Hey, all Peter Zeihan here come from Colorado… hiking season. Unfortunately, I can still get the news, so I know that we now have a 50% tariff courtesy of Donald Trump. That is going to be coming to copper imports beginning on August 1st. Let’s say that you are someone who is really concerned about the US copper industry. 

I am not. I’m really not. But if you are, there are a few things that you do before you get larger volumes of copper from domestic production. Number one, you go out and explore to find the deposit you’re after. Number two, you build physical infrastructure, road and rail to get to that system that can handle heavy freight. 

Third, you build a processing facility to separate the copper ore from the rest of the rock and then an intermediate processing facility to turn it to something called blister copper, which is roughly 98% pure. It gets rid of a lot of the sulfur. You then take that blister copper, and you take it to another facility that you need to build. 

That’s a proper smelter that will turn it into that, you know, the reddish orange shiny stuff that you use in everything. And then copper then goes on to be in almost everything that involves electricity. So it is an important material. But putting a 50% tariff on it on the front end retards that entire process. And from start to finish, the entire process takes somewhere between 10 and 15 years. 

So if your goal was to facilitate copper production, step one, would it be offer, say, tax credits for exploration? Go ahead and build the physical infrastructure and get started on the smelters. All of that is very power intensive. So you all sort of need some more electricity. By putting the tariff on the front end, you’re basically retarding the whole process rather than speeding it. 

That’s a problem. One. Problem two is that the Chinese are literally dying out. And while they are big players in the copper sector, and that will have to be shut out at some point, that’s not my primary concern at this point. My primary concern is we have a limited amount of time in the United States to build out our industrial plant to prepare for the Chinese just not being there, and that means roughly doubling the size of the industrial plant. 

And for that first stage, doubling the size. There are four main inputs that you need. The first one is copper that now costs 50% more than it used to or will on August 1st. The second item is steel, primarily but not exclusively for structure and interior structure support. I think I-beams that, courtesy of an existing a Trump tariff, is now 50% more than it used to be. 

Third is aluminum, primarily, but not exclusively used in cladding and especially Hvac systems. That is now 60% more than it used to be because of Trump tariffs. And the fourth thing you need is a labor force that’s willing to do the construction work. Now in the United States, historically, for the last 40 years, most of that work has been done by immigrants from Mexico. 

And Central America. But as you may have noticed, the Trump administration has basically launched a poll grim against illegal migrants. Now, I don’t want to get into a broad debate of the pros and cons of immigration at this moment, but let’s just talk about where this policy in its current form leads. The Trump administration wants to deport about a million people a year, which carried out for a few years, would basically remove the illegal migrant community in its entirety construction is the industry that they are most involved in. 

Agriculture is number two. And what the Trump administration has discovered is that going after people who have committed crimes, it’s actually kind of hard because it’s a law enforcement issue and you have to do investigations and arrest them one at a time. That’s not going to get you to a million people. So instead, they’re going after people that they know about. 

They’re going to churches. They’re revoking legal status for people who say, I’ve been brought in from Venezuela or Haiti out of economic or political persecution. They’re going to people’s court hearings where they’re going to get ruled on for a, say, a green card and arresting them before they can before the judge, because, you know, these are people where they know where they are. 

So the four inputs that we need to prepare for a post China world are now more expensive. And every time the cost of something goes up, you can do less of it. So if these policies continue for any appreciable amount of time, we can test that economic boom that I’ve been talking about for years. Goodbye. Because we will not have the industrial plant that is necessary to produce the goods. 

We need to continue to lead the lives that we have been leading. It’s almost as if a Russian agent was whispering things in Trump’s ear and trying to convince them to do the things that would be most against our best interests. Oh, wait. 

Peter Zeihan here. Coming to you from Colorado. Today is the 8th of July. We’re going to send this out today and again tomorrow for people who missed it. We’re coming up on another tariff day where Trump says he’s going to reset tariffs for pretty much every country in the world. So far today, he has released about a dozen letters that are basically read exactly the same, except for the header and one number where he’s basically told people what their tariff rates are going to be moving forward. 

Several things from this. First, the spread of countries that are in this first list go from Tunisia and Bosnia on the low end to Korea and Japan on the high end. So countries that are just nothing to countries that are firm allies, all of them got the same letter. There’s no sign of meaningful negotiations with any of them. 

Trump just picked the same number he’d had before. Maybe round it a little bit, put it in there again. Nothing has really changed. And he’s now telling them that they have until August 1st to renegotiate, which means, number two, we are still in this hell limbo. We’ve had over 150 tariff policy since the 20th of January. We now have the threat of a couple hundred. 

And no one really knows what to do. New business, construction spending. The United States has basically gone flat. Nobody wants to start a new project because nobody knows what the rules of the game are, and based by many versions of the tariffs that are in place right now, it actually penalizes people to invest in the North American supply chain system. 

It’s actually cheaper to say, build your entire manufacturing base outside of the United States and just pay the tariff once on its way in. If you want to have an integrated supply chain where countries do what they’re better at. That actually you’re penalized. Okay. What’s number three? Japan. Japan is the country to watch most closely here it is one of the countries that has now gotten the letter. 

It is a country that entered into good faith negotiations and is now a country that it’s kind of talking shit about Trump a little bit. If you remember back to Trump one, there was, about a half a dozen major trade deals that were negotiated or renegotiated, which included NAFTA, which included a trade deal with the Koreans and included a trade deal with Japan. 

And the Japanese came to the conclusion that Trump represented the future of American economic nationalism. And so they needed to figure out a way to get in on Trump’s good side, on my good side, so they could be part of the American future moving forward. And so they made quite a few concessions that had never been made in trade deals before in order to get that agreement. 

And then we get to April 2nd and Trump tears it off, and we get to July 9th and he tears it up again. And so the Japanese are left wondering, like, you know, even if you go out of your way to seek a deal with Donald Trump, even if you offer him everything he has demanded, it still means nothing. 

And that has really colored the other trade negotiations, because if Japan, the country that has bent over backwards to try to make this work by Trump’s own terms can’t get a deal, why should anyone else try? And there’s the fourth thing no one can try. Trump still hasn’t staffed up the Commerce Department or his own office, or much less the U.S. Trade Representative, which is normally responsible for negotiating trade deals. 

So if you are a country out there trying to negotiate with Trump, there’s no one to speak to because the only two people who are handling the talks are Trump himself and the Commerce secretary. And those are both full time jobs that normally are not led by trade talks. We have only ever once gotten a trade deal with anything less than ten months of negotiating. 

And so far from the rhetoric that we saw back in April that people were lining up to talk, maybe they were, maybe they weren’t. There was no one to speak with. And so no meaningful negotiations have really happened. And the only trade deal we actually have right now is with the Brits, who basically just agreed to buy a bunch of planes in order to get a lower number. 

And that was the talks. I mean, there’s a lot of real irritants in the relationship with the UK, and none of them were addressed at all. So that just leaves what the rest of us think about this. Obviously business investment is down sharply. We’re actually seeing new builds drop down to levels we haven’t seen since Covid, which is really bad. 

But the final thing to keep in mind is that this is not the end. Trump has already made it very clear that his new August 1st deadline is very loosey goosey. So August 1st is the new, July 9th is the new April 2nd. And there’s a reason why Wall Street is just kind of ignoring this. I’m sure you’ve heard of the taco trade. 

Trump always chickens out. Well, they’re now calling it Taco Tuesday, which is actually kind of funny and clever. Anyway, but until this is resolved one way or another, until you know what the numbers are. No one knows what they need to do to prepare for what’s next. And so everybody’s stopped.

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

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

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

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

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

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

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

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

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

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

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

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