The Fire Hose of Chaos: Port Fees

Photo of port of savannah, GA

Today we’re discussing the Trump administration’s 96th tariff policy which imposes port fees on Chinese ships.

Chinese ships that enter a US port will be slapped with the higher of a $50/ton (rising to $140/ton overtime) fee or $150/container fee. This policy was initially set to be more extreme, but public comments helped scale the fees back as to avoid crippling US port logistics.

The issue with this tariff is that it increases costs for everyone but fails to offer any solutions. Since the US has no capacity to build cargo ships (as military shipbuilding is the priority right now), shipyards are already overwhelmed and dysfunctional. So, the intention is to reduce reliance on China, but there’s no path to doing it…

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey all. Peter Zeihan coming to you from Atlantic City and today we’re talking about something that actually happened a little bit back on April 17th. That’s when the U.S. Trade Representative Office announced the 96th tariff policy of the Trump administration in less than two months. Oh my God. And this one is on port fees. Specifically, any Chinese registered Chinese built Chinese operated vessel will now have a $50 charge per ton, ramping up by $30 a year until it hits under $140 a ton.Or, $150 per container, again ramping up over a few years. Whichever one is higher. 

This one is unique in that it was actually put out for a degree of public comment. And so people pointed out to the administration that there are no American ships. So, some of the more ridiculous versions of this, were rooted out originally was supposed to be like a million, a million and a half, maybe even 3 million per ship per visit. 

Which would have basically taken everything and concentrated it. So, well, China is the source of most of our manufactured goods. It’s not where they’re necessarily manufacturers, where they’re assembled. It, the manufacturer requires basically everyone in East Asia and China is the low man on the totem pole, but the largest one. So it’s where everything’s put together. 

And then it sails in finished form from Shanghai or Tianjin to, Los Angeles or Houston or New York or Savannah. If the old system have gone through, all of our secondary ports would have basically been starved and we would’ve just had endless traffic jams at the biggest one. So they decided to go with a weight slash volume version rather than just a flat fee, which make it a little less onerous. 

From a logistical point of view, anyway, there’s still some problems here because, it’s starting to interface with other problems the Trump administration experiencing. And that has to do with Defense Secretary Pete Hegseth, who is rapidly showing himself to be up there with RFK Jr to be the most unqualified, and, incompetent cabinet secretary in American political history. 

In the last two weeks, he’s basically fired everybody he brought in with him. And so in his office now, it’s just him. It’s wife, his brother, his lawyer, and that’s about it. And then, of course, Trump fired all of the deputy undersecretary, assistant secretaries and everybody and basically hasn’t replace him with anyone who knows what they’re doing. 

And so Pete says big breakthrough in the last few days has been to build a studio and an editing platform, within his office. So he can share videos of himself working out in the morning. Because that’s what we need to prepare for military readiness. Yeah. Anyway, bottom line is that one of the things the Trump administration says it wants to do, which I broadly agrees to build more military ships. 

Okay. Well, I take shipyards. And so basically, we’ve got an incompetent defense secretary managing a underfunded and unplanned shipbuilding program, which basically takes up every berth drydock that is available at every, shipyard the United States has of it’s being managed just completely incompetently. And so if you want to build a civilian cargo vessel, there’s no room and there won’t be for years. 

So step one, if you want to start mucking around with the ports, is to build more ships so that you have options. And just as with steel and aluminum construction and all the other tariffs, the Trump administration has failed to do that. So we if we want stuff at all, we have to now pay more for the stuff because of the tariffs and then pay more at the ports because of these new port fees. 

And there is no alternative for building an American equivalent, because the building blocks of what you need to industrialize still haven’t been done. And everything is just going to cost more for everyone. Yep. That’s it.

A Concerning Update to the Russian Reach Series

Flags of USA and Russia merging

Well, the Russian Reach series needed an update, and it’s not a pretty one. The infiltration of the US government by Russian interests is growing and I don’t see an end in sight.

We have figures like Tulsi Gabbard with a foot in the White House and the Kremlin. The very institutions which were created to protect the US from these threats are being dismantled under the Trump administration. Don’t even get me started on ‘SignalGate’. Grenell is spewing pro-Russian narratives to whoever will listen. Navarro is echoing Russian propaganda as it relates to economic policy. Trump is still repeating disinformation. Russia is finding more ways to align itself with MAGA through its influencers. Russia wants in on the invasion of Greenland. And to round it out, we have Tucker Carlson as the only media source Trump’s admin is talking to (the guy that features guests like Russian fascist ideologue and genocidal proponent, Alexander Dugin).

I’ll let you sit with that one for a bit…oh, and have a good weekend!

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey, all. Peter Zeihan here, coming to you from Atlantic City. Today we’re going to update a series that we did last month called The Russian Reached what looked at the logic and the actions of the Russian government and how they were attempting and probably successfully attempting to penetrate deep into the American government right up to and including the white House. So the purpose of this is to give you an idea of how much is involved in just the last 3 or 4 weeks, and it’s unfortunately a very long list. 

First off, keep in mind that the Director of National Intelligence, Tulsi Gabbard, is somebody who most of the intelligence community who is has thought of as a Russian agent for quite a few years and one of the first actions that she… well, let me let me put it this way. If she’s not a Russian agent, she’s probably a traitor because the Venn diagram of her worldview and Vladimir Putin’s are pretty much identical. I mean, there might be a little bit of not overlap like a half of 1%, but that’s largely just hairstyles because, you know, Putin is bald and got rich hair is fabulous. 

Anyway, she’s pretty much completed gutting the counterintelligence arms of our various intelligence agencies. So most of those staff aren’t even doing the jobs that they once did, allowing the Russians to really plow into American society however they want. Also, the Trump administration has largely dismembered the parts of the intelligence community and the State Department that, were there to protect our election integrity from Russian intervention. Same thing for web hacking. And, the Department of Justice has largely stopped investigating white collar crimes, most notably fraud and cryptography. Cryptography. Wrong word like Bitcoin scams. 

Which are another way that the Russians really, really enjoy getting their claws into American society. In the American government. We basically just stopped enforcing those laws. The same goes for white collar crimes in general, which, of course, for a country like Russia that is corrupt and uses US intelligence systems to undermine societal stability all around the world, is something that has made their job a lot easier. 

The next big issue is, of course, signal gate. Now, signal gate, happened back in March, mid-March, when the United States was preparing military assaults against the Houthis, which are the militant group in Yemen. And basically the entire top tier of the American national security team, including defense and intelligence. And Gabbard, of course, basically participated in a chat on the signal chat program. Signal is a platform that supposedly secure, but the week that this all went down, the Defense Department’s internal Intel, indicated that the Russians had probably hacked the encryption protocols. 

So, basically, the American national security apparatus were all using what had become an unsecured platform to communicate, basically operational intelligence. Tulsi Gabbard, again, testified, about halfway through the revelations to Congress that this really wasn’t a big deal. And no one should be overly concerned about it, because, of course, it’s not. 

All right. Let’s see what’s next. Rick Grinnell. He is an on again off again semi diplomat who is, working for the Trump administration. He worked for Trump one, did a really bad job, basically just went around talking to German neo-Nazis the whole time so the Germans wouldn’t deal with him at all. Anyway, he’s back in the administration now, and he’s one of those people that is so unlikable that even Donald Trump doesn’t like to have him around in person. 

So he kind of hovers outside of the West Wing and is basically spewing anti Ukrainian Russian propaganda in the ears of Trump Jr because he can’t get the ear of Trump himself. Specifically, he likes talking about the Budapest Agreement, which was something that dates back to the immediate post-Cold War years, when, the Ukrainians gave up their nuclear weapons. Basically, Grenell is a spouting the Russian equivalent of that deal. Their interpretation of it 15 years on, and basically trying to get the Trump administration to disenfranchise Ukraine as a state and suggesting that they’ve never had a claim to anything in the first place, which is, of course, exactly what the Russians would love the Trump administration to believe. 

Let’s see. Next up, we’ve got Peter Navarro. Who is the manufacturing advisor to the president. Very protective guy. He started using Russian propaganda that has been recently designed and released into the ecosystem. That’s specifically targeting Canada. So Navarro has always been an anti-free trader. Don’t really have a huge problem with that. But it’s interesting to see Russian propaganda popping up in his statements on TV now that are very, very specifically tailored to a very specific issue that really wasn’t an issue in, the Russian propaganda sphere until just a few weeks ago. 

Then we have Donald Trump reporting Russian propaganda on everything from broad strategic issues, to very tactical issues. So, for example, near the end of March, Trump started talking about how Ukrainian troops in Kursk had been encircled by Russian forces. And, you know, this or that should happen. I mean, that never happened. 

The Ukrainians were able to withdraw from the Russian province of Kursk fairly, I don’t want to say easily, but without a lot of casualties. And in fact, that withdrawal had been completed more than 48 hours before. Trump is supposedly asking the Russians to modify their operations in Kursk. So this is something that actually came from internal Russian Federation propaganda that was designed to shape attitudes within Russia itself. But somehow it got on Trump’s desk. If I was a guessing man, I would say that that probably happened via gab or directly. 

On Greenland, the Russians are trying to convince, the MAGA spear that a joint invasion, Russians in the North and Americans in the South would be a keen idea, something that would obviously shatter NATO overnight and end America’s defense alignments with, the Scandinavian countries that, in my opinion, are going to be the future of the American alliance network in Europe, which, of course, is something that the Russians would love to see destroyed. 

You may have heard of Tim Poole. He is a far right influencer that’s very tight in the MAGA space. He has a number of podcast and, video vlogs. Kind of like, you know me a little bit. He’s been basically indicted, I think is the technical term for taking somewhere between $400,000 and $10 million from, the Russian state. 

Basically, they’re shoving money into his platform to help spread disinformation throughout the American MAGA sphere. He claims he didn’t realize that it was going on. That’s his official stance on the investigation is impending. But, you know, he has on any given day, somewhere between a number of followers similar to me and twice as many. And I can guarantee you that if $100,000 per video least that I did suddenly showed with my my bank account, I would not need the FBI to tell me to investigate the shit out of that. 

So let’s just say I don’t take it very seriously. 

But the most important part of this is that Tim Pool is now part of the white House press pool. The Trump administration has brought him into the inside while kicking out, you know, those liberal rags like AP and successful farming. 

And then finally, a name that, you may have started to hear bouncing around Alexander Dugan. He is basically a run of the mill Russian fascist who has been advising Vladimir Putin for over a decade now, basically making up the ideology to justify genocide against anyone they feel is necessary. And until a year ago, most of his vitriol was ultimately, reserved for the United States. 

So preemptive nuking, death camps, that sort of thing. He’s a real peach. Anyway, he has started making the rounds of MAGA, publications, in the United States recently. And of course, the first one in that role, the first of the big ones that he did was none other than Tucker Carlson. Now, you guys may remember, Tucker Carlson used to be a Fox News host. 

Tucker has been fired from every media job he has ever had for lying on air about things on purpose. And since he left Fox, he has now basically migrated directly into the orbit of Russian propaganda. And most of his shows deal with Russian propaganda from it. You know, sharing it with the world point of view. Perhaps the most concerning thing I have in the information space as regards the Trump administration is not this Tim Paul thing, although that’s, you know, not minor. 

But this is the American administration throughout history that has had the least contact with the media of any form. It’s not just that they’re not talking to more liberal groups like, say, the New York Times. They’re not really talking to Forbes or Bloomberg or the Wall Street Journal. They basically shut out everybody. But many members of the Trump cabinet have done extensive one on ones with Tucker Carlson. 

So we basically have a gutting of the normal means by which an administration would normally interact with the country and focused on a very, very few, avenues, of which the bigger ones are already in the Russians pocket. Anyway, I don’t have a lot of great news on that front, and I will leave everyone to their own recognizance as to what’s going to happen next. 

The Fire Hose of Chaos: The Green Transition Is Over

Photo of a plant growing in a lightbulb

The green transition in the US has made great progress in recent years, but the wheels are falling off. This is largely due to economic pressures, lack of financing, and the new tariffs instituted by Trump.

Wind and solar projects require heavy upfront investment, which isn’t a great combo with capital costs skyrocketing and available capital draining from the system (blame the retiring Boomers). The government support for the green transition has also dried up; the Biden admin had the Inflation Reduction Act and other Greentech subsidies, but the Trump admin has pulled support and funding for these programs and projects. And you can’t forget the new tariffs hitting key components for the green transition, which have made solar prohibitively expensive and wind an uncertain gamble at best.

So, it looks like the green transition in the US will effectively be on pause until the US can build out its own manufacturing base. And that’s at least a decade-long process…

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey, all. Peter Zeihan here. Coming to you from my parents backyard in Iowa. I’m visiting because I’m a good boy. Anyway, today we’re going to talk about the end of the Green Revolution in its current form, at least in the United States. There are three things that have come together to basically completely destroy the economics of the green transition. 

And then a couple of things on the side that are making it more difficult anyway. The first has to do with the baby boomers. Two thirds of them have retired, which means that all of the money that they were saving for retirement has been liquidated. And it’s gone into less exciting financial instruments such as T-bills and cash. 

And that means there’s less capital available for everything. So we’ve roughly seen the cost of capital in the United States increased by a factor of four in the last five years, has nothing to do or very little to do with government policy. It’s just that there’s less money available in the system overall. So mortgage rates go up, car loan rates go up, anything it needs to be financed goes up. 

And that’s a real problem for green tech. When you’re looking at, say, a conventional thermal power plant, coal, natural gas, that sort of thing, you only have to pay for about one fifth of the cost of the life of the plant at the front end. That’s the upfront construction. And then about two thirds of the expense over the full life of that power plant is the fuel, the coal or natural gas. 

And you buy that as you go. That’s not how it works with wind and solar. With wind and solar, about two thirds of the cost has to be paid upfront. And that means it has to be financed. Well, you increase the cost of financing by a factor of four, and all of a sudden you’re talking about a financial commitment. 

That’s just huge compared to what it would have been just five years ago. And that is now happening across the entire space. So that alone would have probably ended 70% of the power plants that are in solar and wind. Just just off the top. The second problem, of course, is that you have to finance everything upfront in the first place. 

Anyone who wanted to do the green transition really needed a helping hand from government, typically at the federal level. And the Biden administration, through things like the IRA Inflation Reduction Act, was very big in providing that financing. Well, that’s basically gone to zero under the Trump administration. So your financing costs have gone up by a factor of four, and you don’t have any outside help. 

But the real killer, especially for solar, has now been the tariffs. Almost all of the photo voltaic cells that are used in solar systems are produced in China, oftentimes with slave labor. And while the green transition folks were willing to overlook the fact that, most of the stuff was ha, I still have a sticker on there. 

Well, most of the folks in the green transition were willing to overlook the slave labor thing, in order to get the panels that they needed. You can’t really overlook 145% tariff. So if the PV cells cost you two and a half times as much and your financing cost has quadrupled, that’s just not going to fly. 

Now, it’s not quite as bad for wind because there are some non-Chinese providers of wind turbines. Most notably in northern Europe. But those were where we have a tariff of at the moment, 10%. It was 20% a week ago, that just introduces a lot of uncertainty into the system. So both of those things are gone. 

Wind a little on the edges. Maybe. Solar’s absolutely out of the question for most people now. The only other remaining piece is batteries. When last year, the Biden administration slapped a lot of tariffs early in the year on Chinese electric vehicle bills to keep them out of the U.S. market. What happened is the Chinese repackaged all of the EV batteries into, container units to be sold as grid storage. 

And so in calendar year 2024, adding battery storage, which is actually the cheapest form of power that you could add to your system. So the Texans in particular, you know, just boned up on that hugely. Because if you can have a battery grid system, it’s actually better economics and say having a natural gas peaker plant because they normally speakers or is would only run a few days of the year. 

The batteries can take that load, but since you now have them. And since Texas is the number one green energy state, they would use their solar system to generate power during the day, store the extra in the batteries, and then use that during peak demand and evening hours when the sun’s going down. 

It worked really well. She was like 48% off of power costs, but now we have 145% tariff on all of those batteries as well. So I don’t want to say that that’s going to stop cold, but the pace of the application is going to slow considerably because the Chinese dominate that space. And we haven’t built the industrial plant here yet. 

That isn’t necessarily to fill the gap for ourselves. So for the moment, minimum two years, probably until we have a better battery chemistry, probably until we have better PVS, certainly until we have more diversified manufacturing base, which is a ten year process. We’re looking at the green transition taking a bit. 

The Fire Hose of Chaos: Government Debt

Photo of house made our of 0 bills

With everything that’s going on in the US, it makes sense that foreign investors decided to dump US T-Bills. But what does this mean for the government debt market and the future of the USD?

The selloff of $100 billion in T-Bills caused interest rates to spike and US Treasury yields to jump; however, the US remains the global financial baseline. Other countries simply can’t offer the volume, stability, or scale that the US Market can.

With no real alternatives, the US will remain in the number one spot. If things did heat up, the Fed can always monetize the debt (which is something they’ve never had to do at large scale). And the US has structural advantages and policy tools that will keep the US stable in the long run.

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey, all, Peter Zeihan here with a home office video. We’re gonna take a question from the Patreon crowd, and that is, do I worry about what’s going on with the government debt market? Specifically, some of Trump’s economic policies have been so erratic that they have been causing foreign investors, most notably the Chinese, to dump a lot of us T-bills on the market. 

We’ve had reports that as much as $100 billion has been dumped in a short period of time, and in doing so, the cost of financing that debt has gone up, with the US T-bills briefly hitting about 4.6% before falling back. Basically going up a half a percentage point in a day doesn’t sound like much, but typically if you go up more than like 5/100 of a percent in a day, it’s kind of a big deal from a financing point of view, because in the US, government has issued more debt to pay for the financing. 

And since there’s $36 trillion in outstanding debt, you move that needle just a little bit and all of a sudden the US government can get into a lot of financial trouble. And some version of that is what destroyed the Premier ship of Elizabeth Truss in the United Kingdom a couple of years ago. She instituted a policy of tax cuts that were going to be funded by debt, thinking that the growth would then make up for the difference. 

And the market absolutely destroyed the pound briefly. And she was out in only a few days. I don’t really worry about that from the American point of view. A few reasons for that. First and most importantly, the US T-bill market is the global standard. Whether or not it is the 80 list standard is not the point. 

The point is it’s the baseline that everything else trades around. So you can have governments with tighter fiscal ships like say, the Netherlands or Australia or Germany, whose debt is generally considered higher quality than the US. And it doesn’t matter because with $36 trillion, we are the baseline for pretty much all financial instruments, and that provides a lot of cushion against big shocks. 

The bigger problem is whether or not the United States is risking losing its position as the global currency, the global store of value in the currency of first and last resort. After April 2nd, when Trump put in the tariffs, it basically would have generated a global meltdown if they would have stuck around. The concern is that there is a flight to safety, and usually in a flight to safety, people go to gold because they interpret as it being inflation resistant, and they go to U.S. T-bills because they’re the global standard in the US economy. 

If something happens to it, the rest of the world has already melted down. Well, since the cause of the problem was the US government, the T-bills didn’t seem to be a particularly viable option and money went elsewhere. But if you look at the other options, they kind of suck. They went to the European Euro, and the euro has risen since the US dollar in the last couple of weeks. 

But at the end of the day, the countries in Europe are demographically dead, and they can’t provide this type of baseline activity that isn’t necessary to underwrite a new store of value or a new source of exchange. And the euro is bigger than all the other options put together. The British pound still hasn’t recovered from the Truss episode, and without the Empire behind them, they’re just a mid-sized country. 

They could never provide the volume. Canada, Australia. They run a tight ship. But you’re talking about countries with under 40 million people. In the case of Canada, under 30 million people. In the case of Australia, they just can’t compare to 330 million that are in the United States. Not to mention, the United States is a larger economy per capita than any of the others. 

And that just leaves Japan, which until recently had one of the most manipulated currencies in the world. People like to talk about the yuan, but the one is not internationally traded. It’s not even an option. There’s just nowhere else to go. But even in the worst case scenario where everyone, everyone decides they just have to go somewhere else. 

Which, by the way, does indicate a complete financial meltdown of all countries. Even in that scenario, the United States has an ace up its sleeve that has been used as a matter of course, by pretty much every other central bank for the last 30 years. You see, as countries have been demographically declining, their debt has become less and less attractive. 

And so the central banks have had to step in and monetize that debt bit by bit by bit, basically printing currency to buy up the government debt. It’s not that the US doesn’t do this, but the US has never done this on the scales. Everyone else has done it. And since the Covid crisis ended, the federal Reserve has basically been cleaning up its balance sheet month by month by month. 

And so there’s a lot of wiggle room for the fed to do just that. Now, that would still have consequences. But we’re talking here about an end of the world scenario, which is kind of my specialty. And in that scenario, you basically would have the Federal Reserve monetize large portions of the debt and become the buyer of government debt, a first and last resort. 

In that scenario, the existence of the US t-bill as the baseline for everyone else would be a little bit different, but it wouldn’t stop. So having that in your back pocket gives you a lot of options that nobody else has. Don’t feel great about it. We’ll be okay on this measure.

The Fire Hose of Chaos: What Is Hegseth Doing?

Official government photo of Pete Hegseth

Pete Hegseth, the current Secretary of Defense, has been doing his best to completely dismantle the United States’ ability to fight a war now or in the future. Let’s look at why this is happening…

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Peter Zeihan here. It’s Easter Monday. You’ll see this on Easter Tuesday. And today we have to talk about the Department of Defense and in particular, the Secretary of Defense. A guy by the name of Pete Hegseth. Pete Hegseth is the least qualified, most incompetent secretary of defense the United States has had. And over the couple of months that he has been in the office, he has done more to destroy the United States’ capacity to fight a current war, much less a future war, than really anyone in American history. 

And it’s worth exploring why. The big news that came out over Easter weekend that has prompted me to talk about this topic is that if you remember back a few weeks ago, we had the SignalGate issue where the Secretary of Defense, Hegseth, set up a chat room with a bunch of other top national security folks, as well as the Treasury Secretary. 

And somehow a reporter got invited onto it, and on an unsecured platform that the Russians had cracked the security on, started discussing active war plans and operational intelligence—something that under normal circumstances would have gotten everyone involved fired. But this is the Trump administration, and decisions are made differently these days. Anyway, turns out that around the same time that he did that, Hegseth had another single chat—again unsecured—but this time with personal friends, his personal lawyer, his wife, no one who had a security clearance. 

And to be clear, this is a felony that would get anyone in the armed forces put away forever and dishonorably discharged in a matter of seconds. The Trump administration has already said they see nothing wrong with this, and Hegseth will continue in his position. I think it’s worth understanding why the United States military is the most powerful military force in human history, and how Hegseth is looking to rip that up, root and branch. 

The first issue is education. When you have a force that spans the globe, you will need dozens of different skill sets, especially in your officer corps. So the United States maintains the most advanced staffed college system in human history to train up their mid-career officers for any possible outcome, as well as to teach them things like history, economics, trade, technology, electricity, energy, and all the rest. 

One of the things that Hegseth has said is that anything that does not directly encourage activities for an active war fighter should be cut. That includes all of the staff colleges, which is where we get all of our officers. Basically, it’s a return—or an attempt to return—the training system to something that was much more reminiscent of what we had in the Civil War, where you just threw bodies at everything. 

Gone would be the efforts of leveraging technology or anything else. The second issue is these educational institutions that we have to keep in mind: globe-spanning military force. So we do two things. Number one, we fly the troops to the educators. We try to fly the educators to the troops based on the circumstances. In addition, there’s the little issue of allies. Because the United States has the best training system in the world, we kind of lend it out, if you will. We invite other war fighters from allied countries to come to our training institutions to basically get a doctorate in the American way of warfighting, as well as seal up alliances and potential alliances with countries that are not, yes, treaty allies. Well, that requires people moving about. 

And one of the things that Hegseth has done is a blanket travel ban on all the educators so that they can’t travel. So if you want a war fighter to get trained, he now absolutely has to come to where the university happens to be, whether that’s in Annapolis or in Monterey. And everyone else is just shit out of luck. 

So we’ve seen what is arguably, in my opinion, the single biggest advantage we have long-term whittled down to just a weak spot. Then there’s technology. You may have noticed, but since the age of computers, the type of hardware that we are using in the world has been evolving, especially in the last few years with the Ukraine war. 

So, for example, the military gets a lot of crap, I think, fairly or unfairly, for being kind of stodgy because the technologies that they have used really haven’t evolved or mutated a lot in the last hundred years. I mean, yeah, yeah, yeah, we got jets after World War Two or at the end of World War Two. We got tanks at the end of World War One. We developed missiles during the Cold War. But guns, artillery, missiles, jets, helicopters, ships—you know, the general playbook hasn’t evolved all that much. The same basic platforms haven’t evolved. We just upgrade specific technologies and put them together in different packages and throw them at different problems in different ways. 

But the pieces really haven’t changed all that much. Well, starting about five, ten years ago, that really started to shift because we got breakthroughs in things like information technology and energy transfer and digitization, and they’re all happening at the same time, and they’re combining into new weapons systems that we’re only now starting to game out and design. And the Ukraine war is famous, of course, for drones. 

And drones are absolutely the leading edge of this revolution. But we don’t know what this is going to look like in five years or ten years or 15 years or 30 years. And keep in mind that we have a lot of weapon platforms that we designed back in the ’50s that we’re still using. So you have to have an institution within the military that games out the future. 

This takes two forms. First, you get the best and the brightest from the Intel systems within the military. You put them together in a room and get them to imagine the sort of thing that the president is going to be demanding of the military forces in ten, twenty, forty, eighty years. Then you need a technical team that can design a weapons system that will not just be useful ten and twenty years from now but can be upgraded and still be used a generation or two from now. 

Well, Hegseth is firing all of those people. The Office of Net Assessment—whose job it is to do the first part of that, imagine the future—has already been disbanded, and we’re seeing massive cutbacks in excess of 70% for all the officers that do the technical work. So basically, the United States is taking a giant technological step backward in its warfighting under Hegseth. 

And then the third issue is recruitment. Remember, we don’t know what the weapons of the future are going to be. So why in the world would you put any restrictions on how someone might choose to serve their country? We need everyone of every background. And if you look back at the history of the U.S. military going all the way back to before the Civil War, it’s not just that the military has always been a social ladder for underprivileged groups to attain status within a society. 

It’s a way they can attain leadership. They can get the skills that they need to remake their own futures. And from the American point of view, from the military point of view, from the tactical point of view, from the warfighter point of view—we need everyone we can get. Newsflash, folks: straight white dudes are less than one third of the population. 

And if you put restrictions on how the other two thirds of the population can choose to serve the country, you will never meet your recruitment goals. So in the last two months, we’ve seen a series of things go down. Most notably, Hegseth recently changed the physical requirements for what you have to match in order to serve in the military. 

Gold review phraseology—a policy that almost seems like it was custom-designed to kick all women out of the U.S. military. And then, of course, recruitment for any place that is not totally stocked with white dudes has basically been cut to zero. Even Black engineering universities are no longer being visited. And I know, I know, some people are going to say, well, if you’ve got a standard and everyone can’t meet it, it doesn’t work. 

No, no, no, no, no. The Israelis broke the seal on women in the military over 50 years ago. And today, every first-world military has a substantial proportion of women in the field. So if you can’t adjust for that, you’re going back to the 1840s. Moreover, there are some jobs—like, say, fighter pilots—where women are better because they can handle the G-forces better. 

So is Hegseth going to change the policy so only chicks are fighting in the jets? I don’t think so. What we’re seeing is it’s all adding up to the greatest degradation of American warfighting potential that we have ever seen. And this is only two months in. I also don’t think this is the end of it. Yes, Hegseth has now committed multiple felonies. 

Yes, Hegseth is an unmitigated disaster in his leadership. And yes, his entire inner office has now been fired. Oh, this is rich—he fired everybody in his office saying that they were all leaking information. I have no idea if that is true, but Hegseth has a history—especially in the SignalGate stuff—of saying something that is just a bald-faced lie, knowing that the information is out there to prove him wrong. 

And it’s usually released in the next couple of days. So by the time we see this video, we will probably have multiple lawsuits against Hegseth personally, for people firing, quitting, etc. So by the time you see this video, it’s entirely possible that the office that was fired—they will have all issued wrongful termination lawsuits and provided the information that will prove this guy is just an absolute moron. 

Okay. Do I think he’s going to go? No. Remember, the Trump administration did not build its cabinet because it thought these people were capable or change agents. He chose them because they were incompetent. The first time around, when Donald Trump became president, he really didn’t expect it. He thought he was going to lose to Hillary Clinton. And so he didn’t have a cadre of people around him because he had never been in government. 

Well, he reached into the Republican Party, pulled their policy experts, and—especially on security affairs—relied very heavily on generals and admirals to fill out the billets. Well, what he discovered in that environment is when you have generals and admirals who have been through the staff training program and they know how the world works intimately, they have opinions about how things should be done, and they can point out consequences if you do things the wrong way. 

Well, whenever that happened, Trump fired them. And so he went through more cabinet members than any American president in history. Just a huge number of generals rotated through the White House in positions like, say, Secretary of Defense or CIA Director. Fast forward to this most recent race. 

Trump had decided while he was out of power that rather than build a team of competent people who could push an agenda through, he wanted to make sure that there was never anyone in the room who would tell him no. So he reached out and hired people like Pete Hegseth, who I would argue three months before he became Secretary of Defense, had no idea that that was in his future. 

Well, because Trump values incompetence near him, there is no reason to expect Hegseth to be dismissed. I mean, of course he should be dismissed. But of course, in a normal administration, he would have never been nominated, much less confirmed. And that brings us to the next problem: Hegseth and people who are at his level of general incompetence—that includes the Director of National Intelligence, who is Tulsi Gabbard, or the Health and Human Services Secretary, who is Robert Kennedy Jr. 

All of these people should not be in their spots, but they’re going to stay because Trump values their lack of expertise. He values their yes-man mentality. He values the fact that they’re not keeping him informed because it allows him to live in his hermetically sealed, Obama-esque bubble. The only way that these people can go away is if they are impeached. 

And since the Trump team has basically gutted the Senate of anyone who is willing to stand out, that’s a really tall order. As Senator Murkowski of Alaska pointed out, retaliation against Trump is real. And so she’s considering leaving the party and being an independent in her home state of Alaska. That would still leave us with 52 Republican senators who are either unwilling or unable to stand against the president on issues of national security. 

And if you’re going to impeach someone, you have to get two thirds of both houses of Congress. So now you’re talking about roughly 20 Republican senators having to flip. In this political environment, I just don’t see that as feasible. So we are looking into the long, painful, drawn-out crash of the United States’ ability to manage its national security concerns under a leadership that is thin, that is broken, that is incompetent—and unfortunately, that we are stuck with for the foreseeable future.

The Fire Hose of Chaos: Corruption

Photo of a bronze trump doll on stacks of 0 bills

The Trump administration has introduced a level of chaos that can only result in one thing: corruption. I’m not talking about starting a cryptocurrency or manipulating the stock market, this is deeper.

Trump’s arbitrary tariff policies are destabilizing the US economy and eroding the rule of law. The ever-changing nature of these policies makes it impossible for importers to plan for or comply with. And in a broken system, corruption is bound to seep in. And since the US relies on self-reporting tariff obligations and has very few guide rails in place, businesses will likely turn to bribery to keep their goods flowing smoothly.

This is reminiscent of 1990s Russia, or even what happened in Argentina, which aren’t the best examples to be compared to…

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey all, Peter Zeihan coming to you from Colorado. Today we’re going to do the most recent in our Firehose of Chaos series, looking at the economic impacts on the US from corruption that is being imposed upon the system by the Trump administration. And we’re not talking about here corruption at the top, like when Donald Trump forces foreign dignitaries to stay at his hotels, or when he starts a Bitcoin program to basically scam people, or when he does pump and dump systems with the entire stock market. 

That’s a separate topic. And we’re not talking about a more traditional corruption that happens in a federal bureaucratic environment when bureaucrats basically pad things like invoices and take a cut themselves, not the Chinese style. We’re talking here about corruption that is being imposed by the Trump administration on the broader economy, where it can have a much bigger, deeper impact and really start eating away at the cultural advantages that we have of the United States, including rule of law and all has to do with the rapid, rapid, rapid changes in economic policy, most notably tariff policy. 

I’m recording this on tax day, April 15th, and we have now had 94 tariff policies in 44 days, all coming from Trump himself. This is not counting the policy suggestions that are coming from cabinet secretaries or the back and forth that’s happening within the administration is they’re trying to come to grips with whatever. The most recent thing to come out of Trump’s mouth is. 

This is just hard. Trump tariffs. And in that sort of environment, it is impossible for companies who are doing importing to really know what to do because there’s a process for collecting terrorist. I mean, think about the volume here. It’s roughly $3.8 trillion in goods imports every year. That’s over 62 million container units. And we have no none, zero staff at US ports to collate those things, to understand what the value is of the product. 

And so therefore what the terror should be, the way tariffs are collected in this country is the importer self-reports what is coming as it crosses the border and into the port of entry, and then pays the taxes electronically. And in that sort of environment, clarity is absolutely critical. And having 94 tariff policies in 44 days and knowing that much, much, much more is coming down the pipe means that no one’s really sure what to do. 

Because oftentimes we get multiple tariff policies in a single day. We’ve had two days already where we got six tariff policies within an eight hour period. And so even if you are attempting to follow the rules to the letter, you can’t because you never know what is going to come out of Trump’s mouth. These tariffs happen instantly, or maybe with a 48 hour lead in. 

And then it’s just a question of enforcement and there is no enforcement. So take for example auto tariffs on May 2nd. We’re supposed to get a new tariff that’s 25% on all auto parts. If you have a container of auto parts coming in on a truck from, say, Ontario, when that hits the border, you need to know each an individual part that is in there and then report it. 

But what if it’s something that is dual use, like say, wiring? Is it an auto part? Is an electronic part, is it a welding part? Is it something else. So the administrative cost of that goes through the roof and probably is going to be higher than the part is in the first place. The other problem, let me give you another example is what’s going to happen with electronics, over a two week period starting on April 2nd. We had tariffs going up on China. We start with 20%. We went to, I think 54%. Then we went to 80 something percent, down 104%, then 125% and finally 145%. 

So everything coming in from China had that kind of scale going up, and the importers didn’t know what to do. Now think about electronics, a specific subset over $100 billion of electronics coming from China every year. Well, what we did originally was 145% tariff. That’s why I bought my extra phones and my extra computer. 

And then about April 11th, Trump said, just kidding, they’re in abeyance. In fact, we’re not even going to charge our 10% base tariff on electronics products. So it used to be relatively simple, relatively, where every container in just had a flat 145% tariff. Now they had to do a carve out for electronics the next day. Coward, like the Commerce secretary said, this is temporary. 

Don’t get used to it. So they started putting it back on again the next day, Trump said, no, it really is off. And so they started peeling it off again. And then the next day Donald Trump said, actually, no one is going to get an exemption. We’re just going to have a different bucket for computing and electronics products. 

It’s going to be part of our semiconductor tariff. So what now? We’re going to have an additional tariff on every thing that has a computer chip in it. Well, that includes everything from backyard grills to white goods to your fridge. No one knows what the system is, so no one can choose to follow it dutifully because the rules keep changing, they’re not clear. 

And instead of being built up by the bureaucracy who puts this all into the public register where anyone can follow it, it is literally, often nothing more than a Trump tweet. So where does that leave us? Well, it’s a question of how do you administer these things? There’s two problems there, too. Number one, Donald Trump fired all those, fired all of the temporary workers in the federal system. 

Imports and exports don’t flow in the same, scale on for the same products every single day. So we have a lot of temporary workers who work in the ports to help out with the work, as it needs to be done specifically for border Patrol. Those people have either been fired or directed to other tasks, and so they’re no longer is a staff to do it. 

So, for example, on April 11th, when the software for this entire system failed, we just didn’t collect tariffs that day. Oh, there’s also the issue at the upper levels. There’s no one to interpret what Trump says. Remember that the top 1400 positions across the federal bureaucracy were basically cut when Trump cleared out everyone, including the people who are typically not fired between administrations because they have the all the organizational knowledge and technical skills, they’re all gone. 

So there isn’t a cadre of people at the top that are loyal to Trump that also have the ability to design these programs. And even if there was, you know, they’d have to do it hour by hour. Well, we have seen this before. This reminds me a lot of Argentina, where the Peronist government, through the 2000 to the 20 tens, kept changing the rules over and over and over and over and over again for personal, political or ideological reasons. 

And it became easier for everyone to just find ways to avoid them. See, the problem is, is when you make the rules impossible to follow, the only way that business people can function. Is to have a personal relationship with the people who are enforcing the rules. The way tariffs work, you self-report and then there are spot checks. We have set up the perfect system that will, for force American importers and businesses to bribe the people who do the spot checks, and that is something that will corrode out through the broader system. 

This is very Russian 1990s right now. We’re setting up the stage where we’re telling our business community that they have no choice but to violate the rules if they’re going to function, because the rules are almost designed to not be valuable. Is that even a word? Anyway, it would be nice if this all settled down in the near future, but Trump has promised us in the next few weeks we’re going to have tariffs on sector products. 

So agriculture, car parts, semiconductors, medications and so on. As with everything, there is no one in the upper echelons of his administration who knows much of anything about these economic sectors. So it’s all going to be arbitrary, it’ll all be based on the ideas that Donald Trump is having at the time, based on whatever data point he happens to find egregious. And there will not be a rules creation system. 

It’ll simply be imposed by tweet. No one will know how to follow it, and it will set us up for an erosion of rule of law throughout our corporate world. Bye.

The Fire Hose of Chaos: Bye-Bye De Minimis

Cargo ship with containers

The US is plugging a loophole in the trade system called “de minimis” which allowed imported goods under $800 to bypass tariffs and traditional customs processes. This system will end on May 2, and these small packages will now face a 90% tariff and $75 minimum fee.

Many Chinese businesses will take a hit from this, but the biggest fish in the pond is the disruption of the fentanyl trade. Since shipments of drug precursors were abusing this loophole, the flows from China/India –> US –> Mexico will be disrupted. No this isn’t going to eliminate fentanyl, but it will slow things way down.

There haven’t been too many tariff policies to get excited about lately, but we’re going to slot this one down in the ‘win’ column.

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey all. Peter Zeihan here. Coming to you from a Colorado morning. We are going to talk today about something called de minimis, which is how shippers around the world get stuff to the United States to avoid tariffs. Basically, you make it small. If the declared value of any package is below $800, you don’t have to register. You don’t have to pay customs. 

You don’t have to tell people what is in it, aside from like a one word description, which does not have to be accurate because it’s almost never checked. That ends on May 2nd. On May 2nd, the Trump administration’s tariff expand to the de minimis system. And it used to be as long as the declared value was under $800, you were in the clear. 

Now there is a minimum 30% tariff, which has to be a minimum of $25, which basically ends most a minimum shipping. And then by June 1st, that will increase to a minimum of $50, which will definitely put a bullet in its head. Turkeys. Two things come from this. Number one closes a loophole. 

I mean, there’s there’s not a lot of income here. The de minimis exception with the word minimis, I hope kind of communicates that as it most of these tariffs are just considered too small to be worth collecting. And by putting a system into place, the Trump administration is basically ending the practice, which means that most people aren’t going to ship things like that at all. 

And that’s, you know, a minor issue. I mean, if you get a lot of stuff from TMO, it’s a big issue. And and for China, this means a lot of small companies just lost their primary source of income. So it’s a problem over there more than it is over here. Over here the single biggest impact is going to be fentanyl. 

Right now what happens is, chemical plants in primarily in China but also in India produce the pre precursors and the precursor materials for fentanyl and then ship them in the US post to the United States, where they are repackaged into larger packages and then shipped down to Mexico for processing into fentanyl. And then the finished drugs are sent back. 

It’s all covered under de minimis. So basically, the Post Office has been the single biggest contributor to the drug trade in recent years. And this will pretty much kill that, which is great. Comes at an economic cost, but most of the cost is over there, if a little bit more inflation over here, which used to be a minor issue, but with the rest of the tariff war going the way it is, you know, every little bit hurts. 

This doesn’t solve fentanyl. I don’t I gotta underline that. I mean, while this stuff is currently sourced from mostly China, a little bit from India, and comes in through the post office, anyone with a chemical sector could source this, and the volume of stuff that is required is very little. Best guess is that all of the fentanyl that was produced in Mexico last year, all the pre precursor materials would be about the equivalent of under 100, drums, like oil drums. 

If you only got one deals that would be enough for everything. So it doesn’t take a huge amount of volume to get this going. And we’ll definitely be seeing things coming from other directions. It’ll probably go in a little bit more informal direction, like meth, where the pre precursors are actually synthesized at the labs. And that does increase the friction. 

That does slow the process. That does require a little bit more technical skill than what happens in fentanyl. And these are all good things. But this will drive up the cost of fentanyl, drive down the supply, at least in the midterm, and it’ll probably take 2 to 5 years before the fentanyl labs figure out good workarounds. Just keep in mind that once we’re to the other side of this, it will resemble the meth industry a lot more, with a lot more fabrication happening right here in the United States. 

Because once you get the precursors, the rest of it is really easy. You don’t even need a college chemistry experience to do this stuff and volume. And if you have college, chemistry experience, you can produce a huge amount of stuff. We’re talking hundreds of thousands of doses every week, so step in the right direction. Believe it or not, comes at a cost. 

Everything does. But for once, we have a tariff policy. This actually addressing a problem, and I’m going to take that as a win. 

Never mind. The tariff is not going to be 30% on de minimis items. It will be 90% with a minimum of a $75 charge. Everything else stands for now. 

The Fire Hose of Chaos: Don’t Expect Many Trade Deals

Photo of a bronze trump looking at a globe

The Trump administration can put out as much trade deal fluff as they want, but the reality is that the internal dysfunction and unpredictable nature of this admin will impede most deals from ever making it out of an email chain.

Trade negotiations are complex and take years to develop. Given the state of organizational paralysis, there’s just not enough people to handle most of these talks. All of that back and forth, up and down, and dragging through the mud has left a sour taste in most countries’ mouths. And with no real beta on how to successfully approach these trade deals, what’s the point in trying?

So, take those official claims that ‘progress is being made’ and ‘real trade talks are happening’ with a truckload of salt.

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey all, Peter Zeihan here. The fire hose of chaos continues. And today we’re gonna talk about trade deals and why you really shouldn’t expect many. First of all, let’s talk about the organizational side of things. Usually it takes the United States about six months of consulting with industry and consulting with Congress just to build its general position on a trade talk. 

And then you go into talks with the other side, the fastest trade deal the United States has ever negotiated with Singapore. It took about 18 months. Most of them take the better part of a decade because there are so many pieces in motion. Even the Treasury secretary says that meaningful talks aren’t going to begin for another five weeks, and the first results aren’t going to happen with six months. 

Even that is just a grossly optimistic time frame. And what you normally do is the trade talks reach a point of stagnation down the road. Then you start throwing around the threat of tariffs. By doing it in the front end, everybody’s kind of on the wrong foot. And to be perfectly blunt, the United States isn’t ready to have these talks. 

Part of that is also organizationally, when the Trump administration came in, he came in with a much smaller Cordray than most presidents do. It’s really just the cabinet and a few senior aides. The Trump administration then proceeded to gut all of the departments of everyone in the top, several echelons, and then never staffed those positions with anyone but loyalists. 

And so there really aren’t a lot of people who even know how to negotiate in the first place, much less do a trade deal. So there’s really only four people in the US administration that are capable of holding the talks. You’ve got Jamison Greer, the US Trade Representative Office. You’ve got Howard Slotnick Commerce. You’ve got Scott percent at Treasury. 

And then, of course, the president himself. That’s four. And all of them have other things to do. Normally you would have literally hundreds of people taking care of all the technical aspects of the talks. And so when another country reaches out to the United States to do exactly what Donald Trump says he wants them to do. Open conversations on all of the topics. 

There are no people at the lower levels to carry on those conversations. It’s just the four at the top, and all of them are very, very busy doing everything they do with their normal day job. On top of several dozen trade negotiations. And so we’re hearing reports left, right and center from even larger trading partners that messages are going on responded. 

And any offer that they make is just met with silence for their part. The Trade Representative’s office says that it’s sending the things on to the president that he thinks are worth the president’s time. But everything just snarled up because the president is doing other things. That’s kind of piece one. Piece two is much more visceral because of the way Donald Trump has approached these things. 

There isn’t a lot of trust. So consider the situations of our top four trading partners outside of China. So first, Canada, Canada took a hard line position of resisting what the Trump administration did in its early days. And as a result, it got slapped with tariffs that haven’t come off. Mexico decided to bend and give the Trump administration everything it wanted. And as a result, it was slapped with tariffs. So with our top two trading partners, no one knows what the approach should be because the result is the same as for the Europeans. It’s a security issue. Trump administration came in, basically withdrew support for Ukraine. Ukraine is fighting Russia. Russia is the only reason that NATO alliance exists. 

It was created by the United States to contain the Russians. And so the Europeans quite rightly see the United States as a security threat. And anything that happens on the trade front, as a subsidiary to that. And the Trump administration doesn’t want to talk about the security situation at all unless the Europeans buy lots and lots of weapons. 

But still do everything the United States says. And so we’re getting a split in the security identity of the entire Western civilization. Because of this disconnect between the two, what the Trump administration says it wants, what it’s doing. And then throwing the tariff situation into the mix. And so the Europeans really don’t see a benefit to discussing anything with the Trump administration until such time that the NATO situation is untangled. 

And then finally, you’ve got Japan. Japan has tried to take a relatively low profile in this, and it’s mostly one of, it’s kind of a combination of betrayal and disgust that they’re feeling. 

During the first Trump administration, Shinzo Abe, the Japanese prime minister, specifically came to Washington, cut a humiliating deal specifically to get in with Donald Trump so that whatever the future of the United States would be, whatever the future of Japan would be, the hard work would be done, and they could proceed together. 

So the deal was negotiated by Trump, was signed by Trump, was enforced by Trump. And in the last month, the Trump administration has basically abrogated the deal and told the Japanese to start over. And the Japanese position is, if you want, honor your own deals, why in the world should we bend over backwards to negotiate another one with you? 

And so the official story is that everyone is reaching out to negotiate, and lots of good deals are being made. But the bottom line is, none of our trade partners really see the point in doing this, because everything is so erratic today is April 16th. Today, the Trump administration announced its 95th tariff policy in 45 days, raising the tariff rate on many Chinese products to 245%. 

As long as everything is so erratic, there is no point in having a conversation with the United States. Even if you can get someone on the phone because the rest of the world just doesn’t know yet what this administration actually wants. The goalposts are changing on a daily basis, sometimes an hourly basis until that settles. 

Trade talks. Real trade talks can’t even begin.

The Fire Hose of Chaos: Wait, The Recession Is Already Here?

Photo of man holding empty wallet

What could have happened much, much further down the road (or even avoided given the right circumstances) is now in the headlines – the US is headed into a recession. And if you wanted to send a thank you card to someone, you could send it to 1600 Pennsylvania Ave and address it to the Trump administration.

Between the unpredictable tariffs and constantly evolving regulatory shifts, this recession seems like it was part of the “plan” all along. The four big contributors are government spending remaining high, industrial construction on hold since March, manufacturing getting hit hard by tariffs, and consumer spending slowing.

Even if Trump’s reshoring efforts worked perfectly, we’d still be looking at two years of inflation and recession. And nothing in this administration has been done perfectly so expect this recession to be much deeper and longer than necessary.

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Hey all, Peter Zeihan here coming to you from Iowa. Happy Easter week. Happy Easter week? Happy Easter week. Any who, a lot of you have written in to ask, whether I think we’re going to be in a recession and why? Short answer is. Yeah, yeah. First, the caveat. When the United States was making its presidential transition back in January, pretty much all of the signals for consumption activity, for industrial activity, for government activity were all green. 

I don’t mean to suggest there weren’t some complications in there are some things to kind of keep an eye on. But we were in the middle of an economic expansion. There was no reason for expect that to change. But the policies of Donald Trump have been so erratic, so consistently, ironically, that business confidence, has collapsed. And the United States is now in a situation where it is dealing with regulatory and geopolitical risk, which is something that business communities hate. 

On top of that, you have the tariffs, where in the last six weeks we’ve had 92 tariff policies, which make it impossible for anyone, business or consumer or even state and local governments to plan. So we’ve seen everything freeze up. And this is definitely going to cause a recession and a rough one and one that is completely unnecessary. 

So let’s just kind of go through the four categories of where the growth comes from. First, government. This is actually the one I’m least concerned about. Despite everything that Doge has done with firing people, it turns out that the president doesn’t have the authority to fire most federal workers. Neither does the Office of Management and Budget, and certainly Doge, which doesn’t even have a congressional mandate. 

Instead, every department in the federal government does have a federal mandate. And as congressionally mandated activities. So you can’t fire these people without congressional activity. So everything that Doge has done is pretty much already been unwound. The total budget savings and the low double digits of billions and 90% of the workers have already been rehired, doesn’t mean that they won’t be fired. 

Now, the Trump administration, in kind of round two is actually doing it the right way, going through the cabinet secretaries and getting legal structure from Congress for the reductions. And that will work. But that won’t manifest this quarter and probably not next quarter. So what that means is, even with the federal government being in chaos, the spending is still happening. 

So we’re getting none of the functionality of government, but all of the cost of government. And from an economic point of view, that is a slight negative, but not a big one. So government’s kind of a non-factor right now. Next up is industrial spending, primarily on construction of new industrial plant. Now, in calendar year 2023 and 2024, we were setting records every single month, and it all came to a screeching halt on the 1st of March of this year because of all the changes in the regulatory structure programs, and because of all the chaos with the tariff policy, no one knows what the cost structure is any longer to build in the United States. 

And so no one is building in the United States. We have already had a longer stretch of zero industrial construction, at any point, in the United States, since World War two. Now that is only about 10% of the economy, but it’s at a huge drag right now. Next up is manufacturing. Primarily the problem here are tariffs on Canada and Mexico, which are coming in and out and changing on a regular basis, just like with everything else. 

But it’s really hit things like auto spending, Your average automotive has 30,000 parts and on par, all of the parts basically go back and forth and back and forth and back and forth across borders to whichever one of the three NAFTA partners do the best. And on May 2nd, we don’t simply have tariffs on Finnish cars. 

We have it on all of those auto parts. And so we’re looking at the average cost of a vehicle going up by 12 to $20,000. If it’s made in North America. And that is going to be crushing. So with the existing tariff that we have right now that was implemented on the first week of April, that was already enough to trigger manufacturing recession and the really heavily auto committed places like Tennessee, Kentucky, Michigan, Indiana, Ohio. 

And what we’re going to see, in the 1st of May is that will spill out to the other 25 states that are big into transport technology, and that’s everybody from Washington to Texas to, South Carolina. So then we get a manufacturing, recession. That’s another 15 to 20% of GDP. And then finally there’s consumption, which is the big boy, three stories here. 

First of all, Trump says we’re going to get agricultural tariffs very, very soon. In fact, by the time you see this video might have already happened, for the bottom quintile of the American population, one third of income is spent on food. So that immediately is enough to translate into a consumption recession for the poor and especially poorer parts of the United States, such as the Deep South or some parts of the Rocky Mountains. 

Second, the wealthy, most of their consumption is tightly correlated to what’s going on with the stock market. And that’s been a shit show for the last couple of months. So all of a sudden, the people who have the highest amounts of capital are probably going to be drawing back. And third, the tariffs at the time of this recording, we have 145% tariff on, on China, which is where most of our electronics and consumer goods come from. 

So you throw that on top of what everyone would normally purchase and, you get a consumption led recession across the entire system very, very quickly. Now, the end goal here, of course, of the Trump administration’s policies are to expand the industrial footprint in the United States and get back into manufacturing in a big way. But that takes a lot of things like steel and aluminum, copper. 

And we now have tariffs on all of those things. So building out this industrial plant will be very, very expensive. And if everything goes the way that Donald Trump says it will, we won’t see the first output from these new factories within two years, which means that this transition period best case scenario, according to Trump’s words himself, is two years of inflation and recessionary activity. 

That’s assuming that he’s made the plan perfectly. He hasn’t. And that assumes that he’s right about what he’s doing. He’s not. So yes, recession probably starting off formally, statistically in the second quarter, certainly in the third, and lasting a lot longer than it would have ever needed to.

I Hope You Didn’t Want to Buy a Home

Photo of a home in the United States

Trump’s endless tariff policies will likely hit just about every corner of the American economy, but the US housing industry is poised to take a devastating blow.

Mortgage rates are higher, there’s a labor shortage, and material costs are on the rise, which all make the concept of homeownership less attainable. You would think that the aging population would help free up some of that real estate, but the boomers are aging in place, rather than downsizing or going to a retirement home.

So, if you already own a home…good for you! If you do not…I hear Van-life is all the rage right now!

Prefer to read the transcript? Click here

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

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

Learn about medshare here

Transcript

Peter Zeihan here, coming to you from Florida, doing kind of an open ended series now on the effects of the tariffs on the US economic structure. And today we’re going to talk about housing. It is probably the sector that’s going to get hit hardest, with the exception of electronics imports. Both from the point of view of supply and from the point of view, of course. 

So let me just run through it real quick. First of all, if you want to buy a house, you have to get a mortgage, unless you’re incredibly lucky and mortgage rates are going up for a couple of reasons. Number one, if the Trump administration does what it says it wants to do, it’s going to increase deficit spending by roughly 1 trillion US a year, which will put pressure on the debt market hugely. 

And all those ten year Treasury bills the Treasury Department is going to have to issue, are going to add up and raise the cost of a mortgage because it’s based on the ten year Treasury. That’s number one. Number two, we were moving in this direction anyway. Most of the free capital in a system comes from a population of people aged 55 to 65, who haven’t yet retired but are preparing to. 

Their incomes are very high, their expenses are low, and the difference between those two generally gets shoved away for the future because they know when they retire, they’re going to have to basically cash out of their high velocity investments. So stocks and bonds become T-bills and cash. Well, as of January of this year, two thirds of the American baby boomers, the largest generation we have ever had, have retired. 

That liquidation has already happened. I’d argue that most of the reason we’ve seen a quadrupling in capital costs across the overall economy these last five years hasn’t been Covid. It hasn’t been Biden or Trump or the fed. It’s just been the boomers doing what you do when you retire. Well, that hits mortgage rates as well. And then we have Trump’s more specific policies, basically liquidating the migrant workforce. 

Trump says he wants to send about half of at home, roughly 5 million people. Well, the industry that migrant workers are most likely to work in after agriculture is construction. In addition, we have tariffs on steel and aluminum, which are two of the four biggest components that go into home building, the other two being copper and wood, which are also under sanctions. 

So all of the inputs that are necessary to build a house in the first place are seeing their prices go up even as finance goes up. And there’s one more angle to keep in mind if something happens to your car, if something happens to your housing, if you draw upon your insurance policy for rebuilding, you still need labor and steel and aluminum and copper and wood. 

While you might not need wood for the car, but the rest of it. And so insurance premiums are probably going up 20 to 30% just this year, specifically because of new policies out of the federal government. Finally, the boomers themselves, unlike the generations that have come before, who move into smaller units when they retire, whether it’s an apartment or assisted living or something like that, boomers are far more likely to stay in their home and age in place. 

And there’s nothing wrong with that. But what it does mean is the single largest concentration of homes that owned by the boomers is not getting freed up as part of this demographic turnover. And so if you are a millennial and especially, a member of generation Z, the quantity of housing simply isn’t there. The older generation is staying in place. 

The newer construction costs more. The home insurance that you have to get to get the mortgage costs more. And the mortgage mortgage itself costs more. You add it all up and housing is just expensive and only going to get more. So we cannot build it fast enough. And even if we could, the components that go into it are more expensive than they have ever been relative to the average income in American history. 

So if you happened to own your house, of course, this is all great news because we’re entering a higher inflationary environment, which will eat down the cost of your loan relative to your income. So if you were in a position where you have already established yourself, this is great. If you’re trying to get going. This is awful. And that is one more problem that we’re going to have with inequality down the road.