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Trump and Xi got into a pissing contest with their tariffs and you guessed it, everybody lost…
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Peter Zeihan here it is April 9th. Yesterday, the Trump administration added another 50% to the tariff on China, which brings the official total to 104. And we’re probably only days away from a secondary sanction being placed on China for its trade with Venezuela, which will bring it to 129%. Also overnight, the Chinese raised their retaliation on tariffs to, for imports from the United States from 34% to 84%.
So the largest bilateral economic relationship in human history is, for all intents and purposes, over now. And the decoupling is going to proceed with massive pace on the American side. This is highly inflation here because there just isn’t enough industrial base elsewhere on the planet. Even if we had good trade relations with everyone else to replace the manufacturing capacity that is in China.
And if we’re going to build it here, we need all of the raw materials steel, aluminum, lithium, cobalt, all of it that China is the primary processor of. And all of those now does cost twice as much. So we’re looking at a minimum 10% inflation for the remainder of the year. And hyperinflation is something we need to start considering as a possibility.
We’re also looking at a recession, because the increase in costs for the basic things that allow your life to function is now beyond the point that the lower third of the American population can afford without significant external support. And the federal government is already in a massive debt situation that Donald Trump has promised to make worse, with additional spending and tax cuts on the Chinese side, they just lost their largest customer, their largest source of capital, their largest source of technology.
And, the implicit support of a country that provides the military security, that allows their shipments to move. We now need to start considering what happens when the US military is tasked to economic issues, which will disrupt Chinese shipping to the rest of the world. And that very quickly leads not just to a recession and a social breakdown in China, but something potentially far worse that could technically include things like military conflict, and is a disassociation of the Chinese system and everything goes with it.
It is a very quickly evolving and degrading situation. We have to cult of personality on both sides of the Pacific, who basically ignore what few advisors they have left. It is now a battle of egos, with the rest of us caught in the middle, and it will not end well. There is no one who can mediate here. This is no one who can talk either side down.
This is going to go until something breaks. And what is going to break is the current economic expansion in the United States. We are firmly in recession territory now, and probably the Chinese system as a whole. And there’s no way that those two things don’t happen without a cavalcade of additional issues. Now, at very we’re having our question time here on Patreon for subscribers.
If you haven’t signed in already, I suggest you do it because we’re starting at 10 a.m. mountain. Noon eastern. And for those of you who are not in Patreon, we’re sending this video out to everyone. So you have some idea of what’s coming down the pipe. We’re going to be answering questions for a good long time.
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