Trump Trade Talks: US-EU Strike a Deal

European Union Flags in front of a stormy sky

The Trump administration and the EU have announced a new trade deal. It’s more of a political headline than a meaningful agreement, but let’s break it down.

The agreement includes a 15% tariff on European goods, $750 billion in US energy exports to Europe over three years, and $500 billion in investments from EU institutions in US infrastructure. There is a lot to going on here, but the bottom line is that the “deal” was made with the EU, NOT the member countries. So, until the individual countries agree or decide to move forward with this…it’s just another wish list from Trump that’s not likely to go anywhere.

Up until now, these talks have just been political fluff. The structural issues in the US-EU trade relationship remain untouched and will stay like that until the real negotiations begin.

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Transcript

Hey, I’m Peter Zeihan here, coming to you from a suddenly stormy Colorado. Today we’re launching off a new series on the status of the trade deals that the Trump administration has announced. We’re going to start with the European Union, which is by far the biggest. Now, Donald Trump has said this is the biggest trade deal ever. It doesn’t even make the top 25 list, actually, for the United States. 

And the problem is that a lot of the things that have supposedly been agreed to can’t happen. So, let’s start with the headline where we are at the moment. Then we’ll go into the detail. So the headline is that Trump was threatening the European Union with originally a 20% tariff, and that went up to 30%, then eventually 50%. 

And now it’s going to be 15%. And the Europeans agree to not retaliate, with their own tariffs. So there are a lot of folks across Europe who think that this is a particularly unfair deal. But, you know, whatever. 15% on European trade, Europe collectively is probably our fourth largest trading partner. That would have an impact on a lot of things. 

The United States and Europe have a relatively robust trading relationship that’s built on intermediate manufactured goods and then finished things like cars and aerospace that go both ways, as well as the United States sending a fair amount of energy products and processed materials, whether it’s lumber, cement or whatever. To the Europeans, the Europeans, of course, send a lot of luxury goods to the United States. 

French wine, of course, is on that list. Kentucky bourbon goes the other direction. You know, these are these are culturally intertwining trade types. And so throwing a 15% tariff on what’s coming from Europe to the United States is obviously going to require a squeeze in people’s budgets and redirect how things are going elsewhere. The thing to keep in mind, primarily when you’re talking about European trade, however, is that most of the stuff that we buy from Europe is not stuff that can really be sourced from other locations. 

So you’re either going to be looking at a reduction in demand as prices go up, or a withering of that trade relationship. So this is not one of those trade relationships where you’re going to see new industrial plant coming online in the United States to compensate. It’s not that kind of trade. That’s kind of the first piece. 

That’s the headline piece. That’s where we are. That all takes effect August 1st. The other two pieces are kind of loosey goosey and are very Trumpian. Trump has announced and the Europeans have said that, yes, this is broadly what we agreed to, that over the next three years, the Europeans will buy three quarters of $1 trillion in American energy products. 

Now, the energy product is defined very, very loosely to include things that don’t exist, like small modular nuclear reactors, or things that the Europeans just don’t buy from us like, for the most part, crude oil. Mostly we’re talking here about natural gas and liquefied form, but the number makes no sense. 

$750 billion in U.S. energy products over three years, the United States only exports a little over $300 billion of energy products total globally. So the idea that all of a sudden it’s all going to be and go to the United States, that would actually be a massive reduction in the take home pay for U.S. energy exporters. Right now, U.S. LNG exporters in particular, are in kind of the catbird seat because they look to see whoever is having a crunch, and then they send LNG there. 

So they get spot prices that are very, very, very high. If we were to send everything to the continent of Europe, we would be talking about more term contracts where the renumeration cost would be significantly lower because of the reliability. You would probably see U.S. LNG exporters see their profits drop by well over two thirds. And you’d probably drive a quarter of them out of the business if this agreement were to happen, which it won’t, because the European Union is not an economic entity. 

It is an international political organization among the member states. And the member states are the ones who decide what they buy from where. So the EU, the European Union institution, the executive arm, has committed to buy in the stuff, but their annual budget for the entire European Union is under $200 billion a year. So no, this is not going to happen at all. 

And if it did happen, it would be really bad for American energy exporters. That’s problem. One problem too, is that supposedly there’s going to be a half $1 trillion of investment by European entities in the United States. And again, the EU is a political institution that doesn’t have that kind of budget. It has agreed on behalf of the member states, but the member states are under no legal liability whatsoever to actually carry out the agreement. 

So what’s probably going to happen is a few months from now, these talks will continue again, because this is not a final deal. This is a memorandum of understanding for what the Trump administration would like to see happen. And even if this was a final deal, it would then have to be ratified by all the member states. But the EU institutions don’t have the political or legal authority to negotiate for their member states on behalf of things like energy and investment treaties. 

That is a bilateral deal. Those talks have not even begun. And from what we’re hearing from both the Trump administration and from Brussels, is that Trump basically came into the room with a few numbers, said, I want this, this, this, and this. And the Europeans kind of nod and smiled, assuming that this would end the conversation for the moment, which appears to be what has happened. 

But in terms of the real talks, the things that might address the irritants in the relationship, of which there are many, those haven’t even started.

Why Trump’s Stance on Ukraine Has Changed – Part 2

Ukraine solider on a armored vehicle with a split screen of Donald Trump

Let’s unpack Trump’s evolving stance on Ukraine a bit more today.

Trump came into his second term strapped with his loyalty vacuum, purging anyone who wouldn’t kiss the ring. This left Trump with a lackluster roster, many of whom had acquired a taste for Russian propaganda. All of that led to Trump giving Putin an extraordinarily long leash.

After six broken promises of peace, Melania talked some reality into Trump, and he is now pulling back on the lead. The question now is not whether to oppose Russia, but where to draw the line. US support for Ukraine has come cheaply so far, but nuclear retaliation from Russia is still looming on the horizon.

We still don’t know where Trump will take this, but his stance on both Russia and Ukraine is quickly changing.

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Transcript

Now, when Trump was out of power, he had a beef with the Republican Party because there were people who had studied policy in the world and the Republican Party who tried to steer his decision making in a way that reflected history and economics. And one of the weaknesses of Donald Trump, charisma. It’s his ego. And he feels he has to be the smartest person in the room at any given topic. 

So we all he was out of power. He restructured the Republican Party so that all of those folks were gone and basically turned it into an institution that was designed to glorify and reelect him. And it worked. He comes into power. He no longer has a cadre of several hundred people behind him to help him make policy. He just has a handful of people who, for their own personal reasons, have chosen to to hook up. 

And he has a cluster of Russian agents up to and including Tulsi Gabbard, who is currently the director of National Intelligence, who has been whispering in his ear and amending the national intelligence brief since day one with Russian propaganda. Well, as he comes in, he does the same thing to the federal bureaucracy that he did for the Republican Party and basically stripped it of expertise so that no one could ever tell him, you know, he was wrong. 

And what that meant is for the first six months, he was wrong a lot, especially as regards Vladimir Putin and the Ukraine war. We actually had some weird situations where Trump was blaming the Ukrainians for the Russian rape camps that had been set up, or the kidnaping of Ukrainian children, that the Russian government set up a cabinet level position to take care of, and the death camps and the mass murders and, you know, on and on and on. 

Using phosphorus to clear out village was, phosphorus is kind of like napalm. Anyway, turning point for Trump was in May and June. He engaged in personal diplomacy, with Vladimir Putin. He decided that, Steve Wyckoff, who had been his frontman, really didn’t know what he’s doing. And that was because Steve Wyckoff really didn’t know what he’s doing. 

And so Trump took it over directly. He couldn’t hand it off to the State Department because that is handled by, Rubio, who’s a guy he doesn’t particularly like. And actually, I’m a little surprised he hasn’t fired Rubio yet. He’s basically just sidelined the entire national, security and foreign service institutions. Put him under Rubio, then sent them off to the side and told them to do nothing. 

Anyway, he takes over the negotiations himself. So that puts Putin in a position where he’s lying to Trump’s face repeatedly and according to Trump’s own words, on six different occasions. We had a deal to end the war. And then less than 24 hours later, the Russians would bomb a civilian target. When I say bomb, I mean sending several dozen, several hundred drones and missiles and bombs into major cities. 

The first five times this happened. Trump seemed annoyed but willing to give Putin the benefit of the doubt. But the sixth time, the sixth time Melania Trump called Donald Trump out on it, and that apparently changed the minds. Keep in mind that Melania Trump was not born in the United States. She was born on the other side of the Iron Curtain in the former Yugoslavian republic of Slovenia. 

So she, among Trump’s inner circle now is the most aware of international relations of all, because she’s the only one who can’t be fired. How useful that will come to be in the days and weeks and months to come. I have no idea. But what she has done very successfully is convince Donald Trump that he was being played, that he was being lied to, and that he was being made to look quite unintelligent. 

And so a few weeks ago, the two weeks ago, Trump gave Vladimir Putin a 50 day deadline to change policy. And in the last 48 hours, Trump has said, I’m not going to give him 50 days because nothing’s changing and nothing will change. And that’s part of the problem with this conflict. Putin accurately sees the Ukraine war as the beginning of Russia’s last best chance to survive this century. 

From the Russian point of view, and I think the correct, if they cannot conquer all of these countries, not just Ukraine, the other 15 as well, Russia will vanish from the Earth before 2100 based on how the war goes, potentially a lot faster. So there can be no peace treaty that the Russians can agree to that they will enforce. 

That leaves any of these countries independent. This is a country that is fighting for its existence. Unfortunately for the Russians, in order to continue to exist, they have to conquer a number of people who collectively are of a greater number than there are Russian ethnics on this planet. So from the American and the European point of view, the question wasn’t will we or won’t we stand against the Russians? 

It’s where would we draw the line? Where is the point where we say no further? And for those of you who think that we can just wash our hands of this completely. A couple things to keep in mind. Number one, the Russians have more nukes than we do. And since they’re on their way out, the incentive to use them is a lot higher because from their point of view, in the long term, they have nothing to lose. 

Number two, if the line that we decide to defend is in Ukraine, well, then all of the Europeans and all of the Ukrainians are between the Russians and us. And the war to this point, the United States really hasn’t bled. We haven’t really provided much cash, and we haven’t provided much in terms of military equipment that we actually use. 

What the Ukrainians are using against the Russians, or at least until recently, has been American equipment that has been decommissioned since 1995. They are basically going through our hand-me-downs and holding the Russians off. And the cost to us is minimal. The alternative is, of course, to leave the Russians and the Ukrainians to it, break the alliance, go home, and just hope that in everything that happens with the conflict in the time to come, the Russians just forget that we have been the target of all of their nukes and all of their propaganda since 1935, and hope that should they ever be stopped by someone else, that on their way out the door of history, they 

choose not to send a few hundred nukes our way because they really do hate us massively. Anyway, for those of you who have bought the Russian propaganda, you’re going to have some uncomfortable times in the days ahead. Donald Trump’s ego has been bruised and he is now starting to direct policy against the Putin government. There are a thousand ways that this can go. 

I can’t predict the specifics. People like Tulsi Gabbard are still in place, who are still beating the drum on behalf of the Russians inside the white House. This can go a lot of strange directions, but hopefully this little brief gives you an idea of why things are happening the way that they are. And maybe, just maybe, it’ll make you reconsider a few things.

Why Trump’s Stance on Ukraine Has Changed – Part 1

Ukraine solider on a armored vehicle with a split screen of Donald Trump

It seems that the Trump administration might be listening to some classic rock lately, because his recent stance on Russia and Putin is awfully reminiscent of The Who’s 1971 classic “Won’t Get Fooled Again.” Or maybe Melania just yelled at him.

The issue with the Trump and Putin dynamic is that they’ve been operating on two different playing fields. Trump thought he was just caught up in your standard playground pissing contest (the kind of conflict that he loves). Putin was playing along, but Trump is finally realizing that Putin’s war on Ukraine is existential. The Russians MUST take Ukraine. They MUST expand their borders. Otherwise, it’s the end of Russia as we know it.

This is the geographic playbook that Russia has always followed. Now that their demographic crisis has reached critical mass, there is only one path forward. So, Trump’s stance on Ukraine is starting to shift, but this is only the beginning.

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Transcript

Hey, all Peter Zeihan here coming to you from Colorado. Today we’re doing an educational video for folks who are of the MAGA crowd who, are discovering that the Trump administration is changing policy pretty dramatically on them in the case of Ukraine. 

When Trump was running for president, the third time to get a second term, he started repeating a lot of Russian propaganda about how the war was Ukraine’s fault. And Zelensky needs to go. Then he came in and discovered, that things perhaps were not, as he realized. So the point of this video is to explain to you what Trump has discovered over the last six months and why it’s leading to his policy change. This war was always going to happen. It didn’t happen because of who the American president was, or the German chancellor or the Ukrainian president. 

It happened because of how the Russians view their world. The Russian territories are pretty flat and open, and there’s no real good spot to hunker behind to shield yourself the armies of your foes. And so, Russian strategy going back to the time of the early czars, you know, centuries ago, has been to expand. 

Conquer the people next to you, subjugate them, turn them into cannon fodder, and then use them as a vanguard to attack the next group of people. And repeat and repeat and repeat until eventually you reach a geographic border that tanks can’t go through. And so Muscovite expanded into Tatarstan, expanded into Ukraine, expanded into the Baltics. And they keep going until they hit those geographic barriers. 

And the key ones are the Baltic Sea, the Carpathian Mountains, the deserts of Central Asia, and the tension mountains of Central Asia and the Caucasus. If the Russians, from their point of view, can do this, then they will have achieved a degree of physical security that they could not get from remaining at home. And the Russian leader, who ultimately proved most successful at doing this in the modern age is Joseph Stalin. 

And the borders that the Soviet Union held during the Cold War were the most secure that the Russians have ever been. You just have to keep in mind a few things here. Russia is not a nation state like Germany or the United States or Australia. It’s a multi-ethnic empire where the non Russian ethnics exist solely to serve as a ballast. 

And it’s cannon fodder in wars, which means that in times of prolonged economic or political decay, like, say, the 1980s, the empire breaks apart and all of the various nationalities that used to be used as cannon fodder all of a sudden are the on the other side of an international border. So Russia has only about, 60%, 65% of the territory of the Soviet Union. 

But all of those other zones are largely populated, and they’re populated with ethnicities that are not simply hostile to Moscow, but have been subjugated to Moscow in the past. Now, modern day, the Russian population is dying out. There are two big things that shape demographics, and the first is the degree of urbanization. And the second is economic, where for all and health. 

So first, urbanization starting under Stalin, but really getting serious under Brezhnev, the Soviets started a massive urbanization campaign, basically taking people off the farm and cramming them into small housing units. And in doing so, birthrates dropped by 80% in two generations. At the same time, this agrarian population was not really schooled up to deal with the realities of the industrial age. 

And you had a lot of people who became functionally dispossessed. One of the results among many, was insane levels of alcoholism. Then when the Soviet system collapsed in 1989, heroin became a big problem along with multidrug resistant tuberculosis and HIV. And so, arguably, the Russian population of the 2020 tens and today is the least healthy in the world. 

And one of the ones that has faced so low of birth rates for so long that the actual ethnicity of Russians is vanishing. These two trends come together in the Ukraine war. 

First, the Putin government has tried to expand on the cheap through the 2000, sponsoring coups and assassinating people throughout the what they call their near abroad. Throughout the 2020 tens, trying to shape the political space of these countries that they used to control in order to force them to do what Moscow wants. 

And they were always able to find collaborators among these countries who could be bought off, or maybe even wished for the return of Russian troops. But they could never convince the majority of the population that existing to serve Russian goals was in their best interests. And so the result among many, were things like color revolutions, where the peoples of these countries, it would basically rose up and throw off the pro Russian puppets. 

And then the second problem demographics is that the Russian birthrate has been so low for so long, the Russians are losing the capacity to field an army of their own, and they don’t control enough subject peoples anymore to generate a large conscript army full of cannon fodder. So the late 2020s, where we are now, was always going to be the last period where there were enough ethnic Russian men in their 20s where making a go of a military solution could happen. 

These two things come together. And the Ukraine war with the Putin government basically going all in. It was always going to happen. It was always going to happen about now. The only question is, how does the rest of the world in general and the United States specifically react to it? Because remember, the Russians will keep going until they reach a geographic barrier that can stop tanks. 

Ukraine’s only part of that. Ukraine is the ninth post-Soviet war that the Russians have participated in. And it will not be the last. We will also, if Ukraine falls, have conflicts in Moldova, Estonia, Latvia, Lithuania, Poland and Romania, Kazakhstan, Georgia, Azerbaijan and probably Uzbekistan as well. This is just the next phase of Putin’s plan of the Russian plan, that if anything was written 500 years ago.

Inflation Ticks Up Under Trump-2

a vacuum sucking up dollar bills

We spoke about monetary policy last week, but let’s lift the hood. Today, we’ll be discussing the inflation outlook under Trump’s second term, focusing on tariffs, immigration, and supply chain disruptions.

We’re seeing inflation climb. The consumption-led recession has begun, and as Trump’s tariffs continue to roll out, things will only worsen. Labor shortages, driven by immigration enforcement, are pushing labor costs up. And the impacts to global supply chains are hitting housing, food, and transport.

With a dysfunctional Congress, an understaffed administration, and a Republican party with no real plan…prices will continue to tick up and instability will deepen.

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Transcript

Peter Zeihan here. Coming to you from a humid Colorado morning. We’re not used to getting this kind of rain this time of year. Anyway, today we’re going to talk about inflation and what you can expect in the weeks and months ahead. Now, if you remember back, I have been saying since roughly April that, the United States was looking at a consumption led recession in July, and we are in July now. 

And the reason is good shortages. The tariffs that Trump put in on April 2nd basically triggered an end to all exports from China, the United States. And China is our number one source of consumer goods. And that ban functionally ban was in place for several weeks. And so nothing left. Everyone’s been living on inventories in July is when I expected starting on the West coast and then moving its way east us to basically start running out of stuff. 

And that’ll manifest in inflation numbers. Consumption numbers. The data is very loosey goosey because Trump, like he always does, set a very harsh penalty in early April. And then by the time we got to late May had basically rescinded all of it pending further negotiations, which, by the way, are not happening and not going anywhere. We’re now in a second phase of that where Trump is saying that after his grace period expires, tariffs are going to come back in. 

And for most countries, the numbers that he has floated are significant, higher than what he threatened to back in April, suggesting that on the worst case scenario. These tariffs happen as he’s talking about. And we just have a crushing of economic activity and consumer basis around the country. Best case scenario is that he keeps doing this on and off, on and off tariffs where we only have a problem with business uncertainty, which eventually hits industrial development and employment. 

But that’s a longer term problem for right now. Let’s talk about inflation. 

The US CPI, which for many reasons isn’t the best measure, but it’s really the best that we have that we can assess regularly. Is the consumer price index. And it generally puts out a statement once a month about where inflation is going. The newest numbers that came out of June are 2.7%, which is significantly higher than what we’ve had in the next few months before because the tariffs are starting to kick in. 

But you shouldn’t expect the CPI to skyrocket just because of tariffs. Your spending falls into a lot of different buckets, and most of them aren’t goods. In fact, about 60% of total spending is on services. And for services to have significant increases in prices, you have to have a feed through effect that affects goods first and also hits the labor market. 

Now, if we’re getting that on the labor market, it’s an immigration issue with the Trump administration now saying they’re not just going to go after people who with criminal records are not just going to be going after people who are actually working, but keeping the nose clean, but happen to be here illegally. They’re also going to go after people with legal protected status and canceling it on shipping them all out. And now that the big beautiful bill is passed, there is funding available to expand the Department of Homeland Security and Immigration and Customs Enforcement. So we should see significant expansions, in labor costs moving forward in an environment where we already have record low unemployment. So this will just feed straight through into inflation. So that’s going to be a problem throughout the services sector for goods. 

More specifically there’s three categories to watch. The first and by far the most important. And how is housing. It’s roughly one third of the entire index. You want to build a house, you need four things aluminum, steel, copper and labor. And between the tariffs and the immigration crackdown, the Trump administration has severely constricted the availability of all four of those things, which is grossly retarded New builds. 

We’ve seen about a 10% drop in new housing starts since Trump became president. And this is before most of these tariffs even kick in and before the anti-immigration pulse gets really, really strong. So we’re going to be seeing some significant increases in housing prices over the remainder of the year and into the next. 

Keep in mind that once you fix these input problems, it generally takes a couple of years before you see meaningful increases in housing builds, because you have to wait for companies to reform. It took us a good six years to recover from the financial crisis and the subprime boom. It won’t take us this long based on how bad the policies get, but this is not something where you just turn a key and all of a sudden you’re back in business. 

Next up is food. We still don’t have food tariffs. Trump keeps promising and he says they’re right around the corner. They’re going to be 40%. But they haven’t happened yet. And until they do. The biggest problem with food prices is immigration. Again, because most of the harvesting of things like fruits and vegetables and most of the processing of meats is done by immigrant labor and the Trump administration has started directing Immigration and Customs Enforcement to raid the sites where people would show up for work and sometimes even raid meatpacking plants themselves. 

And we’ve already had a number of facilities shut down because of that, because they can’t find Americans to do the job. Number one, Americans don’t want to do the job. Number two, there aren’t any Americans to do the job. Remember, record low unemployment. We have a labor crunch. Third, let’s see. We did the housing. We did food, transport. 

Food and transport are both about 13% of the index. And transport really comes down to cars and trucks. And here’s something where we’re all going to be feeling it really soon. The new tariffs that Trump has threatened against Canada and Mexico were over 30%. And most vehicles that are made in North America are made as a team effort with, say, carburetors coming from the United States, engine blocks from Mexico, spark plugs from Canada. 

Things go back and forth and back and forth and back and forth and back and forth. And in a tariff environment, that model dies almost overnight. There have been numerous extensions to everything. So I’m not saying convincingly that this is what’s going to happen. Because Trump keeps changing his mind. But if these tariffs go in, there will be no more American made cars functionally, because it’ll be cheaper to make cars abroad and then ship them in and just pay the tariff once instead of having to pay it on every part, more or less. 

You’re basically looking at American cars becoming the most expensive vehicles in the American market and out of the reach of most lower and middle income people. One more, drugs. About 5% of the CPI is medications of some form. Trump has announced, without a implication date, a 200% tariff on all imported medications. 

Now, this is both indirectly smart and directly dumb. First of directly dumb. There are a lot of high end medications that come from Europe that simply will be unaffordable. And under things like Medicaid and any sort of insurance that you can get, they simply will be ignored completely because no one will be able to fund them. On the lower end, though, your maintenance medications, your lisinopril and things like that. 

There’s an argument to be made there that terrorists might be part of a tool kit that would improve drug availability. Right now, all of these easy to make pills that are less than a nickel a pop, are typically made in China and in India. And this has been the case for roughly a decade. And so reshoring that to the United States makes a lot of sense from a medical security and a national security point of view. 

And while the cost will undoubtedly go up probably more than double, it’s from such a low base that I don’t think a lot of people are going to really feel it too much. The reason I’m a little bit hesitant this is even in Donald Trump’s mind, is the last time that this was a top of mind issue. 

It was during Covid when the situation was the same, and there was a moment early in Covid when the Democrats, the Republicans and the Trump administration were all on the same page on what needed to be done, and Trump couldn’t be bothered to provide the leadership to make it happen. Now we have a broken Congress. We have a broken Republican Party. 

We have a scattered Democratic Party and a Trump administration that hasn’t staffed up yet. So the idea that there’s a phase two to the plan beyond big tariffs, I find really dubious because it’s now been five months since Trump became president and we haven’t seen that anywhere.

A Ukraine-US Deal?

Volodymyr Zelensky and Donald Trump shaking hands from wikimedia: https://commons.wikimedia.org/wiki/File:Volodymyr_Zelensky_and_Donald_Trump_2019-09-25_01.jpg

Trump and Zelensky recently had a call where they discussed a mega-deal, centered around mutual weapons purchases and military tech sharing.

There is a lot for both countries to gain from a potential deal. The US gets access to all the military tech Ukraine has developed and gets to see it tested on a live battlefield. Ukraine gets the industrial power of the US and, of course, some much needed funding.

These are early days, but when the guy in charge is just after a deal, rather than all the important details…there’s no telling how this will shake out.

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Transcript

Hey everybody, Peter Zeihan here. Coming to you from Colorado. A quick one today. 

Today is the 17th of July and supposedly Zelensky, the president of Ukraine, and Trump, the United States just had a phone call and Zelensky said it was all about a drone. Mega-deal the idea that Kiev will buy some weapons from Washington, and Washington will buy some weapons from Kiev. 

Now, if you go back to the Soviet period, the heart of the aerospace and missile systems in the former Soviet Union was in what is today Ukraine. And in the post-Soviet settlement, the Russians got all of the weapons, but the Ukrainians kept all of the scientists. And so once the Ukraine war began about four years ago, the Russians obviously came in big and strong with all the weapons and the Ukraine’s never much. 

But then the Ukrainians started to turn on their old Braintrust trained up their younger population and get into new weapons systems. And they’re standing to offer to any country is if you put troops in Ukraine, we will share all of the technologies that we have developed with you. And those technologies are pretty robust. So just to pick a few. 

You’ve got the Neptune missiles that sank the Russian flagship out in the Black Sea. You’ve got the rocket drones with a range of just under a thousand miles. You’ve got new loitering drones can go further than that. And of course, this wave of first person drones that we’ve seen more and more and more of. But increasingly, we’re seeing jet skis with missiles on them that are automated. 

Basically, they’re taking the automation revolution and marrying it to a new type of warfare and serving as a testbed. Because from the point that they actually finished constructing a prototype, it’s usually used within a week, and then they immediately start to iterate. So the speed at which the Ukrainians have been pushing the envelope is really impressive. Their problem is resources. 

So at the beginning of the Ukraine war, something like 5 to 10% of their weapons systems were actually manufactured in Ukraine. That number is now over 60% and continues to rise. So if the United States were to get access to that technological suite and the development pipeline, and you marry that to the U.S. industrial plant in the US taxpayer base, well, a lot of really interesting stuff could happen very, very quickly. 

We’re still in early days, but we all know that Trump doesn’t like to talk about details. He just wants a deal. So if the Americans are willing to put some money into this, you’re looking at a fairly short turnaround time for a significant overhaul. First of the Ukrainian military is the resources come in and then eventually the American military, as well as these technologies reach the precision, the range and the rugged ization that the US military demands. 

How much? How fast? I mean, that is entirely up to the two presidents. But one of the things that Ukrainians were very successful at doing was building out their industrial plant in order to make these new weapons and design these new weapons and test these new weapons. But probably about half of that industrial plant is sitting empty because of a lack of resources, which is where the United States could plug right in.

What Happens After Trump and Putin Split?

Split Screen of Putin and Trump with a question mark

On Monday, I talked about the impending breakup between Putin and Trump, and the “plan” that Trump has laid out following the split. But the fallout from this relationship isn’t so straightforward.

There’s a 50-day horizon for Russia and Ukraine to sign a peace deal before the tariffs on everything Russian kick in, but that’s just the beginning of the logistical nightmare for Trump.

With a hollowed-out government and a lineup of Witkoff, Gabbard, and Vance to deal with, real policy change is just a distant glimmer that Trump might not ever see. Unless, of course, Trump welcomes experts with open arms, rebuilds his foreign policy team, and let’s someone into the room who is smarter than him…

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. And today we’re gonna talk about Donald Trump and Russia and Ukraine, war and tariffs and sanctions and blah, blah, blah. So in the last couple of days, Donald Trump has gone out publicly and said repeatedly that he’s really pissed off at Vladimir Putin because Vladimir Putin has been saying all the nice things, and then it’s all bullshit. 

And he just continues the war. Now, anyone who has been following the Ukraine war at all, or really Russian relations for the last 35 years, knows that this is not a new thing. The Russians lie a lot. And on the Ukraine war specifically, they feel that this is a strategic issue for them and they will say anything to continue the conflict. 

They will continue not just until they have conquered all of Ukraine, but until they’ve gotten a number of countries further to the west. Donald Trump came in saying that he knows Putin very well and he can negotiate a truce in a day, and obviously things have not worked out that way. And so with every stage, Putin is basically lied to Trump more and more and more, and it has made Trump look like a fool in the eyes of the international community, and not just a few Republicans back at home in the United States. 

And it seems that in the last couple of weeks that has finally reached a critical mass. So the current threat from Donald Trump is if in 50 days, Vladimir Putin has not agreed to some sort of ceasefire and peace deal, details TBD, then there will be a 50 to 100% tariff on everything from Russia and an another 50 to 100% tariff on anyone who buys stuff from Russia. 

Now, the logistics of implementing this would be colorful, because we don’t have an institution in the United States to handle things. Secondary sanctions, especially not at that kind of volume, because it would apply, among other things, to China. But let’s just assume for the moment that Trump is serious about this, for this to happen. Three things have to go down in the Trump cabinet because remember, remember, remember, Donald Trump has the least staffed government in American history, still hasn’t filled out over 90% of the appointed positions. 

He is the least capable and least competent national security team, and the one person on his national security team actually knows what’s what is the Secretary of State, Marco Rubio, who’s been pushed to the side and really has no impact on meaningful policy. So there’s three personalities you need to watch how Trump interacts with them. The first one is a guy named Steve Witkoff who does not belong in government at all. 

He is a real estate developer in New York. He’s an old buddy of Trump, and Trump has been throwing about every international issue the Ukraine, Russian negotiations, the Iranian negotiations, the Israeli guys and corrections of this guy knows nothing about any of it. And it’s obvious because as soon as he gets into the room, whichever group happens to have the best PR basically twists them around their little finger and gets him to spout their propaganda up to and including in Donald Trump’s ear. 

That is absolutely how the Russian situation has evolved, which is the primary reason why Trump looks so dumb when he’s talking about Ukraine and Russia specifically, and in foreign affairs in general. So Witkoff probably has now been edged out because it’s difficult to imagine how Donald Trump would have had a change of heart to this degree if Witkoff were still being allowed in the room. 

Time will tell, but it looks like he’s already gone. That’s number one. Number two, the director of National Intelligence, Tulsi Gabbard. Tulsi Gabbard, has been a Russian plant and a Russian agent long, long before she joined the government. Long, long before she became a Republican. She used to be a Democrat. And part of the presidential debate briefings were about how she was somebody who was probably already on the Russian payroll. 

And even if you don’t believe any of that, look at her foreign policy stances. If it involves the United States. Tulsi Gabbard has been on the opposite side of the United States on all issues regarding China and North Korea and Iran and Syria and Libya and, of course, Russia going back 20 years. And one of the first things that she did when she took over as DNI was to basically fire everyone on the Russian desk who would tell the truth to the president. 

And then she spent most of her time going through whatever had been published and redacting it, to put it in Russian propaganda and Russian propaganda. To this day remains her primary source of information. So if she’s not specifically and directly working for Vladimir Putin, then the Venn diagram that represents their worldviews is almost a perfect circle. It’s probably 99% overlap, with the remaining 1% being hairstyles because Putin is bald. 

And Tulsi Gabbard, I will give this to her. Her hair is fabulous. Number three Vance J.D. Vance is part of a group of people that are directly in the U.S. government, or one foot in, one foot out, like, say, Elon Musk, who are a certain flavor of white, ultra nationalist, Christian, ultra nationalist, based on how you want to phrase that. 

Anyway, they see Russia as the great white hope, as the country that has been suffering and pushing to protect the white race. Now, of course, that is unmitigated bullshit because the Russians are equal opportunity genocides and the Ukrainians are whiter than the Russians. But he’s the vice president, and he can’t just be pushed to the side and set out to pasture like, say, Witkoff. 

And even somebody like, say, Tulsi Gabbard can just be fired on a whim. Vice president is a little different. Even if formerly officially, the president can just fire the VP, which there would be a court case. Congress is going to get involved one way or the other. It’s a big step for Trump to turn on Vance. Now, I’m not saying that any of these are going to happen. I’m saying that this is what has to go down. If we’re going to see a meaningful change in foreign policy out of this administration on the question of Ukraine and Russia, now, does that change need to happen? 

Oh dear God, yes. We’ve had some really disastrous decisions made on national security as regard this topic. But even if all three of those people were suddenly gone, it doesn’t really solve the overall problem. Trump has a real issue with letting people in the room who know more about a topic than he does. That’s one of the reasons why the government is so lightly staffed. 

That’s one of the reasons why Rubio has been banished to the sideline. And so he would have to do one of two things. Number one, he’d have to dedicate his entire presidency to this one question, because this is this is a lot. And just keeping up to date on it would be robust, especially if you don’t have any deputies. 

Or number two, we’d have to see him turn the page back quite a ways to something that more resembled what he did in the first Trump presidency, when he brought in lots of people from the national security establishment and from the Republican Party, and actually stepped up a proper government. Now, that didn’t work very well, because as soon as I said anything that made him feel little or unintelligent, he fired them. 

But the whole point of being a good leader is to know what you don’t know when. Surround yourself with people who do. No, he hasn’t done that. If he starts to do that, then we’re looking at a very different presidency. But there’s a saying about carts and horses, and we are not there yet.

Copper Imports Slapped with 50% Tariff

Copper tubing

I know it feels like we’re all trapped in a Sisyphean nightmare with all the discussions of tariffs, but don’t shoot the messenger. Trump’s latest move is a 50% tariff on copper imports is going to do a lot of harm.

You all know that the US needs to build out its industrial capacity in the face of deglobalization, and copper happens to be an important part of that. Building domestic copper production would take over a decade and all these pesky tariffs are only extending that timeline.

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Transcript

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. 

Trump and Putin Split, Ukraine Gets Aid Again

Split Screen of Putin and Trump

It looks like Trump is going through another breakup, this time with Vladimir Putin. After years of deception and lies, Putin’s most recent reneging of promises to Trump seems to be the final straw; Trump has announced that US arms shipments to Ukraine would resume.

Since the Russians failed to defend any of the “red lines” that they established during the Biden administration, Trump can send pretty much anything to Ukraine without risk of an immediate major escalation. That doesn’t mean Trump shouldn’t be careful, he just has more flexibility in providing aid than the previous administration had.

On the economic side of things, Senator Lindsey Graham has proposed slapping a 500 percent secondary tariff on any country handling Russian crude. This sounds great in theory, but in practice it’s a legal and logistical pandora’s box that’s best left sealed.

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Transcript

Hey, all. Peter Zeihan here. Coming to you from Colorado. Brilliant. Sunny day. We may. May, may, may be on the edge of a significant shift in American relations with Russia and Ukraine. For those of you who have not been in a hole or drowning in conspiracy theories for the last couple of years, you will know that Vladimir Putin has been lying to Donald Trump’s face for quite some time and has gotten him in bit by bit by bit to move away from Ukraine for reasons that are very, very positive for Russia and very, very negative for the United States. 

In the long run. But time and time again, Trump has basically been made a fool of on the international stage and then has covered for Trump and either peeled back sanctions or removed weapons that were being shipped to Ukraine, and to basically take steps that will cause decades of international problems for the United States moving forward. Well, the tide may be turning. 

In the last week, we’ve had three communications between the white House and the Kremlin, all of which Putin basically lied to Trump to his face and then told Trump he wasn’t going to do anything that he didn’t want to do, including signing any sort of meaningful peace deal with Ukrainians up to and including the point where, Trump felt that he publicly needed to declare that he was sending weapons to the Ukrainians again. 

If you guys remember, a couple of weeks ago, the Defense Department basically canceled a lot of weapons shipments for weapons that we have not used in 30 years. Saying that we didn’t have enough supplies, which is exactly something that the Russians have planted into the American system because so few of the old Russians have been allowed to continue working for the Trump administration. 

Most of them have been fired, either from defense, from the Bureau, from the NSA, or from the CIA itself. Anyway, something seems to be breaking in Trump’s mind, and that kind of forces us to consider this from a couple different directions. Number one, I’m sure we all know people who have fallen for conspiracy theories, and we have all know people who have fallen for lies. 

And when you call them out, they take it personal and they blame you instead of the people who have been lying to them. And Trump is no different from any of those. However, when they do finally make the adjustment, they tend to over adjust. We’ll do it in their own way, saying that this was all part of a test and I was playing the long game or whatever it happens to be. 

But when they do finally adjust, they tend to overcompensate because they’ve been made to look really stupid, and now they feel they need to look strong again. And when the person who feels that he’s been made to look stupid and now needs to feel strong again, is the president of the United States can get really real really fast. 

So the question isn’t so much Will Trump eventually change tune? No one can decide that but him. The question is, what will he do in terms of military actions? There’s actually a fair amount of room for ramp up. One of the things that people loved and hated about how the Biden administration treated the Ukraine war is we never knew what the Russian red line was. 

Will it be providing something that’s more advanced than a bullet to the Russians? So we eased in. Will it be mid-range weaponry? Will it be aircraft? Will be the Abrams tank at every step. There was a lot of debate about whether or not this would push us to a nuclear exchange with the world’s largest nuclear arsenal. A lot of people said, no, you need to do what’s right for the right reasons or just do it. 

And I think, I think there’s nukes in play. There needs to be some nuance here. And so the Biden administration may, in retrospect, have gone slower than a lot of proponents for Ukraine would have argued. But considering that if you got it wrong once. Yeah. Anyway, how it left the last year, the Biden administration is that the United States was up to and including allowing mid-range and even long range American missiles to be used by the Ukraine’s launch from Ukraine into Russia proper. 

And the Russians did nothing. So all of the roughly 80 red lines that the Russians had established proved to be false, which means that there’s really no American conventional weapons systems that could be deployed to Ukraine that are in risk of even going another level up, because all the levels that are short of direct American involvement have already been ticked. 

So it really is just a question of what sort of weapons systems the Trump administration decides it wants to share, and that could be a whole lot of things. Keep in mind that roughly 85% of the equipment that we have sent to Ukraine is stuff that the US military hasn’t used in 30 years. So we’re not talking about anything for most of this stuff that generates a shortfall in what the United States has in its reserves. 

That’s that’s for the most part, a falsity of the remaining 15%. About half of that is ammo, mostly artillery. And that is something to be concerned about. And the United States has basically quadrupled its production of artillery ammo over the time of the Ukraine war. It needs to be expanded more. And then the final little bit are things like patriots that we actually do use. 

And those are a legitimate concern. But most of the weapons systems that the Russians are using to attack Ukraine are low tech drones and missiles, that the Patriot really isn’t the appropriate weapon system for. It’s not that it doesn’t have a use, it’s just it’s not a headline issue that really changes the balance of power. So there’s a whole world full of American munitions that have been developed and deployed since 1992, that the United States could throw into this mix. 

But just keep in mind that most of them like, say, the Abrams would require additional training and perhaps technology transfer in a way that the United States really hasn’t considered at this point. And considering that the US Defense Department has been just as gutted as all the other American government agencies the people would handle, these details really aren’t present in volume anymore, making it a very technical conversation that is very much beyond the capacity of the US defense secretary. 

He was arguably the most incompetent person in the government right now. There’s no one to lead this conversation in a meaningful way like we used to have. So even when you take somebody at the top who’s likely to make a knee jerk reaction, we could get some really erratic policies here with some very, very powerful weapon systems and some very, very proprietary technology which could lead us down a lot of roads that in the long term could be more problematic than beneficial. 

That’s number one. Number two, let’s talk about the economics of it. The Trump administration, Trump specifically has started to make positive sounds about a bill going through the US Senate, sponsored by US Senator Graham of South Carolina. 

Anyway, Graham has been a Russia hawk since the beginning of the war. 

Has really been pushing the Trump administration to take a firmer line. Works pretty much hand in glove with the Biden administration on the aid packages that happened under his term, and has been visibly upset with the inclusion of basically pro-Russian and maybe even Russian agent provocateurs within the Trump administration, up to including the white House, with Tulsi Gabbard, of course, being the worst of them all. 

Anyway, this bill, if it was turned into law, would enable the US president to put a 500% secondary tariff on any country that absorbed any Russian crude. Wow, that would be fun. Now, there’s some obvious problems with the bill in its current form, and that’s one of the reasons why the Trump administration has reached out to Senator Graham’s office. 

Number one, there’s not a lot of flexibility for the US administration, which is in part by design. But if the Trump administration is more willing to engage the senator on this topic, and honestly, it would pass through the Senate with flying colors if it was put forward. It’s an issue of enforcement. Okay. Secondary sanctions are something that have yet to be done, and the US does not have the staff in place to do them. 

You basically just have to get a declaration out of what the Commerce Department, the Treasury, the State Department is saying that this country is in violation. And so bam, all of a sudden, imports from that country are going to cost six times as much as they did. It’s a bit of a lower. The boom would get everybody’s attention. But how it being enforced is a bit of a question. Second, it doesn’t necessarily cover things like the Shadow fleet. So right now, about half of Russia’s oil exports are transported by ghost tankers. Things that are either uninsured or UN flagged or unsafe or old or should have been broken down into scrap years ago. It comes out to about 2 million barrels of crude a day. 

And one of the reasons that the Biden administration never really went after the shadow fleet, it was, was unclear again how to do the enforcement. You just grab the ships on the high seas because they’re not going to dock at any Allied port because they’ll be confiscated. And if you decide that you’re going to use your Navy to basically go out and do privateering, what becomes of the ship? 

What becomes of the cargo? Is it now the property of the country that confiscated it? And all of a sudden you have sovereign countries engaging in a degree of piracy in a world where there’s something like 15,000 ships on the high sea at any given time, you’ll never get a legal framework for dealing with it, because there’s not a legal framework for how ships are handled on the high seas. 

Now, it’s just kind of this gentlemen’s agreement and a bunch of winks and nods and handshakes that everyone agrees that they want free commerce, so they let it all flow. If you start interfering with that without a mechanism, then all of a sudden all commerce everywhere to a degree becomes under threat, because the precedent will be set that a state can just go out and grab things. 

The Biden administration couldn’t figure out a mechanism to make that work without breaking down global trade, which is not something they were willing to do. The Trump administration is broadly hostile to global trade, might not think that they need a mechanism, and might just go do it, which could lead to any number of less than satisfactory secondary effects. 

So the Trump administration is entering this era where the knee is about to jerk, and it’s probably going to kick out and do some things that some people might like in the short term, but it will trigger all kinds of problems in the long term. And this is going to fall very, very clearly under the category of things that you wish for. 

Don’t always go the way that you were hoping.

Elon Musk’s America Party

Portrait of Elon Musk from Wikimedia Commons

I know what everyone is thinking. US politics are just too clean and boring, we could really use something to spice ’em up. Well, Elon Musk has the perfect thing for you! Introducing the America Party.

As a direct challenge to Trump, MAGA, and the GOP, Musk is proposing a new party. However, going down this path is a lot messier than it may seem. Musk is hoping to capture the drifting factions, as the traditional Democratic and Republican parties are in flux. But this can only play out two ways. The America Party replaces one of the other major parties or it splits an existing party and weakens it permanently.

Musk will face massive barriers to achieving this. Not only the monetary side of things (which could be the nail in the coffin for Tesla), but also the technical side of getting on ballots and finding candidates. And the most likely outcome would still be a splitting of votes with the GOP and handing the Democrats a victory.

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Transcript

Hey all Peter Zeihan here. Coming to you from breezy Colorado. And today we’re gonna talk about third parties in the American political system, because none other than Elon Musk has now declared war on Trump. MAGA and the Republican Party and says he is going to launch his own party, the America Party that is intended to run in the next federal elections In the year 2028, Okay. 

Leaving aside the specific chances of a musk led party deal with that later, let’s talk about how this usually works in the United States framework. So every generation or two, the United States political system goes through a seismic upheaval when the party coalitions of the past generation or two no longer fit for the day. 

So if you go back to the last time we had a reorganization in the aftermath of the Great Depression in World War Two, we saw a lot of political factions jump sides. So, for example, big business used to all be Democrats. They became Republicans. African-Americans used to all be Republicans. Part of that was loyalty to Abraham Lincoln’s party. 

They all became Democrats. Lots of things moved around until we got into the form that were more or less into today, which is, you know, in on the right business conservatives, national security, conservative social conservatives, law and order voters, albeit under kind of the same block, whereas the Democratic bloc has urban educated elites, organized labor and a variety of minorities. 

Those two broad coalitions is where we’ve been for the last several decades. Well, that’s all in flux now. That’s all changing. The Hispanics are very much in play. The Catholics are switching into conservative voters instead of being swing voters. The business community and the national security community have been actively kicked out of the Republican coalition. And organized labor is very much in play. 

We don’t know where this is going to settle. Enter Elon Musk. The idea is if you make a new big tent party, you can attract a lot of these factions that are currently in flux and maybe, maybe temporarily. A third pull in politics, according to Musk. He says it’ll be tech driven, centrist, business friendly that’s nowhere near a big enough coalition to generate a majority party. 

But it’s more than enough to break the chances of a different party. You see, when we go through these transitions and these big tents break, you can really go one of two directions. Number one is you get a viable third party that gets enough of the vote that it eventually drives one of the other two major parties out of existence, or doesn’t do well enough to win, but it draws enough votes away that one of the two major parties then kind of absorbs it in order to get those voting blocs. 

We’ve seen that happen twice in American history. In fact, that is exactly where today’s Republican Party came from. Back in like 1854, the Whig Party was the one that was on the ropes. Then the new Republican Party rose up and basically sucked out all the support of the Whigs, and the Whigs went away. I mean, you don’t really think about the Whigs very much today, do we? 

20 years from now? Probably not going to think of the Republicans and the Democrats the same way either. That’s option number one. Option number two is you get a party that, for whatever reason, becomes bloated and maybe has too many factions for the environment. And it splits down the middle. And that is where today’s Democratic Party came from back in the 1820s, I want to say 1828, but I’m not sure about that. 

Anyway, it’s split from the Democratic Republicans into the Democrats, and the Democrats were the surviving chunk. So both of these are viable options. And what Musk is doing is perfectly capable of triggering either of them. Now, there are still a great many obstacles to come through that have to be dealt with before the America Party becomes a viable political force. 

Until very recently in the United States and actually still elected morally, we don’t have a national Republican Party and a national Democratic Party. We have 50 state parties for each group. So you got your Iowa Republicans and your Ohio Democrats and so on. It’s only under Donald Trump where he’s basically ejected most of the regional party leaders and most of the business voters and national security voters that the Republican Party has coalesced into America’s first true national party. 

But it’s a party under one dude with no line of succession and no one who at the moment seems to have the charisma, the power, or the reach to pick up the baton for when he dies. And keep in mind that Trump is older now than Biden was when Biden became president. We all remember how that ended. Trump has basically become the Castro of American politics. 

When he goes down, he probably is going to take his entire political infrastructure with him. However that happens now. Let’s see, what else do I need to cover in this madness of American politics? 

Right mosque America party. He has to start at one party. He has to start 50 parties. He has to get on local ballots and local elections. He needs to get electors. He needs to get candidates. He needs thousands of candidates. The bare minimum amount of cash that is necessary to do that on a national basis, to have any chance of national power is $100 million. 

Honestly, $1 billion would make more sense now. Musk has already given that much and more to Trump, and he has a lot more to lose if he has a falling out with Trump. So trying to shift the political balance at a national level again makes a lot of sense for him personally. The question is how much of his wealth can survive until the next political cycle? 

We’re going to take this inside. 

Where was I before? Lightning interrupted us. All right. Musk’s money. 

Tesla is the core of Musk’s corporate empire, and it is arguably the most subsidized American company in history as a percentage of its sales revenue. And now all those incentives have gone away. Tesla’s either sold enough cars that it doesn’t qualify for a lot of the startup subsidies and the Trump administration and the most recent legislation that the big beautiful bill, if you will, has basically removed any incentive for anyone to participate in things like carbon trading. 

So some of the economic assets that Tesla has built up over the last half decade are basically worthless now. And the entire Tesla corporate empire is backstopped by loans and stock in Tesla itself. So as Tesla basically goes away because there really is no future for the company in a world where there’s a trade spat with the Chinese, which is where all the batteries come from, the rest of the empire basically falls into a degree of debt that, Musk bailed out. 

And the idea of a government bailout now is probably beyond a possibility. And so we’re looking at things like SpaceX that’s probably being nationalized. Starlink is kind of above in the air, and the rest of it really isn’t worth anything. Once you take the effect that the government will no longer be subsidizing it. So Musk is going to have to draw income and equity out of Tesla before that happens. 

And the question is, in that sort of environment, does he kill his company to start a new political movement, or does he just let the company die and then he’s left with nothing? Nobody can answer that question but Musk. But all of Musk’s investors know that that is the question. I mean, is this guy going to take what capital he can out of his company and destroy it for a political play when they want him to be working full time, trying to save the companies? 

There is no winning position here if you’re an investor in anything that Tesla has touched. And whether or not this is the guy, somebody who has a tendency to be perfectly blunt ly constantly is going to be the kernel of a new political movement is kind of a stretch until you consider that that’s already happened in the last ten years. 

  

So I can’t tell you that the American party has a future. I can’t tell you that it doesn’t. I can just say that it comes with consequences of a very real and personal sort for Elon Musk and of course, for the current form of the Republican Party, because if all of the populists on the right have a choice between two different banners, then you’re looking at the Republican Party splitting and the America Party probably not getting enough support to actually get into office anywhere. 

And the Democrats, no matter how disorganized they happen to be, sweep the field. We’re at a moment where everything is in play, and it’s whoever screws up worst loses. And when I look at today’s political map, how many screw ups?

Tariff Day Is Here, Again!

Scrabble pieces showing the words USA and Tarrifs

Tariff Day is almost here and it’s looking like it might be another series of recycled tariff rates layered with vague threats.

This ongoing series of tariffs has stalled the economy, putting business investment and construction in limbo. And since there is no one to negotiate with on the American side, I’m not sure when or if any real deals/negotiations will take place. The only movement we’ve seen on this front is with the UK, and calling that a trade deal is still a bit of a stretch. Allies like Japan are starting to feel a bit betrayed by this endless cycle of tariffs.

All there is to do now is wait and see if any meaningful strategy appears from this Tariff Day.

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Transcript

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.