The U.S. and Mexico Kick Off NAFTA Talks

US, Mexico, and Canada flags with a hole in the Canadian flag

The U.S. has kicked off renegotiating NAFTA, but Canada was left out of the first round between Mexico and the U.S.

The U.S. is likely prioritizing a relationship with Mexico because of its healthier demographics and growing consumer base; therefore, Mexico is a more strategic long-term economic partner. Canada, however, has been getting the cold shoulder from this administration.

Leaving Canada high and dry could backfire, as the U.S. benefits greatly from Canadian manufacturing. We’ll see how the strategy changes throughout these negotiations.

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Transcript

Hey, everybody. Peter Zeihan here. Coming to you from Colorado. You’re going to see this on the 16th of March. Meaning that formal trade talks on the relaunching of the North American Free Trade Agreement have begun. And the first round is specifically between the Americans and the Mexicans, and the Canadians have not been invited. Quite on purpose. 

We’ve got three things going on here. First of all, in the long term, the more important trading partner is Mexico. They’ve got a younger population. On a worker productivity basis, it’s actually a more productive and efficient workforce than what the Canadians have. And when the two countries come head to head in competition, the Mexicans typically win. 

But most importantly, it’s a larger population, over 100 million people. And they are at the stage of their life, under age 45, 20 to 45, where they’re buying a lot of things. So it’s a consumption base that has a lot of upside growth potential. So from a purely macroeconomic point of view, it does make sense for the United States to prioritize Mexico over Canada. 

That’s piece one. That makes some sense. Piece two makes less sense. Trump personally and the advisors around him and the MAGA movement in general have a real bone to pick with Canada for any number of reasons, which I’m not going to go into because a lot of them are made up. But the degree of almost hatred that this branch of the American political system feels towards our northern neighbor really is robust, and it is definitely affecting policy. 

To that end, not only is Canada being denigrated at any number of opportunities, but there’s actually a significant move within this move it to break up Canada as a country. Specifically. MAGA is doing a lot to reach out to separatists in the province of Alberta. Now, for those of you who have been following me for a while, you know that she’s 13 years ago now. 

Yeah, 13 years ago. I wrote a book called The Accidental Superpower. And in it, I listed five major international crises that Americans would be aware of and participate in. And one of them was called the Alberta Question. The idea is that Alberta has a fundamentally different culture, economy, infrastructure and approach to all things in the world that is very, very different from the rest of Canada. 

It’s younger, it’s more highly skilled. It’s an energy, an agricultural economy, and most importantly, all of their major economic links go south to the United States rather than laterally to the rest of Canada. So the idea, that Alberta will eventually seek something else makes a lot of sense to me. But a lot of things have changed in the last 13 years. 

For the most part, we’ve seen the Canadian system through immigration actually kind of get past some of their more urban demographics or at least mitigate them a little bit. So the risk that I had seen 13 years ago, basically Alberta paying for the entirety of the existence of Canada is no longer the case. 

They’re still the biggest contributor in per capita terms by far. It’s the richest province by a significant margin. But Ontario is no longer aging into obsolescence at the pace that it was because of the influx of immigrants that has generated its own set of problems. But that specific problem has been mitigated somewhat. 

The problem is, is that if Alberta were to achieve independence, it would very rapidly become a failed state. It would be a one trick pony with its energy economy. The currency would probably go through the roof because of it, and the place would become vastly unaffordable. The only real long term solution would then be for Alberta to join the United States. 

Now, no one in MAGA is talking about that. Very few people in Alberta are talking about that. But that’s really the only long term solution here from an economic inflation, a population of skills and an infrastructure point of view. There’s just that little cultural issue about whether you want to actually join the United States. So we have MAGA, basically stirring the pot to see the kind of problems they can generate in Alberta, specifically in Canada in general. 

But no one’s really thought about what’s the next step, should they actually win? That’s a problem anyway. Third piece impact on the United States for not having Canada in NAFTA. One of the beautiful things, from my point of view about NAFTA is we get access to the workers in the industrial plant of our neighbors, but we don’t have to pay for their education or their social welfare system, or their health care or the law enforcement. 

We just get all the benefits. So when I look at Canada, I basically see a country of 35, 38 million people, whatever the number is now, but it’s actually more tightly. Each of the provinces is more tightly integrated in the United States than ever with one another. And we get the benefit of that in our industrial base to serve our domestic needs, to serve our export markets, whatever it happens to be. 

And we don’t have to pay for any of it. So we know that the Trump administration is deeply hostile to, Canada’s presence in specifically aerospace and automotive, which are two big, big ticket items when it comes to manufacturing and trade. And it’s been very, very blunt and saying that Canada, you’re going to lose all of that. It’s all going to come back to the United States. 

But that would mean then that we need to train up a replacement workforce and build replacement infrastructure for stuff that already exists north of the border. And considering we’re just a few years from the Chinese breakdown and the breakdown in global trade in general, I would honestly say we don’t have the time to mess around with something like that. 

And even more importantly, we need to take the energy that we would have to build out that industrial plant to build up other industrial plant that we need even more. We’re already an environment of a labor market that is going to be shrinking for the next decade for demographic reasons, two decades, actually, and we just don’t have the labor or the capital, to be perfectly honest. 

That the green space in the industrial parks right now and do all of this at the same time. And so if the Canadians want to continue paying for their health care and their infrastructure and their training in order to help our industrial plant, I say let them, well, go that way. You know, we’ll see. 

NAFTA is the most complicated trade deal on the planet because it deals with all the technical details of 10,000 different product steps. The person who is handling the negotiations is the US TR who is Jamison Greer? He’s seen this before. This is not the first time that Donald Trump has pushed trade negotiations into a different direction. 

If you go back to Trump won the US, TR was a guy by the name of Robert Lighthizer famous for playing hardball. Very good negotiator. Jamison Greer is his protege. So Greer has seen the inside of this process already, even if his name wasn’t on it. And last time around, Lighthizer talked with the Mexicans quite a bit before forcing a deal on the Canadians. 

So whatever deal comes out of this is one that the Canadians, while very, very little leverage and independently of the fact that the current administration really doesn’t like Canada, that’s just the nature of the beast. It’s the nature of the people. It’s the nature of the future of Mexico. And while there are certainly things that we absolutely can do more easily with Canada as part of the process, that doesn’t necessarily mean that’s the way it’s going to go, because if there’s one thing you know about Americans in general and this administration specifically, we don’t always do the obvious thing.

The U.S. Dollar: Short vs. Long Term

Photo of US dollar

Before anybody asks, no, the following is NOT financial advice. The U.S. dollar is constantly in the spotlight, so where is it heading?

Over the long term, the U.S. dollar is well-positioned to rise. Four main factors are driving this: U.S. naval dominance to secure global trade, favorable demographics, abundant food and energy resources, and the need to expand manufacturing. Each of these suggests durable economic strength.

But in the short term, current policy is driving the dollar downward. Before the Iran war, things like immigration limits, tariffs, regulatory uncertainty, and eroding business confidence all weakened the dollar. The Iran war has brought a temporary lift, albeit a marginal one, as investors seek safety.

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Transcript

Hey all, Peter Zeihan here coming to you from Colorado. Today we’re going to talk about the US dollar and where it’s going to go short and long term. Again this is not not not investment advice. This is just where the geopolitics say that we’re going. First let’s talk long term because it’s a really simple story. As a rule, a country’s currency tracks its economic strength and its durability. 

And by that measure, the United States dollar really has nowhere to go but up for the next several decades. The big factor is, number one, the US military is the one that rules the seas. And even if everybody else were to put their militaries together, their navies together, and sail them against the United States, we’d probably only need two, maybe three aircraft carrier battle groups to take the whole thing down. 

Also, with very, very, very few exceptions, single digit exceptions, there are no ships, frigate navies, ships out there that have the capacity to even reach the United States. So the United States can go there, do whatever it wants, but nobody can come here. And that allows us to be the arbiter of really whatever it wants to be. Number two, demographics. 

As much as we are facing a demographic crunch at the moment, specifically is the baby boomers, which are the largest generation we’ve ever had, are now almost entirely retired. Our boomers had kids. We call them millennials, and they are now in the height of their consumption years. And then for the next 20 years, they’ll be at the height of their production years. 

And so we know we still have a relatively strong, stable and balanced economy moving forward that doesn’t exist in very many places elsewhere in the world. So whether you’re in Germany or China or Japan or Korea or Spain or Italy or Poland, we’re looking at a country where they basically already aged out. 

And there aren’t a lot of people under 50 relative to those over 50. So you know that the United States is really the only first world country of size, with the possible exception of New Zealand, where there really is a demographic story for normal economics going forward for the next several decades. Number three, resources. The United States is the only first world country with the exceptions of Australia and Norway and Canada, that are massive, not just producers, but exporters of food and energy products, which without those you can’t have a modern system. 

That doesn’t simply mean that cash is constantly flowing into the American network. It means that the United States never really has to worry about the building blocks of what it takes to make a modern economy functional. All right, what else? 

the last item is kind of, strength from weakness. Because of globalization, the United States is hollowed out a little bit when it comes to manufacturing. We still produce the most value out of manufacturing of any country in the world. But as the Chinese are facing demographic and geopolitical pressures and eventually will fade away, the United States needs to expand its manufacturing footprint massively, at least double it in order to prepare for that circumstance. 

That’s an inflationary story, but it’s also a massive growth story. So those four things together, the need to expand the manufacturing plant, the commodities position, the military position, the demographic position. This tells me that the US dollar has nowhere to go but up for decades. But that’s then, we all live in the now, and we have a lot of problems in the short term that are taking us absolutely the opposite direction. 

And all of those are caused by policy. So first up, the Trump administration’s decision to basically make immigration into the United States impossible. We have gone in the last 12 months from the first world country with the fastest growing population to something near the bottom. And for the first time in American history, 2025, we actually saw the US population drop. 

That is putting huge pressure on labor markets, especially when it comes to things like construction and health care that are slowing American growth, raising costs and pushing the dollar down. Second, the tariff policy, despite what it claims, it’s actually making manufacturing a lot more difficult in the United States. You see, there’s kind of two broad categories of manufacturing. 

Your relatively simple value add, like things like, say, furniture or making glue where there are only a half a dozen steps. And if you have a high flat tariff, you try to then move those steps into your country and consolidate. But then you have more complex manufacturing, like cars and computers and airplanes that have hundreds, if not thousands, if not tens of thousands of steps. 

And there is no country in the world where those are all under one roof. So if you put a high tariff in, then every intermediate good has to pay the tariff and it just makes more sense to move as many of those steps outside of the tariff umbrella as you possibly can, and then just import the finished product at the end, because then you only have to pay the tariff once. 

So what we’ve been seeing over the last year is industrial construction spending in the United States. Drop drop drop drop drop drop drop drop drop. And the only reason it hasn’t plunge is people are hoping, praying against all odds, that the Trump administration will eventually back down and these tariffs will go away. We’re now coming up on a year since they were put in place. 

We’ll hit that anniversary in the first week of April and we’ll probably see the drop off accelerate. So that boom, I was talking about where we needed to double our industrial plant. We’re actually going in the opposite direction right now, and that is forcing the United States to import to cover everything. And so we see the dollar going down. 

The third issue is how easy is it to do business in your country? The Republicans have traditionally been the pro-business, low regulation crowd, and the Trump administration has said that it’s not going to enforce the regulations that are on the book. It’s basically asking companies to lie on their tax forms and ignore the government’s policies as they currently stand. 

You see, there’s a big difference between Trump two and Trump one. In Trump one, they brought in people who knew about deregulation, and they had this idea that for every new regulation that came in, five had to be removed. And so we actually saw meaningful deregulation. But with this new administration, they haven’t brought in those people. 

They’re just not allowing new regulations to go in. So the old regulations from previous administrations are still there. And the people who would go through and winnow them out are not there. And we no longer have the capacity to implement new ones. So the regulatory structure is becoming slowly ever more divorced from the economic realities of the country. 

And there’s no one in place to fix that. So companies are being asked to just ignore the whole thing and saying that there won’t be any legal repercussions for that. At the same time as the, the legal structure becomes almost irrelevant to where we are now. On top of that, with the tariffs, we’ve now had over 5000 tariff changes since April 2nd of last year. 

The the game board is changing every day and companies literally don’t know what to do. And the collective decision is to try to do as little as possible. So while the rhetoric may say one thing, this is actually the most anti-business administration that the United States has had in my life. And business confidence and business activity and business expansion are all dropping instead of rising. All of those are bad for the dollar. 

And finally, there is a rule of law problem. The Republican Party is not what it once was. Donald Trump has exercised a number of factions national security securities, fiscal conservatives, business conservatives from the coalition and has actively campaigned against their champions in Congress. And what’s going on with Immigration and Customs Enforcement is a real big issue. 

Seeing Ice in places like Minneapolis has really jarred the business community, because they’ve always counted on the US government to enforce rule of law. We don’t have that anymore. In fact, Ice is operating in a way that every police chief has always told his or her officers to never do. You know, you’re never supposed to argue with the judge. 

You’re never supposed to argue with the prosecutors. You’re never supposed to recruit from gangs. You’re never supposed to wear a mask. You’re never supposed to draw a gun first. And no one really knows where federal law enforcement is going to be unless you’re looking at the FBI under a guy by the name of Cash Patel, who’s basically a conspiracy theorist. 

So the idea that there’s this stable structure undergirding everything that the federal government does is now gone, and businesses just don’t know how to react at all. You add in record deficit spending and the implications for the dollar are down, down, down, down, down. So we kind of have this perfect storm in the short run that is pushing the U.S. dollar down, even against the overarching long term trends that are pushing the dollar up. 

So I have no doubt that over decades, the dollar will rise and continue to. But I also have no doubt that over months the dollar will drop because the federal government is now actively, loudly declaring that that is their express goal. Now, the idea behind what the Trump administration is saying about dollar policy is their idea is that if the dollar gets weaker, then U.S. exports will increase. 

And ultimately, that’s one of the metrics that Donald Trump is obsessed with. But that also means for a country that imports manufactured products, it also means that we are looking at significantly higher inflation as a result of that policy in the short run. So short run, if you’re a dollar bull, it’s going to be a really rough ride if you’re a consumer. 

Things look a little rough because we’re seeing fewer products produced in the United States, and we’re seeing a hollowing out of the high end employment base that does the high end manufacturing that we’ve always excelled at. That might make good for exporters a little bit, but in the long run, we’re looking at a very different economic structure. And of course, as with everything, the challenge of getting from here to there is where we all live. 

And now an update. We’ve recorded this video before the Iran war started, and if you want to talk about something that threw a shock into the system to underline that there really wasn’t an option out there for financial investment. Outside the United States, this is what did it. And so we’ve seen the United States dollar rise over the last couple of weeks versus every major currency except for, I think, one, I think Canada is holding in there because it’s basically integrated with the U.S. system. 

However, I will underline that, markets are behaving grudgingly in this regard. They really don’t want to put their money in the U.S. dollar because of some of the policies that we have out of the Trump administration right now. So while, yes, the US dollar is rising versus pretty much everybody, only at a moderate pace, in most countries it’s 2% or less over two weeks of war. 

And now the Persian Gulf being shut for the entire time, it should be double digits. But there’s really only three markets where you’re seeing more than this 2% change. You’ve got Korea, which is uniquely exposed, South Africa, whose economy has always been really, wild and, erratic. And Indonesia, where the markets are relatively illiquid for a market of its size. 

So, yes, we are definitely looking at the long term effect here of the US dollar having nowhere to go but up. But also we’re seeing the damaging effects of the short term of no one really trusting to put their money in the United States system and showing that it has nowhere to go but down. The result is, at the moment, in a moment of global crisis, surprisingly small gains for the US dollar. 

I would love to say that the surprises me. It does not.

The U.S. LUCAS Rivals Iran’s Shahed

A photo of LUCAS drones courtesy of US Central Command: https://www.centcom.mil/MEDIA/PRESS-RELEASES/Press-Release-View/Article/4347030/us-launches-one-way-attack-drone-force-in-the-middle-east/

The U.S. has a drone that punches in the same (financial) weight class as the Iranian Shahed. Everybody, meet LUCAS.

With a range of ~500 miles, a price tag around $45,000, and modular capabilities, this is the U.S. military’s first step towards scalable and affordable drone warfare. This is still in early phases of production, but plans are in place to ramp that up by 2027.

These systems have already been used to strike Iranian targets, but the extent of the damage is unclear. LUCAS might not shift the trajectory of this war, but with widespread deployment over the next few years, the math of modern warfare could shift drastically.

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Transcript

Hey, everybody. Peter Zeihan here. Hello from Dallas. Today we’re going to talk about drone warfare, specifically, a new weapon that the United States has introduced in the Iran war. It’s called the LUCAS, which is short for a very long item. That basically means really, really cheap drone. In fact, it’s modeled off of the Iranian Shahed, which has a cost probably in the 30 to $55,000 range. 

Right now, what has been released indicates that it’s in the middle of that range, right around 40, 45,000. It’s a modular drone, so you can decide whether you want a warhead, a jamming pod control, a variety of other things. Anyway, this is the United States first entrance into low cost drone warfare. The idea is you’ve got a drone with a decent range 500 miles, which for an autonomous system is pretty good. 

And because it’s made by the United States and not a country like Iran that doesn’t have much of an industrial base, things are being produced at scale. Or at least that’s the intent. And the modularity means that you can mix and match while you’re in deployment mode. So either on an aircraft carrier or by some Marines who happen to be on a beach somewhere. 

You plug in what you want and then send it off. We know that they have been used already in the Iran war to ironically, target drone manufacturing capacity. The Shaheds, it’s unclear whether or not, the targeting just went after the barracks or the depots or the actual manufacturing floor. We just don’t know that. And Centcom has talked a lot about the targets they’ve taken out, but they haven’t yet to mention the manufacturing capacity at all. 

So far, the estimate is that 1500 of these things have been built. And the intent is by at some point in calendar year 2027 for annual production to exceed 10,000 units. Compare that to how many patriots, the anti-missile systems that the United States is known for, can be made that comes out to about 600, maybe 700 a year right now. 

They’re hoping to get that up to over a thousand over the next five years. Here’s the thing about drones. You have a couple of options. You can either have a fiber line, which means you can’t be too far away because you basically have it on a cord, or you have to realize that there’s going to be jamming. And if there’s jamming, you lose control of it, or you program in a decision tree imprinted onto something like a Nand chip, that’s, the memory in your computer that holds when your computer is off, and then it just kind of goes to that specific location, looks around for something that matches its targeting priority, and then drops. 

That’s basically what the Shaheds are with the United States, though, you have a different option because the United States typically has air superiority where it operates and a satellite network. So you can put something like, say, a Starlink transceiver on it, and you can micro adjust it the entire way. And since these things have a range of 500 miles and a lot later in time, about six hours, that really expands your options. 

Now, in this specific war with Iran, there just aren’t enough of them at the moment to make a difference. 1500 total. Not a big deal. The United States hit over 1200 targets in the first 48 hours of the war. But if you fast forward this 2 or 3 years, when a typical American naval asset can have a few hundred of these bad boys on station in any given time, then you’re talking about a very, very different sort of math. 

One of the weapon systems that I was a big fan of that ultimately did not get built was the Arsenal ship. The idea you have something that’s smaller than a destroyer that basically carries a bunch of cruise missiles, 5000 of them, and you just send it out there and blah, blah, blah, blah, blah, blah, blah. This achieves that basic concept at a fraction of the cost, assuming it works. 

Right now we know they’ve been used. We don’t know how well they’ve done, but these are exactly the sort of weapons that we need in this transition phase from going from an old, very, very high cost system to whatever the future of drone warfare happens to look like. And as soon as I find out more, I’ll let you know.

The Iran War: Interceptors and a Costly Mistake

A Shahed Saeqeh-2 variant drone | Wikimedia Comons: https://en.wikipedia.org/wiki/Shahed_drones#/media/File:Saegheh_(4).jpg

Attacks have intensified, with Iranian drone and missile strikes heading towards the Arab Gulf states. Many of these states rely on costly U.S. interceptors, and with stockpiles dwindling, energy infrastructure could become exposed. Marco Rubio told Congress that the conflict could intensify over the next 5 weeks, so stay tuned.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Colorado at home. I’m about to head to the airport just a little early anyway, overnight, day four of the war, we’ve had significantly more attacks. A lot of drones, a lot of drones, and quite a few missiles as well. The pattern that has erupted now, makes maybe me think that the Trump administration hadn’t thought this all the way through when they launched their attack a few days ago. 

The issues targeting, the Iranians can’t really go after U.S. vessels because they don’t have the guidance that’s necessary. And the Israelis are a long way away. So there’s plenty of times to detect and shoot down drones and missiles, especially drones. But for the Arab side of the Persian Gulf, the story is different. So, what we’ve got going on is instead of going after the Israelis or the Americans, the Iranians are going after the Bahrainis and the Kuwaitis and the Emiratis and the Saudis. 

And all of these countries have purchased us Patriot missile systems and even some fads. But those interceptors are expensive. And the hundreds of thousands of dollars and the showerheads that are being thrown against them are less than 50,000. So in order to reliably shoot down a projectile, you often have to shoot more than one, interceptor. 

And best guess, and it is a guess, is that the beginning of the conflict, the collective Arab side of the Gulf probably had over 2000 interceptors, but they’ve already intercepted over 1000 things coming at them. So we’re already getting to a point where the, cupboard is getting a little bare. And it seems that the Americans are not replenishing any of those stocks in order to pressure the Arabs to join the war more directly. 

But honestly, there’s not a lot they could bring to the table. Only the United Arab Emirates and Saudi Arabia even have an air force. It’s worthy of the name. And the pilots are inexperienced and few. And honestly, they would probably get in the way, as we saw yesterday when the Kuwaitis accidentally shot down a trio of American jets. 

What this means is very soon, probably within a week, the Gulf eyes are going to have to decide to just not shoot down the heads at all and focus on the ballistic missiles that can cause more damage and have more accuracy. And in doing that, you will see waves of Shaheds be able to start targeting energy assets, whether it’s loading platforms or refineries or even the fields themselves, pumping stations. 

And that’s, you know, that’s going to be more than 10 million barrels a day in the direct crosshairs, perhaps as much as 20, based on how things are going at the time. And in the meantime, Strait of Hormuz is closed, insurance companies and sold all insurance. So nobody’s coming or going. So we may be getting that energy crisis sooner than we thought. 

The easy way around this of course, is develop cheaper interceptors. And there’s only one country in the world it has that, that’s Ukraine. And we are seeing very clearly that the United States’s decision a year ago to cut off military connections, has a big price, the Brits who still have relations with Ukrainians that are good in the military sphere, have repositioned several Ukrainian assets, including Ukrainian staff, into the Gulf to help shoot down some of these projectiles, but give you an idea of how little, the United States has invested in this technology. 

Fifth fleet headquarters in Bahrain, got hit in the second day of the war on the radar dome. Got blown up, which kind of surprised me that something got through to an actual military base. And then I realized that there was no point defense at the base, something that the Ukrainians have been doing around their cities as a matter of course. 

So, the American decision to not engage the Ukrainians, where they have been defending themselves against Russian launched Iranian showerhead drones now for three years. This is where the knowledge base sits in the world to defeat this technology, as having a real price, because that technology, those tactics, that experience hasn’t filtered up to the US military and then down to US military deployments. 

And now the United States is facing the source of the Shaheds head on, and all it has is expensive interceptors that exist in a limited number, which makes it very, very strange that the Shahed facilities that are building the drones in Iran still haven’t been targeted. But more on that as we move forward with the war. 

Okay, finishing this one up from the airport lounge in Denver. The other big news is that yesterday morning, the secretary of State Rubio, testified to Congress to comply with the War Powers resolution, notifying Congress of what was going on. biggest thing that has come out of that is that, he said that the United States actually went significantly heavier attacks in the days and weeks to come, and that he expected the entire conflict to last 4 to 5 weeks. 

Now, this is not vacation Congress. This is not battle plans. So there is absolutely no reason to expect the Trump administration and the Defense Department to follow that to the letter by any stretch of the imagination, which is kind of interesting. The story that’s being told to Congress. We’ve got a number of senators and reps on both sides of the aisle who are pretty angry at the idea that this conflict has happened at all, and we’re expecting a bipartisan war. 

Powers Act resolution which aims to restrict, the American military’s ability to prosecute the operation moving forward. The chances of that passing are pretty good, but the chances of it being a veto proof majority are almost zero at this point, barring something significantly, jarring happen in the next 48 hours. All right, that’s it for today. 

Bye.

U.S. Boots on the Ground in Nigeria

Silhouetted soldier against a black background

Following the Christmas Day U.S. airstrike on a jihadist target in northern Nigeria, the U.S. has deployed 100 troops, more so advisors, to train local counterterrorism forces in Nigeria.

This is important for several reasons. Nigeria is Africa’s most populous country and a dominant power in West Africa. Russian influence has stretched across Africa and into Nigeria, so U.S. involvement could help counteract that. And this marks a significant shift for the Trump administration, as the U.S. will get firsthand insight into Nigeria rather than relying upon speculation.

We’ll see what Washington does with the information gleaned from the boots on the ground, but U.S. policy in West Africa could be reshaped in the coming months.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Today is the 17th of February, and the news is that 100 U.S. troops have just arrived in Nigeria to help train local forces in anti-terror operations. It’s the first batch. Another hundred or 200 is expected to come in the next several days to weeks. Why Nigeria? Why now? What matters? So if you go back to Christmas season, December, the big story that was making the rounds in MAGA was that Nigeria was massacring Christians and oh my God, we got to stop them. 

And so on Christmas Day, Donald Trump bombed a, jihadi, stronghold in northern Nigeria. First time we’ve done military operations in Nigeria. The Nigerian government internally was kind of pissed off because this is a country of 230 million people. It has dozens of ethnicities. The northern part of the country is more Islamic and drier than the South, which is more Christian and tropical. 

But, the militants that have been operating in the north, they don’t care who they, kidnap, they kidnap anybody, so most of this was just a collective MAGA, fabrication, which, you know, we’ve seen a few of those before. But this time it resulted in the United States actually bombing someone, which is generally not a good reason to do it. 

Anyway, the Nigerian government was really pissed off. But rather than be pissed off in public, they said, you know, you’re right. We do have a militancy problem. Why don’t you come help? And Trump did. Now these are not combat troops. These are advisers, but they are now getting enmeshed into, this situation in Abuja. And further north, and we’ll see what happens. 

This matters for three reasons. Number one, Nigeria, 230 million people. Significant energy producer, based on the day, exporting somewhere between 1 and 3 million barrels a day, although it’s pretty chaotic. So it’s usually on the lower end of that. 

It is the clear superpower of West Africa. It is the most populous nation on the continent. It matters in a great many ways, and in times when Nigeria is able to hold itself together, it projects power to an entire neighborhood. And in areas when it’s not able to hold it together, it falls into civil war. So anything that helps Nigeria hold itself together is generally good for the region and US power production regardless. 

Number two, we are seeing some of the outcomes of the Ukraine war on another continent here. So one of the things that the Russians did right when the Ukraine war was getting going is they tried to stir the pot everywhere they could to cause as much chaos. And civil conflict as they possibly could. And in the Sahelian region, that’s the dry area that’s south of the Sahara Desert, but north of the tropical belt. 

They targeted the French position and they basically went in under the guise of counter terrorism, counter Islamic terrorism. They encouraged Islamic terrorism to continue. And cut deals with regimes that were in the process of having coups. We called it the coup belt for a while, to push the French out. The French have now left all of French West Africa, Burkina Fastow, Mali, countries like that. 

And so we now have these, arrangements of pro-Russian tinpot dictators that are basically raping their country and running mining interests for the Russians, whereas the militant groups have been able to spread beyond those countries into places like northern Nigeria. So anything that pushes back of that tide is generally a good thing too. And again, consolidation Nigeria is probably the best bet at this point because the first line of defense, the French forces in the region are now gone. 

Sorry, U.S. forces for that matter. So that’s number two. Number three. 

The Trump administration just put it into a position where it has now has sent forces into an area specifically with the goal of finding out what’s going on. That’s the first time that’s happened in this administration. Usually they just rely upon rhetoric and whatever circling through the conspiracy sphere. Now we actually are going to have a couple hundred troops interfacing with the Nigerians on a daily basis, getting a feel for what is a very, very complex country and a very, very complex security environment that doesn’t match the story that you hear on the web. 

What they do with that information is going to be really, really interesting. I don’t mean to suggest the United States has, like, immense interest in this region, but as a rule, anything that holds Islamic terror at bay and keeps them in worthless territories is a good thing. If this is able to penetrate into central or, God forbid, southern Nigeria, then we’ve got a very different situation where the entire region would become unmoored. 

So, you know, kudos if this works out. But right now the government of the United States is still very, very, very early in a fact finding stage. And once they have the information in front of them, they will then have to make a decision and balance against what we are hearing in the MAGA sphere, which is largely the opposite of what is actually happening. 

That’s going to be an interesting conversation that will happen a few months from now.

The U.S. Navy Goes Down Under

A US Navy battleship

The U.S. is turning to the Aussies for some help with stationing four American submarines at Stirling in a hedge against potential future conflicts with China.

This is done in an effort to help the U.S. reduce reliance on Guam should the Chinese strike, giving the U.S. options other than Hawaii. This move has some pros and cons. Stirling is outside China’s striking range, but it’s incredibly isolated. So, the U.S. couldn’t project power directly against China from there, but China’s trade routes in the Indian Ocean and Strait of Malacca would be vulnerable. The forces based at Stirling would also be on their own if anything boils up, which isn’t ideal.

Beyond this plan being good or bad, its just outright unsettling. This move signals the U.S. is preparing for a world where our current global trading system will be irreparably broken.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Colorado. And today we’re going to talk about the U.S. Navy deployment plans for the Pacific. Specifically, the U.S. Navy has announced that it’s going to be working with the Australians to expand their naval facility at the Stirling base, which is on an island just outside of Perth. For those of you who don’t read or know Australian geography, almost everybody in Australia lives in the southeastern kind of crescent, but all the way in the far west all by itself is Perth. 

So it’s kind of in the middle of nowhere, both the city and the base. And that’s from the Navy’s point of view, kind of the point. If, if, if there is a meaningful military conflict with the Chinese, the Navy’s concern is, is its current forward military base at Guam could come under missile attack. And if the Chinese get a few shots through the missile defense at the island, then the ability of using Guam in order to project power in the direction of the Asian mainland would be destroyed, and they would have to fall back to Pearl Harbor. 

So the idea is, if you permanently station four of America’s submarines out in the Indian Ocean near Perth, then that is well beyond any range possibility that the Chinese have. So this is both very smart and perhaps a little dumb. First, the smart anytime you can disperse your forces and maintain a reach would be really a robust idea. 

So the overall concept of having a second facility in that corner of the world makes perfect sense. The Australians are about the best allies and most loyal allies. We have hard to come up with a better spot if your goal is to have it beyond the range. Second, the dumb part. It’s really beyond the range. Perth is near nothing, and there is no way you could use naval forces in that area to project power to strike at China directly. 

What it could do is you could strike Chinese shipping in the Indian Ocean and up into Southeast Asia to the Strait of Malacca. And so one of the things that I’ve been saying for a very long time is that any war with the Chinese, I’m really not overly concerned because they’re dependent on international trade. We’re not we have a global navy. 

They don’t. You put those two together in any hot war. The easiest way to destroy China. Not not not the military of China, China, the country. Let’s just stop the shipping of the stuff that doesn’t go to the United States, which obviously would be shut down. About 80% of their energy flows come through the Indian Ocean basins from the Persian Gulf. 

About half of their food flows and about 80% of their manufacturing good flows goes through the same route. So if you put some naval assets in sterling in case of a hot war, we now have a Ford missile base. It could shut it all down in a matter of days and weeks. Just keep in mind that this is a different sort of conflict. 

If you’re going to put subs to do it, you are not taking over the oil tankers or the cargo ships. You’re just sinking them. That would be really, really colorful anyway. The other other problem is that, if Guam is taken out, then there really isn’t. A series of stepping stones to get to Perth. So whatever is operating there is going to be more or less on their own unless they decide to go quiet and cross the Pacific the long way. 

So any assets there will be exposed. It’s not that this is a bad plan. It’s just it’s laying the groundwork for a very specific sort of action that assumes the global system is broken beyond repair. I would argue we’re getting there anyway, but starting to put teeth in a place where it would force that to happen gets my attention in a way that I’m not entirely excited about.

Trump Announces $12B Rare Earth Stockpile

Photo of rare earth minerals: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. Photo by Wikimedia: https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg

The Trump administration has announced a plan to create a $12 billion stockpile of rare earths. The goal is to create a buffer against any supply disruptions, but this is just a band-aid.

Depending on the metal and use case, this stockpile might give the US a five-month supply. But the core problem still exists: the US doesn’t have any domestic refining or processing. It’s not all that hard or expensive to extract and process this stuff; the US just hasn’t invested in the infrastructure to do so.

If the goal was to establish real supply security, this stockpile isn’t the way to go about it. But hey, at least we’ve got an extra five months.

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Transcript

Hey all, Peter Zeihan here, coming to you from Colorado. And today we’re looking at a new initiative from the Trump administration to solve the critical materials issues. Short version. The United States doesn’t refine most of its materials these days. It relies on countries that have much lower pollution concerns, like, say, China or India, to do the processing. And then we buy the process material and do whatever with us. 

What that means is, well, while you save a lot of money and you certainly clean up your own local environment, you subcontract all of this out to countries that, in the case of China, might not be the most friendly and then might cut off supplies at a later time, as the Chinese have done to a number of countries from time to time, including the United States. 

Anyway, the idea is you establish a $12 billion stockpile. The U.S. government is going to be tapping the import export bank. And so the idea of using one government agency to finance the development of another, I personally find that delicious, but bygones. And the idea is you buy these processed metals, primarily rare earth metals, and then they are in the United States. 

So you have a buffer. I don’t want overstate this. It’s a good step. It’s in the right direction, but it’s going to get crazy. $12 billion of critical materials for a country that is a $25 trillion economy is not going to last a long time, probably somewhere between 1 and 5 months, based on the specific material, because there are over 30 different materials that they’re talking about here. 

It’s a step in the right direction. But if your goal is to really achieve a national security issue and economic self-sufficiency, you need to make these things yourself. Right now they’d just be buying them from China on the open market a little bit more than what we need, and put them into basically a safe. What you need to do is build up the processing. 

The problem here is that there is no such thing on the planet as a rare Earth element mine or rare Earth element production line. Rare earth metals exist as small, small impurities in other mineral extraction, primarily things like silver, but also copper and zinc and a lot of other things, uranium, for example. And so what happens is you have your mine that produces X mineral. 

You process that to get X refined mineral and then the waste material you then go through a separate set of steps that involves several hundred vats of acid. Basically with every step you concentrate the mineral that you’re after, whatever it happens to be. And after six months to a year of such processing through acid, you eventually get some refined metal rare earth metal that you can use, but it takes several tons of raw material to generate one ounce of the finished metal over months of steps, and hundreds of vats us and until the United States builds that infrastructure, which isn’t technically difficult. It’s chemically very tricky. Until you do that, you are never going to have independence from international suppliers. Now, there’s nothing about this technology that is new. It was developed back in the 19 tens and 1920s. The U.S. obviously can do it. It’s not even particularly expensive even if it is environmentally dirty. 

But it does require space, and it does require capital and does require planning. It does require infrastructure. And at the moment, the Trump administration has not put a dime into that effort. If and when that changes, I will be there with bells on to sing and dance. That is not what is happening today. Today we are building the equivalent of a piggy bank that we still have to fill up.

U.S. Trade Talks with the UK

US and UK flags with a selective focus on diplomats shaking hands. Licensed by Envato Elements

We haven’t seen any real negotiations over the past year because the Trade Representative’s office wasn’t staffed. All that’s been discussed are tariff levels, not full agreements, and nothing has been ratified. However, the Mother Country is the main exception to this lack of trade talks.

Since Brexit, the UK has been on the hunt for a major export market. With the US as the only viable option, the Americans aren’t afraid to demand regulatory alignment and force the UK out of the European trade orbit. AKA – the UK might not have to switch to the imperial system, but they would have to accept just about everything else.

The UK doesn’t have much leverage either, as going it alone isn’t viable. So, the Brits will have to bunk up with Brussels or Washington, and it’s a painful path forward regardless.

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Transcript

Hey, everybody. Peter Zeihan here, coming from a snowy Colorado. Today we’re talking about trade talks. Most of what has been going on this last year is not what I would consider to be an actual trade discussion. If you remember back to April of 2025, Donald Trump announced tariffs on really everybody and then said he was starting trade talks with all of them, 200 different countries at the same time. 

But at the same time, the US Trade Representative’s office, which is the office that handles trade talks, was never staffed out. So from the point of view of how we negotiated every trade deal to this point, no real talks had begun. Trump did not personally oversee any of them. He subbed them out to say the Treasury secretary, the Commerce Secretary, who were usually not involved in trade talks. 

And so basically all it was was a negotiation about that specific number that was announced back in April of what the overarching tariff would be, and a couple of side things patched on to it. And at this point, none of those deals have been ratified by anyone. So we really haven’t really started. There is one exception, and that’s the United Kingdom now, the United Kingdom, ever since Brexit, which is almost a decade ago, has been desperate to get some sort of trade relationship with the United States that is more formalized. 

The reason is pretty simple. The demographics are aged. They’re losing consumption based. They need an export market. And they used to have the European Union, but they don’t have it anymore. The question then, is if it’s going to be the United States, because it’s really the only large economy that’s close enough to matter. What does the United States want from the United Kingdom in order to get that? 

And as the Brexiteers have discovered, the United States takes a very hard line in meaningful trade talks, especially if you’re like the United Kingdom and you really don’t have any other options. So the news that has come out in just the last few days is something that the Brits are really cheesed off about, and that the United States is striking an uncompromising position under Donald Trump on regulation. 

And this isn’t new. The Trump administration did this the first time around. The Biden administration held at that position the idea is that if you have regular regulatory unity, you basically achieve market capture, because all of a sudden your country is now measuring everything and regulating everything in the same way as the country you’re trying to partner with. 

And that makes it harder for other countries to have trade deals with you. So this is about pulling the United Kingdom out of the European Alliance of Trading Countries and locking them into the NAFTA system. The Brits are resisting this, particularly around things like food safety, because they realize that once you go down that path, you’re pretty much locked in. 

And the Brits would prefer to keep their options open. But at the end of the day, the Brits are a mid-sized economy trapped between two major blocs, one of which has long range consumption options because it’s the younger population in Mexico and the United States, and one of which doesn’t because the European Union is much further along in the aging process demographically. 

So if there is going to be a meaningful US UK trade deal or a NAFTA UK trade deal, this is part of it. Now there are other things the United States is going to insist on. For example, in aerospace, the United Kingdom is going to have to leave the Airbus family and join Boeing on agriculture. They’re going to have to accept US agricultural exports in volume, which will probably drive most farmers and producers in the United Kingdom out of business. 

On automotive, they’re going to have to go with American emission standards instead of European and so on and on and on and on. And then, of course, on finance. London, just goes away and New York absorbs it all with maybe a little bit for Toronto. So there’s a lot to swallow here. But the United Kingdom has come to this negotiating table with very little on offer. 

I mean, yes, it’s a market of 60 million people. Yes, that is significant. But at the end of the day, the Brits are going to have to bend to either Brussels or Washington and it’s not going to be comfortable. But their alternative is to try to go it alone. And that is something that is just not going to fly.

Rolling Back Regulations in the U.S.

A gavel and law book on a desk

Trump’s pledge to roll back regulations isn’t inherently bad, but the way he’s going about it is problematic in just about every way.

Trump’s second term has brought about a new level of bureaucratic hollowing, leaving no capacity to manage regulations already in place. So, we’re left with a backlog of outdated policies, with an admistration who has no intention of enforcing them. Imagine the nightmare this creates for anyone trying to operate under those circumstances.

What we need is a functioning government with experienced staff who can regulate these systems and give clear guidance to those who need it. The bar is low, but the current administration is still trying to play limbo.

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Transcript

Hey all, Peter Zeihan here. Coming to you from Colorado. Taking a question from the Patreon page today, specifically about regulation in the United States. Donald Trump says that he’s going to strip out ten words of regulation for every word that gets put in. This is up from his first term when he said the ratio was going to be 5 to 1. 

And will this have a meaningful impact? The person was asking the question, was quite circumspect about this. And he realizes that some regulations are good. So it’s just a question of whether this is a pro or con at large. Overall it’s con, but probably not for the reasons that you’re thinking, the two most regulatory heavy administrations that we have had in modern history are the Biden administration and the Obama administration, and by far the most administrations we’ve ever had are Trump one and Trump two. 

But they’re very different beasts. The Obama administration stacked itself with people with no real world experience. There was only like five years total of people who’ve had a real job. Most of them came from academia and ideologues and think tanks and people who had never actually participated in the real economy. So a lot of their regulatory structures existed because the president hated to take meetings. 

And so he never went to Congress for anything. And so they made up what they thought the ideology would demand and try to force that on corporate America. And needless to say, it made a lot of mess. The Biden administration was kind of the opposite, and that most of the people who were in the administration had real world experience, either as mayors or governors or corporate titans. 

And so while there were still a lot of regulation that went in, it wasn’t nearly as crazy. 

Trump very different beast. In Trump one, the Trump administration, we’re all going to be right back that up. President Trump didn’t think he was going to win in his election with Hillary Clinton. And so when he became president, he tapped the Republican brain trust very heavily in order to build out his cabinet. 

And all the senior positions in the bureaucracy. And in doing so, a lot of people with corporate experience became bureaucrats. And in doing so, when they came across regulations that they knew from personal experience were stupid, they stripped them out or modified them to make it less onerous for the business community. And so, as a rule, the business community was broadly pro-Trump throughout the bulk of his first administration. 

That’s not where we are with Trump. Two, President Trump spent his time out of power during the Biden administration, purging the Republican Party of anyone who might ever come across as knowing anything, because he wanted to make sure that everybody knew he was the smartest person in the room. And the easiest way to do that was to dumb down the room. 

So he comes in to president the second time around. There’s no longer a brain trust and the Republican establishment, for him to tap. And then he goes into the bureaucracy and fire the top 1500 or so people, but doesn’t necessarily replace them. So what we have is this weird dichotomy. And yes, the regulatory frameworks, the the system that builds out new regulations that has been frozen in very, very, very, very, very few new regulations have gone into place under Trump. 

Two, however, these institutions are not staffed out, so they’re also not going through the old regulations and purging them or trimming them or amending them or getting rid of them or whatever it happened to be. So in some ways, we now have the worst both worlds. We have this massive regulatory hangover that dates back to the first Obama term, a lot of stuff that still hasn’t been cleared out. 

At the same time, we now have an administration that isn’t putting any brain power whatsoever into cleaning up that system. So yes, we’re not getting new regulations. And broadly speaking, for the business community, that’s a plus. But then we’ve got this massive overhang of stuff that is outdated or ill conceived, or never went through Congress or never went out for review. 

That is still on the books, and you’re legally required to still follow them. The Trump administration is telling people just don’t follow them then, which puts business in the worst of all positions. They’re legally liable if they violate the corporate codes. But this federal government is saying that they won’t enforce the corporate codes. So we get this rule of law problem. 

At the same time, we have an outdated and overburdened regulatory structure, and corporate America is left in the middle trying to decide which specific legal risk they want to deal with. Not a pretty situation to be in. The solution is for the government to be the government, but the government can’t be the government without people.

The Semiconductor Tariff Nightmare

A semiconductor chip

A poorly designed and destined to backfire tariff has just been announced; this time, the Trump administration has turned its focus to high-end semiconductors.

Putting tariffs on semiconductors is nearly impossible to do cleanly. There are thousands of types, production stages, and end uses. So, the Trump admin thought it would be a good idea to tariff them based on the end use, rather than where they’re made. The only problem is that most importers don’t even know the final use of the chips upon import, creating a legally and financially risky situation for everyone involved.

This tariff will likely freeze access to advanced semiconductors and choke the US tech and manufacturing sectors. There are a few ways around the tariffs, but those offer little relief to existing manufacturers. But hey, let’s just keep trying to jam this square peg into that round hole.rough strong alliances will struggle to survive. And the next generation of kids (however small that cohort might be) will be studying those countries in the history books.

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Transcript

Hey everybody. Peter Zeihan here, coming to you from Iowa. Today is the 15th of January, and the Trump administration has at long last announced the first wave of semiconductor tariffs, specifically targeting high end semiconductors. There was always going to be a question as to how this was done and whether it was going to be a disaster. 

It really matters because semiconductors are, for most intents and purposes, a commodity. They come in in thousands of forms and at thousands of different stages of production. There’s over 100,000 steps for high end semiconductor fabs creation. And they can come in as raw chips still attached to the disk. They can come in separated from those disk. 

They can be put into intermediate products like motherboards or charging stations. They can be included into intermediate products. They can be incorporated into final products. And so whatever type of tariff regime you’re going to put in there is obviously going to be full of flaws, even if it’s very, very, very well designed. And commerce was never set up to manage this sort of system, much less, Customs and Border Patrol. 

And that was before we had the personnel purges of last calendar year. So the questions were always, you know, how are you going to do this? Are you going to look like at a car? And the 1500 types of semiconductors that are installed within it have a different tariff rate for each one. Do you tariff the entire car tariff the chips independently? 

You do it based on the intermediate products. Based on where the value added happens. Basically, you could get more paperwork for one tariff on one vehicle than all of the rest of the 30,000 pieces in a car combined. What the Trump administration has done with this round is instead of going by sourcing, which would make a degree of national security sense, even, it would be, logistically almost impossible. 

They’ve decided to go on end use, which is, if anything, even more confusing, because now anyone who is importing these products has to decide what each individual chip is going to be used for. Declare that on the tariff form and the way that Customs and Border Protection enforces the tariff regime is to not check it on the front end, but to randomly check it on the back end and then really bring down a hammer in terms of fines and penalties. 

The problem is if if somebody is important to, say, 10,000 of a specific type of chip, they’re not the ones who are probably going to use the chip. The chip is going to go on and get put into computers or cell phones or pacemakers or whatever it happens to be. And so who is responsible for it? So the person who is doing the importing has to go and gets a customer affidavit and assign them to each individual box, each individual chip that Customs and Border Protection can then go into later a year from now, three years from now, and attempt enforcement. So what we’ve gotten is something that will freeze the use of semiconductors at the high end, because no one is going to know how to do the paperwork on the front end. It’s difficult to come up with something that is going to chill American manufacturing more, because now simply accessing the pieces in the first place is not going to happen cleanly. 

And you could open yourself up to legal liability simply from plugging a piece of typical technology into something that you’re working on, because you’re not the one who did the actual importing, but you’re probably legally liable. So we’re probably going to see a seizing up across not just the tech space, but the advanced manufacturing space in the United States, especially in places like heavy machinery, automotive and aviation, where these chips are used in the thousands in every single vehicle. 

It’s going to be very interesting to see how this goes. The Trump administration says it’s going to do a review after 90 days where if progress has not been made and expanding the supply chain within the United States, then, more tariffs will be coming. One of the many exceptions, because there are a bunch is that if you’re using these chips to expand the construction of a supply chain, you get a pass. 

But if you’re already have a supply chain, you do not. So this is a horribly designed tariff, absolutely the wrong tool for the job. And it’s going to become very obvious as this year rolls on, that it is actually going to poison most of what progress the US has made in its industrialization effort over the last decade.