officially reopening without any meaningful tracing or testing efforts. Much has been (accurately) made of the United States’ insufficient testing; in per capita terms, Indonesia’s testings are less than one-fifteenth what the Americans are doing.
Add in a likely case surge due to Ramadan, and a national government response that can best be described as “in denial.” It’d be a welcome surprise if Indonesia’s infection rate is less than one-tenth of what is officially reported.
It might seem a little weird for a COVID update on East Asia to not include data on China. After all, the coronavirus pandemic began in the country’s Hubei province, in the city of Wuhan. However, we are not including too much analysis of China in this piece for three reasons.
First, Chinese data is at best unreliable, and often wholly fabricated in an attempt to make China look good. Second, the coronavirus outbreak in China is, undeniably, under control.
Yes, we can say the data is unreliable, and also say that China’s outbreak is no longer a big deal. The reason is simple. The Chinese Communist Party now equates COVID cases as being a threat to the CCP’s political power. China treats them with the same panicked fury that they treat the Falun Gong, Hong Kong protestors, or anyone with the audacity to suggest that Taiwan is a country. Reliable data reporting is not part of that fury; anti-viral efforts are. For example, when the Chinese discovered over a hundred cases in a wholesale food market in Beijing this week, they locked down most of the capital metro. Twenty-two million people live there.
So, do we trust China’s data? No, and we’re not bothering to publish it here. But, do we trust the Chinese government to act swiftly to suppress the virus? Totally.
Which brings us to the third reason we don’t have much China in this newsletter: We’re saving it up.

If you enjoy our free newsletters, the team at Zeihan on Geopolitics asks you to consider donating to Feeding America.

The economic lockdowns in the wake of COVID-19 left many without jobs and an additional tens of millions of people, including children, without reliable food. Feeding America works with food manufacturers and suppliers to provide meals for those in need and provides direct support to America’s food banks.

Food pantries are facing declining donations from grocery stores with stretched supply chains. At the same time, they are doing what they can to quickly scale their operations to meet demand. But they need donations – they need cash – to do so now.

Feeding America is a great way to help in difficult times.

The team at Zeihan on Geopolitics thanks you and hopes you continue to enjoy our work.


Flipping the Philippines

The Philippine government this week began the formal legal process of ejecting US forces from the country and ending the US-Philippine alliance. Chinese involvement in the decision isn’t so much suspected as assumed. The few pundits who can tear themselves away from the American primary process are bemoaning another American strategic retreat.

Continue reading

My Way or the Huawei

On May 15 the U.S. government put Chinese telecoms giant Huawei and nearly all its affiliates and subsidiaries on an export black list, which prohibits American firms from selling them high-tech products. Much has been made of Huawei’s position in global telecoms and the role it might play in Chinese surveillance of, well, everyone. The American decision largely ends the concern.

To this point I’ve tried to stay out of the Huawei battles for a pair of reasons. First, the people who really know what is going on when it comes to global data surveillance either do not talk publicly about it or have a vested interest in lying. In the former camp sits the United States National Security Agency, the institution responsible for monitoring global electronic communications. In the latter is the Chinese intelligence directorate, who would like to monitor global electronic communications.

Some background:

Back in the 1960s, the American government started collaborating with the U.K. government on a global monitoring system known as Echelon, a sort of semi-public codename for the series of satellites, towers, fiber optic taps, server farms and software backdoors that span the planet. Echelon soon expanded to include the Anglophone allies of Canada, Australia and New Zealand, becoming the core of what is known today as the Five Eyes intelligence alliance. Echelon’s original raison d’etre was to battle the Soviets, and in time it found new life in the Global War on Terror. According to informed scuttlebutt, if a communication is transmitted using electrons, Echelon sees it.

Or at least it used to. Telecoms have evolved radically in the past half century. Even before the recent fascination of all parties with encryption, the simple fact the United States is no longer the middleman in all telecoms traffic means Echelon is more a tool of yesterday than today, much less tomorrow. Regardless, the ability to scan, read or listen for key words remains essential to America’s tech-heavy intelligence gathering networks.

Enter the Chinese, who found themselves behind the Americans by several decades, and that before considering China lacks the alliance system to create anything of Echelon’s depth or scale. Beijing’s bid to catch up is Huawei, a massive telecoms firm which produces everything from the fiber optic cables and telecoms towers of the physical internet to the phones and computers needed to connect.

While the internet is an infamously unorganized mass of connections, the modern network has central exchange points where the tributaries of information coming from all over the world become torrential flows. Such “core” systems are what Huawei is after. Control the cores and a spy is wired into everything that passes through it.

Huawei’s corporate strategy – which is to say, the strategy of China’s intelligence services – is to grant massive discounts on the installation of a network’s less critical bits on the condition that Huawei can also install and maintain the cores.

Beyond the not-so-minor technical fact that there are people beyond China who understand how the internet works and so might object to handing over all their communications on principle, the plan has an amusing political flaw. Like nearly all of China’s tech industry, Huawei is not technologically self-sufficient. It remains heavily dependent upon tech imports from none other than the United States. Which is the second reason why I’ve never taken the Huawei talk all that seriously: The Chinese not only expect the world to pay them to monitor global communications, they expect the Americans to enable the scheme.

At first the Americans didn’t take the Huawei plan all that seriously, mostly because it was a seriously stupid plan. Then Huawei had some success using heavy subsidies to convince some countries to install their gear. That generated a diplomatic reaction in Washington. American bureaucrats started warning countries not simply of the dangers they seemed willingly oblivious to, but that any country who used Huawei in their cores could kiss any intelligence sharing with the Americans good-bye.

That was enough to shut Huawei out of New Zealand and Australia outright. (The Brits got cute and accepted Huawei gear for their system’s edges, but not their cores, a smug near-miss which undoubtedly infuriated the Chinese to no end.)

But three things have changed that have sparked stronger action out of the Americans.

First, the transition from fourth- to fifth-generation cellular technology blurs the line between core and non-core systems. Huawei penetration into any part of a cellular system now generates complications and vulnerabilities.

Second, despite the risk of communications exposure, enough countries have decided to proceed with Chinese equipment that the Americans can no longer just let it roll. In particular, China’s targeting of Five Eyes members – most notably Canada – has snapped the Americans to attention.

Third, after seventy years of expressly keeping economic and strategic issues separate in American foreign policy, a more standard intermingling is now occurring – and that puts everything Chinese in the Americans’ crosshairs.

Bilateral trade talks with China more or less collapsed last week. I can’t say I’m shocked. At the talks’ onset the Americans laid out a series of non-negotiable demands including an end to cybertheft, an end to forced tech transfer, an end to the hyper-subsidization of Chinese industry, an end to functional prohibitions on American firms’ access to the Chinese market, granting the Americans the right to impose any investigation at any time on any issue without any consultation complete with the ability to impose any desired punishment on any Chinese economic sector.

The fact the Chinese even began talks with those swords hanging over them indicates just how weak the Chinese knew their hand was. China exports over four times as many goods to the American market as vice versa and China is completely dependent upon American global security commitments for access to raw materials, energy and end markets. There is no modern China without active American involvement.

Last week it became apparent to the lead American trade negotiator – one Robert Lighthizer – that the Chinese were backing off what commitments he had previously convinced them to make. It was Lighthizer’s recommendation to Donald Trump that American tariffs on China be more than doubled May 10. He then put an even bigger set of tariffs in the pipeline to be applied within a few weeks.

The Americans’ Huawei announcement has the feel of Lighthizer’s work: he likes to throw the odd sharp elbow and knows his boss is particularly fond of bold, direct, splashy actions that cut to the heart of the issue.

That issue is pretty straightforward. The Americans may be done managing the world, but that doesn’t mean they are going to help someone else do it – especially someone who doesn’t have a ghost of a chance of pulling off such a feat without deep and active American collaboration. Better instead to put China in its place.

The Chinese, understandably, have proven less than enthusiastic about accepting that message.

So the Americans decided it is easier to simply end China’s global surveillance ambitions by killing Huawei’s international position outright. It isn’t very subtle, and if it doesn’t generate the desired Chinese cave-in in the trade talks it makes me wonder what Lighthizer will take aim at next. I’ve got lots of ideas.

I’m certain Lighthizer has more.

Of China and Oil

The economic conflict between the United States and China continues to ramp up. Earlier this week the Trump administration announced plans for tariffs on another $200 billion in Chinese exports to the United States. Barring (substantial) Chinese concessions the new tariffs will likely come into effect around the end of August. This is now the third volley in what has become a tit-for-tat trade war. I’m starting to think up snazzy names. “Pacific Pong” doesn’t have quite the right je ne sais quoi, but I’m working on it. Suggestions welcome.

The Americans’ imports from China are triple China’s imports from the United States (quadruple if you factor out services). The simple fact is the Chinese are already running out of American imports to penalize. Any effort to shift the dispute to something beyond goods trade will similarly end in colossal failure. The Americans control global trade routes, global energy, global security, and global finance — everything that makes the Chinese system possible. The Chinese simply can’t bring the fight to other fields without suffering immeasurably. (Which isn’t the same thing as me saying I’d like to be an American company operating in China right now.) Chinese holdings of American government debt don’t even give Beijing leverage as such “investments” in reality are capital flight from the Chinese system.

While Chinese state media continues to put on a brave face, the days of tone-deaf chest-beating are gone. Government censorship guidelines now regularly bar terms like “Trump tantrum” and “trade war” and in general discourage the discussing of any angle of the issue whatsoever. One of the problems with stoking nationalism is that it can be hard to turn off. With the Politburo realizing they have little ammo for this sort of fight, political consolidation at home is far more important than scoring points in a media firestorm.

But that’s not what I want to talk about today. I want to talk about one of the funniest things I’ve seen in months. On July 11 the Chinese floated the possibility of a 25% tariff on U.S. oil exports. Several media commentators immediately pounced on the trial balloon as evidence of something that would get Trump’s attention because of his stated interest in “achieving American energy dominance.” Maybe it will. The criteria for what attracts or doesn’t attract the American president’s attention continues to elude me.

But that doesn’t mean a tariff on American oil isn’t a fabulously stupid idea. It has to do with the nature of the oil market, and in particular the role of American crude within it.

First, demand for oil is inelastic. What you need, you need. If it takes ten gallons of gasoline to get your delivery truck from A to B and you only have nine gallons, you cannot make the run. You must have ten. So regardless of what the price of the gasoline is, you’re going to buy it. Applied to this situation, were the Chinese to levy the tariff they will simply have to buy oil from somewhere else, and America’s oil will (easily) fill that gap in that third market. Net effect on U.S. energy exporters: zero.

Second, American oil is different from the rest. Conventional crude percolates through rock formations over time, picking up impurities as it goes (sulfur being the most common). A big part of refining crude oil into finished product is removing those impurities. But American oil exports are not conventional. They come from shale formations. Shale isn’t as porous as most rock, so the oil never percolates. It is trapped. Shale technologies are all about cracking out these pure bits of petroleum out. Shale oil’s lack of exposure to impurities makes it the lightest, purest oil produced in the world, as well as the most valuable and easiest to refine. China likes shale oil because they can blend it with thicker, dirtier crude to make a cocktail that their refineries can use. American exporters will have zero problems finding alternative buyers, but since the United States produces more of this ultralight/ultrasweet crude than the rest of the world combined. China will find alternate supplies difficult to scrounge up.

So either China isn’t going to put this tariff on, or if it does it won’t have any meaningful impact on the American side of the equation. What the tariff trial balloon might do – what discussion of the topic is probably already doing – is pump up oil prices a touch. Markets – especially oil markets – hate anything that might even momentarily restrict oil’s availability. And this little China discussion is only one of four oil-related bits of news that oil markets are stressing about right now.

The second and third issues involve general civilizational breakdown in two major oil exporters: Libya and Venezuela. Ever since Colonel/President/Wacko Muammar Gaddafi was deposed and killed in 2011, Libya has not existed as a state. It is now a shifting series of warlord-run fiefdoms. Unfortunately for the oil markets, not only is Libya’s crude production not in the same area as the oil export facilities, oftentimes the connecting pipeline infrastructure is under a third party’s control. Libya’s larger oil export ports have switched hands twice already this month, with the expected impact upon export volumes – and global prices.

If anything, Venezuela is even worse. Government ineptitude combined with a slow slide towards one-man dictatorship cum anarchy has transformed what was once South America’s richest state to one of its poorest and condemned much of the population of this once-food exporter to famine. The government’s ability to perform basic maintenance on its oil industry is now collapsing. Venezuela’s oil output is already down to a 30-year low and will likely dip below 1.0 million bpd by year’s end… assuming the country doesn’t completely implode.

Needless to say, such civilizational breakdowns can only exert upward pressure on oil prices.

Permian Basin, Texas, US

The fourth hit to the oil markets hasn’t quite landed yet: Iran. The Trump administration is pressuring, well, everyone, to eliminate their imports of Iranian crude by November. The expectation is for a two-thirds reduction in total exports. Countries that resist American pressure will find themselves subject to secondary sanctions that would bar their access to anything that touches the U.S. banking system. Since that is in essence anything that involves nouns it is sort of a big deal. The Indians and Japanese have already signaled they’re going to play ball, and the Europeans are rapidly coming around. That just leaves China.

While the pot-stirrer in me would love to see what would happen to a trade-dependent internationally-wired oil-importing economy like China’s under full financial embargo, I’m fairly sure the Chinese will blink on this one. Financial sanctions of the type the White House is preparing would hit China at least an order of magnitude harder than the tariffs they are staring down, and the Chinese are not suicidal. And while I firmly stand by my claim that no one can really claim to know what Trump is thinking I have to admit things are starting to look more than coincidental: a last-minute cave by the Chinese on Iran just as the third round of tit-for-tat tariffs really start to bite? I see some serious negotiating leverage there, useful in many theaters.

This – all of this – is quite possibly the best-case environment for U.S. shale oil producers. Chronic export outages in multiple countries for multiple reasons, a trade war that is both widening and deepening. All this pushes oil prices up. That helps whichever oil producers can bring new output online fastest. And with today’s shale tech American shale operators can bring on new oil output in half the time the Saudis can bring on their pre-existing spare capacity.

In the first half of 2018, before all this noise erupted, U.S. shale operators were already on course for increasing total U.S. oil output by the largest volume ever – in excess of a fresh 1.5 million bpd. Courtesy of China and Trump and Venezuela and Libya and Iran, that is now the low case estimate.

The concentration of power in the global system continues to gather in the Americans’ favor. Trump is demonstrating he doesn’t need to build an alliance to fight and win a trade war with multiple countries simultaneously. Trump is showing he can wield financial tools simultaneously with trade tools to crushing effect. Trump is showing an enthusiasm for standing up to the business community, something that resonates not just with his base, but also Bernie Sanders’. And in case you missed it, last week the United States became the world’s largest oil producer courtesy of shale, granting Trump even more leverage and autonomy in international relations.

As a guy who makes it his business to integrate context and data in to everything, I find Trump’s brash, details-be-damned approach to… everything a bit annoying. But that doesn’t mean he can’t get results.

I Think They Get It Now, Part Roku: Japan

Jump to other parts of this series: IntroFranceGermanyUKItaly, and Canada.

Japan was a latecomer to the modern world.

The Home Islands are rugged territory with few chunks of flat land that can play home to the sort of agricultural infrastructure from which most cultures rise. Geography made transport between these little pockets of land treacherous and rare. Combined with a dearth of local resources much of Japanese history right up until the industrial age was flat out feudal. Local leaders would rise and fall based upon local politics and dynastic struggles. Family was everything. The odd imperial impulse towards unification did occur, but typically the emperor’s powers were of the limited sort. Most competitions had a distinctively local feel. Hell, most names had a distinctively local feel. Most Japanese commoners didn’t have last names until after 1868.

The islands’ distance from the Asian mainland combined with China and Korea’s brand of insular chaos layered on more locality; aside from pirate raids, Japanese interaction with the mainland was at most episodic. Foreign ideas, culture, technology and norms were a world away. Life was slow. While the Germans and Americans and Brits and French and others were using (early) industrial volumes of steel in railroads and stoves and weapons in the first half of the nineteenth century, pre-industrial Japan’s steel use was pretty much constrained to a handful of implements and those famous samurai swords.

But then the Americans arrived.

Admiral Matthew Perry’s flotilla of hybrid sailing-steam ships likely comprised more steel than had been produced by all Japanese in the previous decade. The world realized Japan wasn’t some mystical kingdom, but instead a hugely, hilariously, outdated backwater. The tsunami of American trade – and the new technologies that came with it – surged across Japan, wiping away and transforming the country’s entire political, social, cultural and economic system in what is arguably the most holistic transformation in modern history. It wasn’t an entirely pleasant experience, including as it did the greatest industrial buildup in history, regional civil wars, a class-based genocide, a massive imperial expansion, and a fascist rise to power,

It happened so quickly that Japanese cultural mores couldn’t possibly keep up.

The Japanese thought of their enclavic geography as granting them infinite variety, but when exposed to the kaleidoscope of the wider world they realized just how uniform Japanese culture was. The Home Islands’ isolation sharply limited contact with the wider world; the Japanese are nearly homogenized racially, not just compared to multi-ethnic America but even to rather monochromatic places like Vietnam or Korea.

The sudden exposure encouraged some significant rank-closing, further deepening Japan’s cultural monolith. And since the consolidation occurred during a time of rapid economic development and technological advancement, cultural unity became synonymous with the ideals of Japanese superiority and invincibility.

Cross that cultural tweak with Japan’s geography and East Asia got something new… and dangerous. For Japan wasn’t simply a unified nation, it was a unified island nation – and islands have navies. Industrial prowess, an industrialized navy, a culture bordering on the wrong side of haughty with a burning desire to show its neighborhood just how invincible and superior it really is… you can see where this is going.

Japan’s participation in the Second World War resulted in the imposition of a regional brutality that while not as industrialized as Germany’s Holocaust, was more pervasive through the Japanese armed forces. More casual in its application.

The combination of cultural arrogance and the reach of an industrial navy inevitably brought the Japanese into sharp conflict with the Americans, who eventually rolled the Japanese all the way back to the Home Islands. The post-WWII settlements were crushing – Japan lost absolutely everything from over a generation of imperial expansion. That made sense to the Japanese. They had lost the war so they lost territory.

But the post-WWII order the Americans imposed was downright bizarre from the Japanese point of view. Through the Bretton Woods system, the Americans offered the Japanese everything they had fought for for decades: access to global resources and global markets. In addition, the Americans offered to protect the Japanese from all threats. In exchange all the Americans asked for was that the Japanese join an alliance expressly designed to combat a country that the Japanese had crossed swords with three times in the past half century. Confusion reigned, but the Japanese know a good deal when they see it. They signed up for Bretton Woods eagerly.

The American occupation continued with the now-familiar Japanese tradition of root-and-branch overhaul. The emperor was stripped of everything except his clothes. Democracy was imposed. Bombed out cities – three of which were little more than cinders – were rebuilt from the ground up. The Americans used Japan as a launching pad for their military operations, first in Korea and later in Vietnam. By the early 1960s, Japan had recovered and was humming along nicely.

And then the changes… stopped.

Sure, the newest technologies were still layered into the Japanese system as soon as they were developed, sure booms and recessions came and went, but there were no wars. No political revolutions. No jarring cultural upheavals. No coups. No invasions – either by Japan or of Japan. No shocks – internal or external.

For the next fifty years.

After a century of shock and reinvention and revolution and war and pain, Japan simply was allowed to… be. In a way, time stopped. In a way, Japan walled itself off from the world again. In a way, the average Japanese citizen’s interactions with the world ended.

In a way Japan’s cloistered narcissism returned.

Now the Americans are backing away from it all. All at once the Japanese are discovering the global structures which enabled them to be wealthy while also being isolated are evaporating. That there isn’t a thing Japan can do to preserve the world order. That very soon they will have to choose between wealth and isolation. Considering that one involves high living standards, electricity and full bellies, I’m pretty sure I know which they’ll go for.

But East Asia isn’t as simple a place for the Japanese in 2018 as it was in 1928, because the Japanese were not the only Asian peoples the Americans brought into Bretton Woods.

Taiwan too came in early, and became nearly as technologically sophisticated as Japan. Access to global markets combined with American military protection transformed backwards, poor, wrecked Korea into an industrial powerhouse. Richard Nixon and Jimmy Carter brought mainland China into the fold, starting Beijing on the path to the colossus it would become.

With the Americans leaving, Japan finds itself in a struggle to be Asia’s first power. Unlike in 1928 when Japan was industrial and the rest of Asia undeveloped, the whole East Asian rim is overflowing with industrial might. No longer is Japan towering above the rest.

But that hardly means Japan is going to lose. All Japan’s perceived vulnerabilities are real, but in all cases those same vulnerabilities apply to all its East Asian neighbors – where they are all far more serious.

  •   All the East Asian powers face a dependency upon foreign markets, but Japan has long since offloaded its production capacity to be on the safe side of currency and political risk. Its trade exposure is less than a third relative to its economic size of any of its neighbors.
  •     All the East Asian powers have horrid demographics, but Japan mastered automation over a decade ago and has been steadily modifying its industrial base to operate in a world of constrained supply chains ever since. As a percent of GDP, Japan’s vulnerability to disruption is a shadow of everyone else’s.
  •     All the East Asians face cultural difficulties in dealing with other countries, and Japan has utterly failed to collaborate with its neighbors as equals. Yet far from weakening Japan this exclusionary attitude has forced the Japanese to find economic and technological means around immigration. For example, a refusal to admit foreign health workers has lead to the rapid rise of automation and AI in geriatric care. This not only generates positive knock-on effects throughout the Japanese economy, it keeps a large chunk of the Japanese economic system in-house and utterly immune to the ebbs and flows of the international environment.
  •     All the East Asian powers are hugely dependent upon oil imports, but Japan sits on the outside of the island chain that constrains Asian mainland access to the world. Japan also has a long-reach navy that can go almost anywhere in the world without encumbrance.
  •     All the East Asian powers are poor in any sort of electrical input fuel whether it be high-quality coal, natural gas, or uranium. Not only does Japan’s geographic position enable easy access to diversified sourcing, but Japan’s overbuilt power system enables it to fuel switch with a few days’ notice to whatever imported inputs Tokyo can scrounge up. (For those Greens out there, East Asia has pathetically low wind and solar potential too.)
Will Japan have to fight? Certainly. But it is a fight Japan is well suited for.

My concerns are twofold.

First, part of what made the Asian theaters of the Second World War so nasty was the norms of cultural and racial superiority that emerged from Japan in the pre-war decades. While democratic Japan today is a far cry from the imperial fascism of the 1930s, the Bretton Woods system has certainly enabled pieces of the old cultural milieu to re-entrench. The sort of culturally isolated Japan that exists today, combined with a technologically advanced navy, and a need to use that navy to achieve national prerogatives feels uncomfortably familiar.

Break the global system and it is devilishly easy to imagine an East Asia where the Japanese are not simply on the warpath (again), but one where the Japanese are less than gentle with countries who disagree with them. Most focus on the likelihood of Chinese aggression throughout the region. I think that’s a bad reading of East Asia’s geographic, industrial, trade, and historical characteristics – both past and present.

Second, is the issue of “what then?” I typically try to limit my forecasts to the next couple of decades. Past that range, changes in demography and politics and culture and technology tend to layer in a lot of future fog that limits data-and-geography-fueled forecasting to little more than armchair prognosticating. But if the Japanese have the deck so stacked in their favor, I believe it is useful to push a bit further forward and guess at what’s just over the horizon. What happens after the Japanese have re-established some version of a mercantilist colonial relationship with their region, an Asian Co-Prosperity Sphere, if you will?

More than any of the other major players, Japan needs to be cognizant of American goals, interests and whims. The United Kingdom is in tight and won’t break with Washington. Canada is family. Family fights, but family also makes up. The Germans and Italians swim in different ponds. The French will be the French, but there’s no real likelihood of meaningful French structural competition with North America.

But Japan is likely to emerge from the coming Disorder as the dominant regional power. Its relations with everything from Vladivostok to Yangon will be a diverse mix of neo-imperial management systems ranging from alliance to partnership to suzerainty to occupation. That sort of dynamism and variety is certain to suck in external powers. And this phase in American isolationism is just that: a phase. It will end.

Of all the soon-to-be-rising powers, it is Japan which must tread most carefully to ensure it doesn’t step on Washington’s toes. Tokyo remembers full well what miscalculation in that department leads to.

Asian Pivot Pending

By Peter Zeihan and Michael N. Nayebi-Oskoui

There are many things that geopolitics teaches us. One of the more important lessons is that personalities rarely matter. The fate of peoples and nations are largely determined by a mix of geographic features that they cannot amend, and technological trends that are damnably impersonal.

The operative word there is rarely.

There are instances where the cultural zeitgeist and the singular attributes of certain individuals intersect so elegantly that the political or cultural changes that follow emblazon themselves on history.

But we’re reaching a point within two of East Asia’s powers where it seems like the impact of personality is tipping the scales. There were two noteworthy events that took place during the past few days. The one that is getting the most attention is the ongoing National Congress of the Communist Party of China. It’s wrapped up in a story that media and policy experts love to tell: Chinese President Xi Jinping has burst onto the scene, quickly and deftly amassing authority and shaking up the Chinese Communist Party apparatus, and elevating China to global prominence. Demolishing various factions and pursuing an almost-legitimate anti-corruption plan, Xi is the very popular and surprisingly astute leader to guide China through its unavoidable economic slowdown. Part of which is true, I suppose, and part of which is just really glossy PR bullshit.

There are a few key fundamentals that are absolutely necessary to keep in mind when looking at China:

  1. China as a culture and a historical concept are ancient, but the “Chinese people” and their amalgamated histories are not the same as the “People’s Republic of China,” which is also distinct from the “Communist Party of China.” Part of the Xi myth is attempting to make those three labels synonymous in everyone’s minds. That flies in the face of millennia of Chinese history, but hey, PR has to start somewhere.
  2. The current iteration of China is predicated on many things, but chief among them are employment and a national safety net overseen by the party. In turn that employment and safety net are predicated upon Chinese access to international markets, both for resource imports and the income that comes from merchandise exports.
  3. China’s geography is atrocious. Less than one-fifth of its land is habitable. Its flood- and drought-prone north is a flat security free-for-all that has suffered nearly three millennia of incessant internal warfare. Its south is a tropical disease belt. All but one of its rivers are too moody to help with commerce. Its interior is alternatively desert, mountain, tundra, jungle – or some brutal combination thereof. A line of archipelagos parallel its coast, all but preventing military or economic interaction with the wider world.

With that in mind, it doesn’t really matter so much if Xi is an anti-corruption reformer, a savvy consolidator of power, or re-establishing a cult of personality to rival that of Mao Zedong himself (my money is on the latter for those of you keeping score). If he can’t sell his schtick to the masses, well… in a country of nearly 1.4 billion, everybody’s expendable. And so we can’t lose sight of the fact that Chinese media, international outlets – everybody – focuses on Xi’s popularity, especially among China’s urban youth. And it is this popularity (or the belief that its constant repetition confirms its veracity) that provides the political currency for Xi to act like almost every other leader in Chinese history and create a political leadership and patronage structure that entrenches his own power.

That he has certainly achieved. China’s Communist Party holds a big meeting every five years, ostensibly to cement the country’s development plans and party leadership changes. In reality the meeting serves more as a clearing house, disseminating information and decisions made well in advance. Despite all the speeches about China now being “the” world power, the real reveal was supposed to be Xi’s nomination of his successor. Tradition tells us that a Chinese premier serves for five years, nominates his successor, and China then has a five-year leadership transition period.

Xi didn’t simply nominate himself to succeed himself, he enshrined himself into the Chinese constitution so there’d be no doubt just who was in charge. The Party Congress was a Trumpian celebration of Xi. A bit much, n’est pas?

The problem Xi sees is that China’s economic success has very little to do with China… or the Communist Party… or even Xi. China as it exists today is only possible because of the global Bretton Woods economic order Washington has upheld since the end of World War II. Simply put, a land-based power with some of the longest supply chains in the world cannot exist as a manufacturing and export powerhouse unless someone with a global navy enables it. That someone has been the United States, who has guaranteed the safety and security of the goods flowing to, from, in and out of Chinese ports, and who has offered largely unfettered market access for decades. With that in place, the specifics of China’s rather horrid geography haven’t mattered. That’s enabled Beijing to employ millions and millions of people in factories to make widgets and gadgets, and employ even more to feed China’s urban factory populations and to build roads and houses, etc. etc. etc.

But the Americans are going away, and they are taking the Bretton Woods system with them. China’s current economic slowdown is nothing compared the dawning tragedy it will experience during the emerging global disorder for which Beijing is terrifyingly ill-suited. When viewed in context, I don’t see Xi’s surpassing Mao to become the most powerful leader in Chinese history as an event driven by an excess of confidence, but instead an increasingly desperate effort to completely lock down the Chinese political space before the covfefe hits the fan. China is running out of time, and Xi knows it.

So I don’t get excited or worried about China taking over the world, or even its neighborhood, as I do about Japan. While most of the world had eyes on Xi’s celebrations, Japanese voters braved a hurricane over the weekend to participate in parliamentary elections, granting incumbent Japanese Prime Minster Shinzo Abe a commanding majority. Sure, Xi Jinping is disrupting and reshaping Chinese political corruption to better suit him, but why don’t we talk about how Shinzo Abe was able to get his anti-war, Buddhist coalition partners to support his efforts to expand the role of Japan’s military forces? It is Japan, not China, that boasts the world’s second most capable navy. It is that navy that is second only to the United States in the number of aircraft carriers floated (Japan claims those carriers are only for helicopters but that is, if you’ll forgive the repeat, just some more PR bullshit).

Nor do I understand the lack of excitement over how the Japanese, (in)famously fickle when it comes to sacking Prime Ministers, have stuck with Mr. Abe through three concurrent rounds of parliamentary elections. It’s also worth noting that Abe is the first Prime Minister since the American Occupation ended to serve non-concurrent terms, even as he seems likely to coast toward becoming the longest-serving leader in modern times. The Japanese government under Abe has attempted several painful economic reform initiatives – and the fact that Abe has remained in power to oversee more than one strategy is a testament to not only his singular staying power but the trust the Japanese people have in his vision. But perhaps most important is the shift in Japanese society toward a more nationalistic, assertive position both regionally and globally.

That will make the region decidedly sparky. Unlike the Chinese system which is based on backroom-manipulation, globe-spanning economic links, suppression of minorities and carefully-sculpted public relations, Japan is a vibrant democracy with no minorities to speak of that has relocated most of its industrial base to the territories of its foreign customers and a boasts a leader who is genuinely popular despite (because of?) his increasingly militant stances.

This shift isn’t happening in a vacuum. As North Korea increases its provocations, as China is an ever more belligerent actor in its various littoral waterways in order to stoke nationalism at home, and as the United States seeks to diminish its global presence, it’s Japan that has the correct mix of geopolitical underpinnings, unique leadership personality, and national character to pounce on the opportunities ahead.

China is still the world’s second largest economy, the biggest by population, and its domestic (d)evolutions will certainly cause international ripples. But Beijing will remain constrained by its domestic concerns as its economy remains tied to a disappearing global order it cannot hope to replicate, not even – especially not even – in its own neighborhood. But while the world has eyes on China, mine (and I imagine many of those who attended the Chinese Communist Party’s Congress) will be fixed squarely on Japan.

North Korea: Part III—Why I Already Worry About South Korea

In the aftermath of North Korea’s Sept 3 nuclear test, a Donald Trump Twitterstorm delivered its greatest disdain not to North Korea, but instead South Korea. Trump accused Seoul of being overly pacifist in the face of the North’s belligerence, as well as using a wide variety of measures to steal jobs from American workers. Later, piling on his own comments, Trump indicated that he was highly likely to soon withdraw completely from the United States’ free trade pact with South Korea.

Many found themselves head-scratching. The United States seems to be sliding towards a military confrontation with North Korea, and in any war scenario, coordination between the United States and South Korea would be key. As the New York Times editorial board summed it up,

“For Mr. Trump, the crisis lays bare how his trade agenda – the bedrock of his economic populist campaign in 2016 – is increasingly at odds with the security agenda he has pursued as president. It is largely a problem of Mr. Trump’s own making. Unlike several of his predecessors, who were able to press countries on trade issues while cooperating with them on security, Mr. Trump has explicitly linked the two…”

Unpacking all this – North Korea, South Korea, Trump and the relationship between trade and security – requires a few steps back.

American foreign policy since World War II has been based on a simple premise: the United States will create a global security structure for its allies, enabling them to access resources and markets the world over without the need to protect themselves, those resources or those markets. In exchange, those allies would allow the Americans to fight the Cold War their way. In essence the Americans bribed up an alliance via the Bretton Woods system to fight the Soviets, and in doing so not only attracted the allegiance of traditional cultural allies, but also countries with which the Americans had fought long, bitter wars – up to and including the former Axis and the U.S. own former colonial master. The end result was the strongest military alliance in human history, and also history’s longest and greatest period of peace and prosperity because nearly every imperial power of the past was on the same side (with the notable and obvious exception of the Soviet Union).

To put this in the Times‘ lexicon, trade and security were linked – with the Americans sacrificing their position on the former in order to gain deference on the latter.

The Cold War ended in 1989. The Soviet Union dissolved in 1992. And at the moment of truth when then-President George HW Bush stood poised to update America’s strategic policy, he was booted out of office in a federal election. His successor – Bill Clinton – had no time for foreign policy and so let the old system ride without a foe. The next U.S. President – George W Bush – pursued a monochromatic foreign policy completely focused on the Islamic world, and he too let the Cold War trade-for-security rubric continue, just without the trade-off. Then came Barack Obama who, in essence, didn’t have a foreign policy at all. Obama would on occasion go through the motions and say the right things about trade and allies, but actions were but rarely matched with words and the whole system atrophied. After 24 years of autopilot, the world barely resembles the bipolar alignment of 1945-1989. New power centers – think China – have emerged into what feels like a more multi-polar system.

Seoul, South Korea

This is the world the Times sees: trade and security are no longer linked. The United States negotiates on trade as an independent topic, while providing security for the global commons free-of-charge.

Everyone would do well to remember three facts:

First, throughout human history, there has never been a multipolar period in which widespread wars among constantly-shifting alliances were not the norm. If a post-American, multi-polar system really is where the world is headed, the future will be a dark, poor and war-torn place as various regional powers struggling for regional supremacy utterly overturn the global trade system that makes the world’s current safety, wealth and prosperity possible. For example, if the U.S. releases the security reins, Japan and China quickly fall into cutthroat competition over Middle Eastern oil. (Fun fact: there’s a full chapter on this “Tanker War” in The Absent Superpower.)

Second, all the powers that have arisen since 1989 are utterly dependent upon the security and trade systems the Americans created to fight the Cold War, and none of them are capable of taking up that burden from the United States. The U.S. Navy is more powerful than the combined navies of the rest of the world by a factor of ten (and that without nuclear weapons), and even if multiple powers could agree to pool their forces…whose interests would they look out for? It is hard to imagine the Chinese contributing to a force that facilitates French commercial penetration into Southeast Asia or the French navy providing the security environment required for Chinese commercial penetration into Belgium. If there is no American commitment to global order, there is no global order. That pushes every trans-national organization designed around a benevolent global security environment – that’s everything from the European Union to the Chinese Communist Party – over the brink.

Third, for the Americans, trade hasn’t been about economics – it’s been about security. Trade was the bribe to get all the world’s once-imperial powers to cooperate. Not only does an American withdrawal unleash heretofore quiescent powers as varied as Japan, the United Kingdom, and Iran to attempt to reshape their neighborhoods more to their liking, it further means that the Americans never really integrated their economy into the global whole like nearly everyone else did. And since the United States is by far the leastintegrated of the significant countries into the global trade system, it would be the one to suffer the least should that system collapse.

You might not care for Donald Trump very much, but if the United States is getting out of the global management business, you’ve got to admit that a rejiggering of the relationship between trade and security makes a lot of sense. (Whether the specifics of Trump’s preferred rejiggering make sense is, of course, an entirely different topic.)

And what about the raft of countries that did not even exist before 1945 because the various regional powers could easily subjugate them? What about places that in the intervening decades used this historic opportunity to transform themselves from backwaters to advanced economies? What happens to them when the global environment changes?

What happens to South Korea?

South Korea is a country roughly the size of Indiana with a mid-sized population and a gigantic role in global trade, currently ranking in the top ten in terms of total value of trade. Its markets span the world, with the majority not within a thousand miles. It sucks down vast volumes of raw materials – again, almost none of which are from East Asia – including over 2 million barrels of crude a day, almost all of which is sourced from the Persian Gulf. American economic sponsorship has transformed South Korea from being the world’s fifth-poorest country in 1953 to one of the richest. Remove the Americans from the world writ large, and South Korea would experience an economic crash at least twice as bad as the Great Depression.

Then there is South Korea’s military problem. The United States is South Korea’s security policy. U.S. troops not only face off against North Koreans opposite the demilitarized zone, American rapid reaction forces are stationed in Seoul, elsewhere in South Korea, Japan and throughout the Pacific to respond to any military situation the North might trigger. Remove the Americans, and the South Koreans lose air superiority, naval strike capability, ballistic missile reach, cruise missiles, missile defense and all those tough, zippy tanks. In a North-South war I firmly believe the South would emerge victorious – invasion routes through the DMZ are remarkably constrained and the South’s industrial plant and population are much larger than the North’s – but the damage to the south would be immense: North Korea has dug thousands of artillery emplacements into the hills on their side of the DMZ, most of which could target Seoul with withering fire. It isn’t something that anyone is looking forward to.

Finally, there is the overall American strategic angle:

Part and parcel of the Americans maintaining the Bretton Woods system is making the world safe and keeping the American market open for everyone. In the case of South Korea, that has come at immense cost.

As a mid-sized economy, South Korea could only develop with the direct physical and economic sponsorship of the United States. Resource-poor South Korea could have never obtained the raw materials and energy it needs without Bretton Woods. It would have never been independent without the U.S. military’s involvement in the Korean War and the decades since. It could have never grown without the American position in the Persian Gulf to ensure energy flows. It could have never built its infrastructure and industrial plant without American capital. It could have never exported its way to affluence without the American market. And there is meat to Trump’s trade accusations against South Korea: South Korea regularly uses everything from corporate welfare to state-sponsored intellectual property theft to advance corporate Korea’s interests.

The mismatch in the American mind between South Korea’s (lack of) commitment to American actions against North Korea, and the ongoing outlay of American blood and treasure for South Korea’s benefit has been an irritant in relations between Washington and Seoul since the Carter administration. The only thing that’s new about the recent criticism from the White House is that it is public. If the Americans really do back away from maintaining the global system, South Korea – as a country that cannot possibly field a navy capable of securing the markets and resources it needs – faces cataclysmic decline.

Yet while the South Koreans cannot do much about their economic exposure, they can do quite a bit about their military position. The land of Samsung, LG and Hyundai is one of the world’s most technologically advanced economies. Remove the Americans from the equation and the South will arm itself very rapidly. But tanks and planes and missiles all take time.

For a first-world country like South Korea with a lively civilian atomic power program, nukes are much easier. Delivering a ruggedized, miniaturized, thermonuclear weapon halfway around the world is hard stuff. But that’s not what South Korea would need to do. They’d just need a basic device they can lob a couple hundred kilometers. The South Koreans could probably build an explosive nuclear device in a matter of days, and mate it to a bare-bones delivery system shortly thereafter. The North Korean leadership – used to needling a Washington who views Pyongyang as a mere irritant rather than a terrified, angry sibling who knows just where to kick for the biggest effect – probably doesn’t not yet realize just how complicated their lives are about to become.

And keep in mind that North Korea is only South Korea’s danger-of-the-month. Before World War II, what is today’s South Korea tended to alternate between being an unwilling colony of Japan or China. Under most scenarios South Korea may be the runt of the neighborhood, but it will be a runt with a desperate population, a functional nuclear program and a couple million engineering doctorates used to making the impossible a functional reality. Poor, friendless, nuclear-armed, devilishly creative and testy – that is South Korea’s future.

The South Koreans won’t be alone.

Every country that was once either an imperial power or an imperial province is going to have to beef up its military simply to look after its own interests, and South Korea is hardly the only smallish country that lives in a dangerous neighborhood. A partial list of countries about to face drastically different security environments and starkly poorer economic futures while also boasting sufficient technical (and/or financial) skills to acquire a nuke include Sweden, Finland, Poland, Ukraine, Uzbekistan, Kazakhstan, Japan, Taiwan, Saudi Arabia and Turkey. All of which have pressing security concerns now, much less after the global security architecture collapses. For those of you into international relations, you may recall that some of the personalities that have topped some of those countries make Donald Trump seem calm, prudent and patient in comparison.

Each of these countries – indeed, nearly every country likely to go nuclear in the next couple of decades – sees a very specific security threat very close to home, and in no case is that threat the United States. One of the few topics on which I agree with today’s Twitterati is that a nuclear exchange is very likely a part of the not-so-distant future. But that doesn’t mean it’ll be part of America’s.