Taking Naval Options Away from China

A Chinese Naval chip in harbor

There were some recent tests in the Philippines involving the Japanese Type-88 anti-ship missile system and the U.S. Typhon launcher. These truck-mounted systems can move throughout the islands, rather than relying on fixed bases.

Deploying these systems across the first island chain would limit China’s naval access to the wider Pacific. We’re also seeing Japan step into a new era of defense policy, reflected by a broader regional effort to contain Chinese naval power.

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Transcript

Hey all. Peter Zeihan here, coming to you from Queta in Umbria in Italy today. We’re talking about a couple of events that happened in the Asian rim in the Philippines specifically last week. We had two test fires of weapon systems. First, the Japanese launch something called a type 88 anti-ship missile. And the United States launched something from what’s called a typhoon. 

Excuse me, typhoon launcher, which is basically a tomahawk, those long range cruise missiles the US is famous or infamous for, based on whether you’re target or not. Both of them launched from the Philippines. Both of these are truck mounted systems. The Chinese threw a bit of a shit fit, but there’s really not a lot they can do about them. 

The issue is two things. Number one, the first island chain, which is the line of islands including Japan, the Philippines, Taiwan, Malaysia and Indonesia, they’re all at least nominal US allies. But more to the point, they block the Chinese from accessing the wider world unless these nations allow it. What are the things that has held up during the Cold War? 

The post-Cold War era is that the United States has not reinforced the first island chain, because during the Cold War, China was an ally against the Soviet Union. And it’s only in the last couple of decades that that has really changed in the last few years, where they’ve become outright hostile, which means that we are now in the early stages of fortifying the island chain, not just the United States, but the countries in question. 

Because if you can install weapons systems that can hit ships, then the Chinese are permanently locked into the lake that is the west side of the the island chain. And now that is happening. Second, like I say, we have three things. Second, the weapon systems involved are truck launched. So you don’t even need a fixed installation. The Typhon Tomahawk launcher, you know, has the range of a normal tomahawk, which can be pushing 1500 miles. 

And the type 88 is shorter. It’s actually an older system that only has a rate of about 100 miles. But they have newer systems that they haven’t just put into place in the area right now. But you take the Philippines, which is one of the most erratic, probably the best word countries in the region with the lowest military capability. 

You have a bunch of trucks running around, some driven by the Japanese, some driven by US Marines, and all of a sudden everything within several hundred miles of the archipelago is completely no go for Chinese vessels. And that’s before you consider more capable states such as, say, Taiwan. So these two weapon systems are basically enough to completely castrate the entire Chinese military position. 

So of course the Chinese are kind of losing their minds. Third thing, this is the first time that Japan has tested an offensive weapon system outside of home islands since World War two. 

Japanese were forced by the United States in the aftermath of the war to have permanent neutrality, and that is now rapidly eroding away. And if you take a country that has the second most capable navy in the planet, you allow them to start stationing military assets outside of their country. And it doesn’t matter, really, what the relationship with the United States happens to be. The Chinese aren’t going anywhere. So we’ve now had a very, very clear example of what can happen with these new systems or even old systems. 

Something to keep in mind. There are a number of countries in the world that, operating all by themselves, that have the ability to completely destroy the Chinese economy because they can interfere with any sort of corporate shipping. China is the most dependent country in the world on globalization because they import a lot of their food, they import the inputs they need to grow their own food. 

They import the raw materials they need to make their manufactured goods, and then they have to export the manufactured goods to pay for it all. You interrupt the sea lanes and it all falls apart. So Japan and the United States obviously have the direct naval power to do that whenever they want to. Singapore, Malaysia, Indonesia do, because they control the straits that allow the Chinese access Middle Eastern crude and European end markets. 

The Australians have weapon systems that can reach that entire zone as well. And now the freaking Philippines has a bunch of dudes running around on trucks that are getting weapons systems so that they can do it to the degree to which the Chinese are in a box here is immense. So it really doesn’t matter from my point of view, what happens with demographics or relations with the United States or globalization in general? 

Every time you look at this from a fresh angle, the Chinese are screwed and the state media really realizes that, which is why they’re having such an outrage rejection of what’s going on right now. And the Japanese side, this is barely even talked about. They’re just kind of sneaking in the background. Anyway, that’s it for me for today. Until next time.

Is Now a Good Time for China to Invade Taiwan?

Taiwan flag is shown in an open matchbox, which is filled with matches and lies on a large flag | Licensed by Envato Elements

With the U.S. distracted (and depleted) by the Iran War, should China seize this opportunity to invade Taiwan?

While it appears the stars are aligning for China to make its move on Taiwan, there’s one big issue: energy. Sure, the U.S. military is stretched thin, munitions stocks are running low, and power projection in Asia is weakened, but China still needs the oil to make it all happen. Since China imports most of its oil, primarily from the Gulf, the U.S. could cut off energy imports at any time.

While China may have a short-term military advantage, the strategic vulnerability and risk of losing imported energy just isn’t worth it.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Colorado, where the snow is back. Today we’re taking a question from the Patreon crowd specifically. Do I think now would be a great time for China to attack Taiwan? What would the United States distracted in Iran? On the surface, it sounds like it would be a great time, doesn’t it? The United States is basically completely all in in the Iran war and is not doing well. 

The strait has been closed for weeks, and we’re now starting to see these cavitation and cumulative failures in global energy markets, which as we get into June and especially July, are just going to be catastrophic for any number of countries. And at some level, the United States is going to have to address that without solving the military question in the Persian Gulf. 

In addition, the United States, for safety reasons, chose to fight this war not in the Persian Gulf. most of the sea craft that were involved were either over in the Red sea or deep in the Arabian, firing things that are on from beyond any theoretical retaliation. And in doing so, the United States used up half roughly of its deployable long range munitions. 

It’s going to take 5 to 10 years reset those stocks, even assuming we don’t launch any attacks during the entire time. So the United States is really out of the game when it comes to the type of long range strike capability that would be necessary to deal with China in a way that wouldn’t have horrendous casualties in a lot of ship failures. 

So on the surface, seems like, yeah, now’s the time. But the United States has the greatest concentration of naval forces. It has had in Middle Eastern region right now, just off the Persian Gulf, and with a few ships now going in and out as part of convoy efforts, which aren’t working very well, but that’s a different topic. 

In addition, the United States has kind of riled up and has more ships coming to and from the region. And guess where China gets most of its crude oil? China imports about 80% of the crude that it uses, and about 75% of that comes from the Persian Gulf. And now the US Navy is right there. So if we got into a scenario where the Chinese decided to make a move on Taiwan, maybe from a tactical local military point of view, the Chinese would find it a lot easier to do. 

The US is out of position, and a lot of the preferred weapons that we have designed specifically for that scenario just aren’t available in the numbers they would need to be, then the United States would shut off energy flows to China, and within a year, China would fall into a post-apocalyptic wasteland, complete with famine that kills half of their population. So on the surface, short term, yeah. Now’s a good time. But none of this has changed anything about China’s overall vulnerabilities. And actually, the United States is standing on the energy flow right now in a way that would guarantee the end of the People’s Republic, should there be a war. 

The only scenario where it might work is if the United States decides, you know what, we didn’t really need Taiwan anyway and decides to not get involved at all. That would be strategically idiotic for the United States, but it wouldn’t be the first time this year that we’ve done something like that, so I can’t rule it out.

China Tries to Build Sand Bases, Again

A desert full of sand

China is out building sand castles again in the South China Sea, and I bet you can guess how it’s going to end.

They’re trying to do something that has already failed. These new sand-based structures will suffer from the same structural problems as last time, so runways will crack and infrastructure will become unstable.

The Chinese are surely assertive and persistent, but larger sand islands just mean a larger failure. Chalk this one up as a costly mistake rather than a serious military threat.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. some of you have written into the Patreon page asking about China’s new base building thing in the South China Sea. For those of you who haven’t been following, South China Sea is a disputed waterway that is east of Vietnam, west of the Philippines, and south of China. 

Lots of different countries claim it. China has a particularly insane claim where they claim all of it, even though there’s no historical geographic basis for that. But, you know, bygones. Anyway, in bits and pieces over the last 30 odd years, the Chinese have been building artificial islands in this zone and stationing military equipment On them. 

This stopped several years ago. I think it’s been seven years since the last one. And now, as of this week, they’re starting on a newer, larger island in the paracels. So should we care? Short version is. Yes, but usually out of entertainment on this topic. So a few things to keep in mind. South China Sea is not particularly deep to sandy bottom. 

And so what the Chinese do is they bring dredge ships in and pump the sand, and the core will break it up and then pump it into a pile. And that pile becomes an artificial island, and they build infrastructure on it. And I don’t know if any of you ever played with sand as a kid, but this stuff isn’t all that stable. 

And so what happened within 48 months? Most cases within 12 is all of these structures that they built started to settle. And so after a couple of years, after five years, for sure, all the runways they built were useless. Planes couldn’t land on them. And the reinforced hangars they built just started to crack open. And so about seven years ago, they stopped. 

So what’s changed? Well, seven years ago is where Chairman Ji got rid of his last real advisors. And so the advisors who were willing to tell him that. Hey, boss, this is a really stupid plan that is wasting a lot of money. And anyone who knows anything about military tech is laughing at us and hoping we do more of it, so maybe we shouldn’t. 

And they stopped. But seven years ago, that last person who was willing to speak truth to Ji was let go. And in the last seven years, she has been imbibing nothing but his own rancid propaganda. Does this sound like anyone you know? Anyway, so we’re back at it again. And the Chinese seem to think that it. Well, if a small island made out of sand, it was going to sink and crack and be useless. 

I bet a big one will work. And yes, it will work differently. It’ll sink bigger, it’ll crack bigger. It’ll be even a bigger disaster. And I really hope that they make some mid-term military plans based on this, because it’ll be a delightful disaster when the rubber hits the road in any meaningful way. So, am I worried? No, but I have bought some more popcorn.

Panama Boots China from the Canal

Photo of a ship in the panama canal

Panama has taken control of the port facilities previously run by a Chinese company after the courts ruled the original contracts were secured through bribes. This move reaffirms U.S.–Panama relations, as a U.S. ally is now operating the ports.

While the ports weren’t a direct military threat, they are strategically significant. So, removing China from the equation makes Chinese activity in the region that much more difficult, especially as the U.S. Navy begins to step away from its role as global protector of the sea lanes.

This move is a great example of using legal pressure to reshape outcomes and affirm U.S. soft power. While I’m not sure this administration can replicate this success elsewhere, let’s see how well the U.S. can sustain and expand power across Latin America.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado, today is the 24th of February. And the news is that the government of Panama has just formally taken control of the series of ports that used to be run and owned by the Chinese. This is something that has been an irritant in US Panamanian relations for a few years. Basically. The Chinese subsidize their shipping system and then go into places to buy up infrastructure. 

There are a lot of people in America who feel this is a security risk. It really isn’t. These facilities didn’t have the ability to hold military assets of any meaningful size, but that doesn’t mean that they’re not strategic anyway, because the Panama Canal is the primary connection between the Pacific and the Atlantic, and unless you’re in a really big ship, that’s just how you’re going to get from A to B, and for cargo that is destined from the East Asian Rim to the U.S. East Coast, pretty much all users Panama. 

Anyway, the Trump administration threw a bit of a fit, shortly after it came into office, started legal proceedings within Panama. Last month, the Panamanian courts basically ruled that the Chinese bribed their way into getting the contract, which is absolutely true. And so therefore, it was void. Today was the day that the Panamanian government took formal control of the facilities from the Chinese. 

The Chinese a bitch and moan and bitch and moan. But at the end of the day, under legal consequences, they were shepherded out of the building and it is now under the operational control temporarily of a company called Maersk, which is based in Denmark, which is a country that, despite all of the problems between the United States and Denmark over the Greenland issue, remains an ally. 

Fun, fun, fun. 

Anyway, the question is, what’s next? China’s entire position in the Western Hemisphere is based on one very stupid assumption that the United States will actively keep the seas safe for Chinese shipping and allow the Chinese to establish whatever economic footprint they want in the Western Hemisphere. This is dum dum dum dum dum, but it has always been the basis of all Chinese decision making. 

The idea that we don’t have a global navy, we just have a lot of little ships that are close. The Americans have a global navy, so it’s up to the Americans and their global navy to allow us to penetrate into the wider world. It’s always a stretch, and this is a great example of showing how it all falls apart with nothing more than a little bit of legal action. 

The question now is, what is the United States going to do with this? It’s not that Panama isn’t important on its own, but it’s only one piece of a broader environment in the overall region. We’ve seen a military side of the strategy now with Venezuela. We’re seeing basically a functional boycott in places like Cuba. But really, if you want to talk about American power projection in the Western Hemisphere, the Panama example is far more important because it’s one thing to knock off a government you don’t care about, it’s another to get a government to do it for you to reshape its policies in your direction simply because you asked. 

Soft power is not dead, apparently. Not even in the Trump administration. But the presence of Maersk tells you that it’s always easier to do it if you’re not a dick about it. So future topics are absolutely going to be Mexico centric, because that’s where the real money is in the American economic relationship in the hemisphere. But we’re probably also going to see things in Ecuador, Peru, Argentina and Brazil, all of which have, for various reasons, butted up to the Chinese in order to get the cash. 

Whereas the United States is the strategic guarantor of everything that matters in the region. We’re not there yet. The big problem that we’re facing is that when the Trump administration came in, it gutted the National Security Agency or, excuse me, the National Security Council. It gutted the State Department. And it winnowed down a lot of things in the Defense Department as well. 

And then the Commerce Department was not simply winnowed down. It was then given the task of enforcing the most complicated tariff regime in human history. We’ve now had over 6000 tariff changes in the last year. And a lot of this is going to be based on diplomacy and economic activity. And there aren’t a lot of personnel in the United States to craft, to advise, and then ultimately to carry out the policy. 

So strong start on Panama. The question is, how deep can this go and how much can it be replicated? As for the Chinese, their options are kind of limited here. The screenplay screenplay screamed, but at the end of the day, it was a domestic court ruling. And if the Chinese pressure a Latin American country to go against its own courts because it might be pro-American or anti-Chinese, you know, that doesn’t exactly resonate in Brasilia and Buenos Aires and the rest, it doesn’t mean that the U.S. policy couldn’t use a lot of work and a bit of a facelift when it came to diplomacy. 

But hey, when you’ve got the tools, you’ve got the tools.

China’s Alleged Nuclear Test

nuclear bomb with a mushroom in the desert

The Trump administration has accused China of conducting a small nuclear test in 2020. The claim is that a seismic event was detected in Western China around that time. A lot is going on here, so let’s unpack it.

A nuclear blast creating that small of a seismic reading would have to be from a small weapon in a massive underground containment facility. However, developing a weapon that small and testing it doesn’t add up. So, could there be a political rationale for raising this accusation now?

One theory is that the Trump administration wanted justification for restarting U.S. nuclear testing (which has no military support) to garner leverage in negotiations. The Cold War showed us this is a fairly strange path to go down, but we’ll just have to wait and see what comes of this.

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Transcript

Hey all. Peter Zeihan here coming  to you from Colorado. Super windy day today. So we’re doing this one inside. Well that hair is out of control, isn’t it? Anyway, today we’re talking about the US government’s, the Trump administration’s accusation against China that the Chinese did a unofficial and banned, nuclear test back in 2020. They’re saying that somewhere out in western China, which is the, Chinese testing grounds, that there is a subterranean explosion five, six years ago, which the Chinese blew up a bomb that is in contravention of pretty much every nuclear treaty that has left. 

And there aren’t a lot of those left. This one’s quizzical. So we’re going to look at the technical aspects of that more than say yay or nay. 

There is a worldwide detection system for seismic activity primarily designed to detect earthquakes and help forecast where the aftershocks are going to go to help with things like disaster recovery. 

Because of this, all of these sensors have been basically double tasked to also look for underground nuclear explosions because they send out something somewhat similar. And the US government is saying that something in the range of a 2.75 on the Richter scale was registered, 2.7 times is a really, really, really low. That’s like fracking levels of earthquakes, something that is largely undetectable to humans who are standing directly above it. 

And if this was indeed a nuclear explosion, it would be something in the tens of, tons not even reaching a kiloton. Even if that was true and it was a nuke, the only way that you would have been able to contain it without, you know, some sort of activity is to have an underground cavity that is probably at least 100ft on a side and at least, six, seven, 800ft deep. 

The, the physical stress on any sort of construction at that depth is immense. And it’s not clear that that is within the Chinese technical capacity. And even if it was, it’s unclear what a bomb of that size would achieve for the Chinese. Most modern bombs are in the tens to hundreds of kilotons or more likely in the megaton range. 

If you’re talking city flatness and bombs of that size are actually below the range of most conventional explosives. And when you consider that conventional explosives are an order of magnitude easier to manufacture and store, not much in use because you have to worry about fallout. It’s difficult to see why there might be a need for a bomb of that size that is so tiny. 

A nuclear bomb of that size, about the only thing that might, might, might, might, might make sense is if you were to use it as a kind of a bunker buster, because the shockwave that comes off of a nuke is significantly different from the shockwave that comes off of a conventional penetrator weapon, and it might do more damage to things that are subterranean and hardened. 

But the only things that are subterranean and hardened at scale are, ironically, the Chinese nuclear system. And it’s difficult to see the Chinese researching the development of a weapon that they would then use on themselves. Anyway, lots of questions. There is not a single arms control expert on the planet who thinks that this was an actual nuclear explosion. 

And these are a very, moralistic, idealistic and loud crowd. And they’ve been angry at the last several American administrations for basically letting all the nuclear control treaties of the Cold War, post-Cold War era lapse to the point that, the last big one just lapsed last month. So the question is, what is going on here? If if if the Chinese are testing in violation of norms and treaties, then obviously that’s a big deal for any number of reasons. 

But this was from 5 or 6 years ago, so it’s difficult to see a immediate implication of it. Second, there is a theoretical possibility that you would do something like this on a trigger mechanism rather than the general nuke, just to see if your plutonium still works. But since it’s so mechanically simple, and relatively inexpensive to spin down the plutonium and separated in a centrifuge, it’s difficult to say how that would make sense. 

The Chinese are in the business of expanding their arsenal, not maintaining a set number of pieces like the United States. So again, it doesn’t make much sense. The only other theory that is out there that if I heard, is that the US administration under Donald Trump, wants to restart testing of nuclear weapons. This is something that has no support within the US military community, because it’s designed to fight a conventional fight. 

We don’t maintain an arsenal of tactical nuclear weapons anymore. Really haven’t since the Cold War. We only have the strategic city flatness, and if those are used, it’s not really a military question. It’s a purely political question about whether you want to risk nuclear Armageddon or not. It’s primarily a deterrent force because the US conventional capabilities are so far and above. 

What any potential threat could be. And if it’s a paramilitary threat, like we say we encountered in the global war on terror, you’re not going to solve that with nukes. So the leading theory is that Donald Trump personally wants to be able to blow up some nukes as examples to push negotiations forward. Now, Trump has not said that personally. 

This is something that has leaked out through the administration. I don’t know if I should take it serious or not. But the idea of setting off nukes as a negotiating point doesn’t strike me as a particularly effective negotiating strategy. Unless, of course, the people on the other side are doing that already. And before you discount of that, keep in mind that that was part of the logic during the Cold War is that one side would innovate a new nuclear weapon, demonstrate it, and then the other side would go set off a test immediately to prove that their nukes still worked, and then develop their own weapon. 

And the cycle would repeat until we got to Gorbachev and everyone realized that, hey, maybe this isn’t the best way to carry out negotiations. So no firm conclusions here. What? The only thing that is clear is the administration really is pushing this line is not shared any information with the wider world that would suggest that was actually a nuclear test that actually happened. 

Obviously, there are classified intelligence gathering techniques that are not being shared here. But again, the Trump administration has been pretty liberal with sharing those bits of information whenever it serves a political purpose. So a lot of weird little mysteries here. And the only explanation makes any sense is this is coming directly from the white House for reasons that until they are revealed, remain unseen.

The Real Winners After a Chinese Collapse

A man holding a Chinese Yuan in the middle of Tinannamen Square

First order of business: No, this isn’t financial advice. Second order of business: taking a loan out in Yuan to profit from a Chinese collapse is a very bad idea.

Practically all yuan is locked inside mainland China, so you probably couldn’t get it out anyway. If you managed to, you would have to convert it before the collapse. The smarter move would be investing in the physical infrastructure and industrial capacity that will fill China’s shoes.

In all likelihood, a Chinese collapse will be more Venezuela-esque than Soviet…so anyone with yuan claims would be SOL.

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Transcript

Hey, everybody. Peter Zeihan here, coming from Colorado. Taking a question from the Patreon page specifically, and this sounds a lot like seeking financial advice, so I’m not giving it in that way. But if the Chinese system collapses, wouldn’t it be a great idea to take out a big loan in yuan and then convert it to dollars or some other currency? 

I wouldn’t recommend that. A couple things to keep in mind. Number one, over 99% of the yuan is locked within mainland China, and most of what is traded abroad is done through currency markets in Hong Kong specifically. So if you take out a yuan loan, you’re probably taking out the yuan loan in China, and the money cannot be transferred out. 

The Chinese do it this way to maintain full control over the Chinese financial system, which they see as a political tool more than anything else. 

So you wouldn’t be able to get the money out most likely in the first place. But, you know, if you could, then what? Well, you would definitely need to convert it out of yuan before the collapse. 

One of the things that we have learned over the last 40 years from a number of countries that have collapsed is when their system breaks, their currency becomes not just soft, but nearly worthless. So in the post-Soviet system, for example, there were a fair amount of rubles out there because the, Russians, Soviets sold a lot of hydrocarbons and other materials to the wider world, some of that manifested as ruble circulating in the international system. 

But it basically became worthless the next day. So you need to look at maybe not the Soviet collapse as a guide, but maybe the Venezuelan collapse. Venezuela used to be one of the richest countries in the Western Hemisphere, before Hugo Chavez took it over in the late 1990s. That was driven into the ground by the current bus driver, Nicolas Maduro. When you have a petroleum economy, you generate a lot of hard capital in hard currencies that are not your own. You can use that currency either to bring home and subsidize things to achieve whatever it is you want. You know, more roads, better education, happier people by just handing out cash. 

In the case of Venezuela, AK 47 is for everybody. Or you can take some of that money that is already outside of your country and invest it outside of your country in longer term assets, whether they be financial or real estate or some sort of productive capacity. So, for example, Venezuela used a lot of their money to improve their educational system. 

Preach those again. And they also built up their own oil industry at home. So they became, at the time, one of the most sophisticated energy companies in the world. And they invested in hardware in the United States that would further entrench their relationship with America, specifically buying or building refineries that were designed to process their crude oil. Well, as Chavez came in and started mismanaging everything, and eventually we had fiscal and eventually nutritional collapse in Venezuela, these assets all of a sudden were there. 

And Venezuela lacked the financial capacity to service them and operate them. So eventually they kind of fell into a degree of receivership that was eventually brokered by the US government. And they either got spun off into independent firms or bought by third parties. I think some version of that is what the Chinese collapse would look like. Now. China is a lot bigger than Venezuela. 

They have $10 trillion of investment in the wider world, about one third of which are foreign direct investment. So hard assets like a, say, a refinery or a farm, and so when these things go, you basically have the owning entity and the Chinese Communist Party and all their affiliated companies back in Beijing, cease to exist in some form or be denied functional ownership by the governments where the assets were held. 

And at that point, typically what happens is the government nationalize it, and then auctions it off or sells it off in some way to their own domestic entities. Which means if you have a yuan loan, you would still get nothing, because your deal was with Beijing and Beijing is now gone. So if you’re looking to profit from the disintegration of the Chinese system, I know this is going to sound really boring, but it’s like just invest in the physical infrastructure and the industrial plant that will have to replace what the Chinese are doing now. 

And to be perfectly blunt, doing that earlier rather than later is a lot cheaper because then you can have it up and running when the Chinese break, and then you can really rake in the cash. But it is a long term play and it is not a financial one.

Canada’s China Option

Flags of Canada and China

Canada’s prime minister, Mark Carney, recently visited Beijing. This trip sparked rumors that Canada was ditching the US and buddying up with China instead. Let’s pump the brakes a bit.

On paper, all that came from this meeting was China lifting punitive tariffs on Canadian canola and Canada easing restrictions on Chinese EVs. Canada knows that it can’t replace the US with a distant partner like China, but it could be stacking chips for the upcoming NAFTA renegotiations.

With Trump signaling indifference to NAFTA’s future and possibly favoring bilateral deals instead, it’s smart for the Canadians to have some bargaining chips when the time comes. Especially with how messy these negotiations might be.

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Transcript

Hey all. Peter Zeihan here. Coming to you from Colorado. Today we’re talking about our northern neighbors, the Canadians. Prime Minister Kearney recently completed a trip to Beijing. And in the aftermath of the Trump administration, going off the rails a little bit when it comes to trade in the alliance and threatened to invade Greenland, which is a territory of an allied, nation. 

A lot of the talk out there is about Canada finding alternatives, and a lot of people are talking about Kearney’s trip to China. In that light, and they’re not completely off base. But we need to keep a sense of perspective here. While there were lots and lots and lots of documents and memorandums, signed, on everything from agriculture and manufacturing detect IP. 

Really, there are only two takeaways from the entire trip. The first one is that Beijing will stop charging exorbitant, punishing tariffs on Canadian canola exports. Canada is by far the world’s largest exporter of that sort of thing. China has always been the single largest consumer. And so in the past, when Canada has done things like help out the Americans with sanctions regimes or, say, arrest somebody who’s violating Iran sanctions, the Canadians have been punished by Beijing as an arm of the United States. 

So at least that one piece now is undone. Second, if you remember, back during the Biden administration, the entire world put massive tariffs on Chinese electric vehicles because the Chinese were subsidizing their production and then dumping up on the market with the intent of bankrupting everybody else’s, production. That has now been scaled back. The Canadians will allow, instead of having 100% tariff on all Chinese vehicles, will allow about 50,000 in, this coming year, at a much lower tariff rate, something like 6%, and then ramping that over five years to 70,000. 

Not a huge opening, but for the Chinese who have basically have oversupply across the market, getting every little bit out helps and that’s it. And you know, I hate to break it to you, if you’re looking for me to make a mountain out of a molehill here, but the future of Canadian canola and Chinese EVs, when they’re already banned in most countries isn’t what an alliance or an economic relationship is going to turn upon. 

But there is an angle of to this that is, of course, Trump, because we’ve now had a year of all Trump all the time. And it’s really pretty straight forward, this calendar year 2026, the Americans, the Mexicans and the Canadians renegotiate the NAFTA two treaty. If you remember, NAFTA started back in the late 80s, was ratified and implemented in the 90s under Clinton and then was renegotiated under Trump, won. 

Now it’s time for the five year review where everything’s up in the air again and nations are starting to lay out their opening positions. Overall, the NAFTA accords of all variations have been very, very good for the United States and most of the growth we’ve seen in manufacturing over the course of the last 30 years has been because of NAFTA. 

And it integrates Canada, Mexico and the United States into a single manufacturing space, especially for automotive. In fact, you would really not be able to make any vehicles in the United States right now without that integration. Basically, think of Canada as a partner to Michigan and Auto Alley, where parts are going back and forth across the border all the time. 

Anyway, the Trump administration. Let me rephrase that. Donald Trump personally has said that he doesn’t care about the future of NAFTA, although the Canadians, of course, want it. He might just want a bilateral deal with Mexico or a separate bilateral deal with Canada. That is a potential form that this could all take. But the bottom line is that countries are starting to get their chips in order for the talks. 

And you should look at Carney’s trip to China in that light. It’s not that Canada has really any other options for a big trading partner like the United States. There isn’t one all provinces, but two in Canada trade more with the United States than they do with one another. 

And the two exceptions. One of them is Prince Edwards Island, which is basically a retirement community that lives on government handouts from Ottawa and the other one is British Columbia, where its primary trade partner isn’t the rest of Canada. It’s the East Asian rim, and they serve as the import point for everything that flows into the rest of the country. 

So there isn’t an option here for Canada to go anywhere else. It’s the tyranny of geography writ large. But the same is true for the United States. Right now, the United States gets access to the workforce in Canada and the infrastructure in Canada without having to pay for any of it, which is about as good of a deal and a trade deal as you can get. 

I mean, it’s pretty awesome. They pay for all that weird socialism they have up there. We get all the manufacturing benefits. It’s great. But that doesn’t mean that is how the American administration sees it. So Carney is trying to find some things that he can trade away. And at the end of the day, with the Chinese facing demographic mortality, in a way that is historically unprecedented, combined with the general anti-Chinese position of Washington, it makes sense that you get some Chinese chips that you can trade away because you don’t care about them. 

And it’s a reasonable strategy whether it’ll work or not, of course. Depends upon how the negotiations actually go. On both sides of both borders. The big problem we’re going to have here in the United States is that the US Trade Representative Office still hasn’t been staffed out to carry out normal operations, much less the 200 plus trade agreements that the Trump administration is trying to simultaneously negotiate. 

Hopefully, NAFTA will rise to the very top of that to do list when the time comes. But at the moment there is a very real bandwidth problem. All right. That’s it for now. See you next time.

Saving China: Three-Child Policy

Young Chinese children

If China was able to curb population growth with the One-Child Policy, can a Three-Child Policy help solve the current Chinese demographic crisis?

The short answer is no. Large families in urban settings don’t make sense. People in their mid-40s aren’t cranking out three kids. And if everyone moved out of the cities to have some space for larger families, China’s entire economic and political control model would collapse.

China would need to pull off a Star Wars-esque rapid cloning situation to have a shot at reversing the demographic decline they’re facing…

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today we’re taking a question from the Patreon page. Specifically, how about solutions to China’s demographic problems? What if they started to institute a mandatory three child policy? Short version is clever, but no. Number one, roughly half of the Chinese population now lives in high rise condos. There isn’t room for one kid, much less three. 

So you got a mechanical problem there. And if you wanted to force everyone to have three kids, you’d have to first change the residency style of the country and basically force people out of the major cities where the economic activity is and where the services are, and where the government has control of things and push them back to the outskirts or into, the areas beyond. 

So you might, might, might, might, might, might, might, if you’re really brutal about it, get the birth rate up. But it would come at the cost of the entirety of the Chinese economic model, complete with the way that the Chinese Communist Party controls the population. So, no, second, I don’t even think it’s physically possible anymore, to move the numbers to the degree that are necessary according to official Chinese statistics, which are definitely not correct. 

The average age in China is now 44, 45, and getting people over age 45 to kick out three kids. I’m sorry. That’s just not biologically possible any longer. And that assumes the Chinese data is right, which it of course, is not. The debate within Chinese statistical circles, that is a thing, is how much they have over counted their population by whether it’s just 100 million or something closer to 300 million. 

But there’s a broad agreement that most of the over count are in people under age 40. And if you look at what has happened with the official data, they’re now saying they have roughly 60% as many people age 6 to 0 as they have age 11 to 6. So we’ve got a sharp collapse coming down the pipe, even according to the official numbers. 

If that thins out in the teenagers, in the 20 somethings, then you’re actually looking at the average age in China being a lot higher than 44, probably closer to 54 or even higher. And in that sort of environment, having three kids for the small number of people that they have of childbearing age just isn’t going to move the needle at all. 

Right now, The only theory I’ve even heard that might work, that would allow the CCP to maintain their political and economic system is Star Wars style cloning. 

And for those of you who are not Star Wars nuts, that’s basically taking an embryo, maturing it into a 20 year old in under three years. And the 20 year old that you’ve created actually has the full skill set and become a fully functional adult. Obviously our technology is not there at this point. Certainly isn’t in China. 

But growing an entire new generation of 20 somethings is the only way to make this work. And if you want to do it the old fashioned way, that takes at least 20 years, and the Chinese no longer have enough people to even attempt, regardless of what the government tries to force upon its population.

What Would a Conflict in Taiwan Look Like?

Taiwan flag is shown in an open matchbox, which is filled with matches and lies on a large flag | Licensed by Envato Elements

Let’s discuss what China’s potential invasion of Taiwan would look like.

Should China attack, both Biden and Trump have been explicit that the US would intervene economically and militarily. Beijing doesn’t believe that, though. Despite the echo chamber Xi Jinping has created, deep down, he knows that this invasion doesn’t bode well for them.

China lacks the logistical capabilities to move a large enough force effectively and efficiently across the Taiwan Strait, so Taiwan would have time to prepare, and it would become a shooting gallery. If they somehow managed to capture Taiwan, that would only be the beginning of China’s problems. China couldn’t operate the semiconductor fabs, supply chains would begin to collapse, energy and agriculture imports would falter…

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Transcript

Hey all, Peter Zeihan here come to you from Snowmageddon 2025. We’ve gotten about ten inches, so far. We’re expecting another three before the stops. And if you this is my last video, you’ll know what happened. Today we’re taking a question from the Patreon page. A lot of people have been doing war games recently of the Chinese attack on Taiwan, simulating a combined naval and cyber attack. 

And what do I think of their prospects for Taiwanese success? And how do I think the United States, and especially Japan would respond? 

Under the Biden administration and now under the Trump administration, the American policy on Taiwan has actually been shockingly clear. It used to be we had something called basically deniability, where the United States deliberately said that it could neither confirm or deny any particular action. 

We called Taiwan a significant entity and a friendly entity, but not a country that has pretty much gone by the wayside. Now, while there’s not a firm bilateral defense treaty between Taiwan and the United States, both Biden and Trump have said very similar things that if there was an attack, the U.S. would intervene militarily and economically. Now, that is not believed in China. 

In China, the belief is at most they’d have to face some mid-level sanctions, kind of like what the Russians are dealing with with the Ukraine war. But let’s review a few basic facts. Number one, if you think the Trump administration is echo chamber, it is nothing compared to what’s going on in the People’s Republic. Chairman XI purged his last real advisors eight years ago. 

And so anyone who’s repeating the party line is doing just that, repeating the party line. And if you want to get in, good. Well, if you want to get in dead with Chairman XI, the best thing to say. So yeah, Taiwan is a real place. We shouldn’t invade that. That’ll end your career and several other things related to your life very, very quickly. 

Second, it’s a bit of a hop across the Taiwan Straits, over 100 miles. And, the seas are often relatively stormy. So if the Chinese were to pull this off, they would have to build a really large amphibious force. And they are working on that. But the time it would take to merge forces into the zone across from the Taiwan Strait and meet them up with their equipment and then sail them to the few points in Taiwan that you can actually land safely. 

That’s a whole other question. It would take weeks, if not months for the Chinese to arrange. And in that time, anyone else in the world could choose to do something. Most notably, the Taiwanese and Taiwan has had a nuclear power reactor for as long as I’ve been alive. 

So if the Taiwanese decided that they needed to build a few crude nuclear weapons to dissuade the Chinese, that is something that is well within their technical skill set. Third, let’s assume that none of this is relevant, and that the Chinese and the Americans do not intervene militarily at all, even though it would be an absolute shooting gallery taking out all of these troop transports, which are most of which are just civilian vessels that would be attempting to cross the Chinese strategy is literally to shove a million people in the boats and just kind of sail that way. 

It’s not a good plan, but let’s assume that it works. Then what, the Chinese can’t operate their own semiconductor fab facilities. There’s no way they can operate the Taiwanese ones, nor would they even get the plants, because those come from Japan or the United States. So the question then would be, what happens on the next day? 

Remember that the Chinese navy lacks reach. It is designed around the goal of capturing Taiwan, and it would probably be a real sight. But it’s not designed to project power, much less control ceilings. They just don’t have the range. They have a lot of ships, but they’re small and their legs are short. So you put a few ships in the Indian Ocean, maybe in the general vicinity of Malacca, and you cut off the energy artery. 

That’s where two thirds of their energy comes from. You do a few targeted strikes on things like pipelines, and all of a sudden you’ve got a country that imports 80% of its energy, having very little, if any. And that assumes the United States doesn’t do a cyberwar back. So, Chairman Ji, a decade ago knew full well that any meaningful attack on Taiwan is not just the beginning of the end of China’s of strategic power. 

It’s the end of China as an entity. It’s the end of the Hun ethnicity because of energy shortages and famine, because this is a country that imports three quarters of the stuff that they need to grow their own food. And so the decision was made to proceed because for nationalist reasons, they can’t do otherwise. But I really don’t see the strategic math of changing very much. 

All that’s changed is that China today is more dependent on international trade than it was 15 years ago, because 15 years ago, they at least had some people who were, you know, age 40 and under. Now they really don’t have many at all. We’re in the final decade, and if the Chinese are going to try something, they’re probably going to do it in the next decade. 

But if they do, they will be accelerating their utter end and removal from history, because they’re just won’t be enough energy and food to keep what’s left of the population alive. Do I worry about Taiwan? Not really. Does that mean I think semiconductors are safe? Absolutely not. The semiconductor supply chain is the most diverse and fragile thing in the world, and we only have lose one country of significance to globalization or depopulation. 

And the whole thing falls apart. I normally point at Germany is the country I’m most worried about, but as long as we’re talking about China and Taiwan, let me point at China, because they do the processing for a lot of the materials that go into everything. This industry really does take every one, and there’s no version of globalization that can take place over the next 15 years, where we don’t lose the ability to make those high end chips at all.

China’s New Ship: Enter the Sichuan

LHD Sichuan Class Aircraft Carrier | Photo by Wikimedia Commons: https://en.wikipedia.org/wiki/Type_076_landing_helicopter_dock#/media/File:LHD_Sichuan.jpg

Let’s talk about the Sichuan. And no, we’re not ordering take-out. We’re talking about China’s newest Type 076 amphibious assault ship, similar to the US Wasp-class.

Through the lens of global power projection, this falls short; it doesn’t have the range or speed necessary. However, this ship isn’t meant to cover too much ground. It’s designed for near-coast, amphibious assaults within 1500 miles of China. You know what lies within that range? The first island chain.

If all China wants to do is bully its smaller neighbors, the Sichuan will do the job fine. Should it find itself caught in any real naval combat…I hope they have enough lifejackets.

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Transcript

Hey all Peter Zeihan here coming to you from Colorado. Today, we are going to talk about the newest vessel in the Chinese navy, the Sichuan. It is a 40,000 45,000 ton carrier. And it’s roughly analogous to the US wasp class, which are the core of our expeditionary units. And so, of course, the core questions is, is this something from a military point of view, the United States should worry about, big problem that the Chinese have always had with all of their vessels is while they have teeth and they’ve got decent missiles, and those missiles have reasonable ranges. 

The ships themselves don’t have long legs, and the Sichuan is no exception, that it’s probably maximum emergency speed is less than 25 knots, probably closer to 20, which means that even three days in full sprint, it’s just not going to go that far. From the point of view of global power projection. It does have a wet deck. 

It is designed to help with amphibious landings. But it just doesn’t have the range or the speed to compete with anything that the United States has put in the water, really since the 1960s. It does that mean that it’s a pointless platform? Not what I’m saying. What I’m saying is it’s no good for power projection at distance. 

It can’t operate in the Central Pacific, much less the Indian Ocean or anywhere else. But that is not the strategic environment that the Chinese would like to contest with it. They’re concerned primarily about the first island chain, which are at the line of archipelago, starting with from Japan in the north to Taiwan to Philippines, to Indonesia and Singapore. 

That is the line of islands that basically block in the Chinese and mean that the Chinese are ever, ever, ever going to be a, naval superpower. They need to have a navy that’s at least five times as powerful as the US Navy, because they have to get through all these potential interdiction points or conquer them first before they can even pretend to be a global naval power. 

And the situation in that context is a step in that direction. Basically, if you’re within 1000 1500 miles of the coast, the system can operate, and it’s designed for insidious assaults. So you use those against islands in particular, most notably Taiwan and the Philippines. And for that specific task, this is probably the right ship for their needs. But if it comes up against any capable naval power and I’m talking here, Australia, Japan and the United States, of course, in this theater, want to look elsewhere. 

You’re looking at the United Kingdom or France or Turkey. This ship will go down fast. It’s not quick. It doesn’t have long legs. It requires a massive logistical train, which is something that the Chinese aren’t very good at at all. So in a hot war against a country that actually has a meaningful navy, this thing is almost useless. 

The Chinese aren’t planning on using it against somebody who has a navy. They’re planning on using it to intimidate the weaker powers immediately in the periphery. For that, it’s okay for anything else. It’s a reef.