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Trade War With China Won't Help the US Stay Number 1 for Long


Yesterday, Trump took to Twitter and unexpectedly threatened to raise tariffs on Chinese goods this coming Friday. This caught most people by surprise given incessant commentary over the past several months about how good trade talks were going and how close both sides were to signing a monumental deal.

Although Trump’s tweet led to immediate turmoil in global financial markets, U.S. equities have gone up in a straight line since the market opened and are barely down as I write this. Investors appear to assume this is just theater meant make the U.S. public think he’s being tough, so that when he ultimately signs a largely meaningless sham deal with no teeth he can talk it up and pat himself on the back for being a brilliant negotiator. I’m not convinced this is correct, but it’s what markets seem to be pricing in. Either way, we’ll have answers soon enough.

More importantly, I continue to think the U.S. and China are on a major collision course irrespective of what happens with the trade deal. This charade will likely resolve either with no deal and an immediate dangerous ratcheting up of tensions, or we’ll get a deal so weak and irrelevant it’ll fail to fundamentally alter the U.S.-China economic relationship in any meaningful way, which was supposedly the whole point.

Many people still assume the “trade war” is actually about trade, when in reality it’s about geopolitical power. The Trump administration wants to knock China down a notch and consolidate global hegemony, which is why it’s been pressuring China on a variety of fronts. This pressure will not cease until China either rolls over and becomes a client state of a U.S. unipolar empire, or it fights back. My view is China will fight back.

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As such, I think the next several years will be characterized by a consistent escalation in tensions between a U.S. desperate to hang on to global imperial hegemony, and rival powers committed to solidifying a multi-polar world. In other words, this isn’t simply an attempt to reorganize trade between the U.S. and China, rather, it’s one piece of a much larger historic competition to define what the next great paradigm of world history will look like. The old world is dying and a new one is being born. Expect plenty of chaos in between.

When the shoe was on the other foot...

That said, what’s most fascinating about this period of time isn’t that we’re living through a modern day Thucydides Trap. There’s another great struggle happening — arguably far more important than nation-state tiffs over geopolitical power — which centers around a conflict between decentralization and centralization, between freedom and top down control.

Humanity now possesses powerful tools to level the playing field it never had before. The blossoming of the internet made instantaneous person-to-person global communication a trivial exercise for the first time in history. This was then turbocharged by the advent of social media platforms, which gave anyone the power to rapidly influence public opinion in a way only gatekeepers could previously. More recently, the creation of Bitcoin has birthed an unprecedented era in which humans can transfer value globally, without permission, by just clicking a button. When it comes to two of the most powerful aspects of human interaction, communication and value transfer, technology has empowered the average person in ways that would’ve been unfathomable just a decade or two ago.

While that’s well and good, I’d be remiss not to point out that powerful figures have taken notice and aren’t particularly pleased. The 2016 election of Donald Trump was the final straw as far as the status quo’s tolerance for free speech on the internet. His victory proved they could no longer easily steer the public into the arms of their preferred candidates. As such, Russiagate was used to convince much of the public that billionaire tech oligarchs should be encouraged to rid their platforms of wrongthink, a process that continues to accelerate despite the fact that hysterical claims of Trump-Russia election collusion have been summarily dismissed.

Similarly, defenders of the status quo recognize the threat Bitcoin presents to established centralized power and the bloated rent-seeking finance industry. Those with an interest in keeping the entrenched corrupt system in place, or harbor fantasies of subjecting the public to a draconian environment of deeply negative interest rates, are overcome with fear of Bitcoin and other cryptocurrencies due to the freedom they offer average human beings.

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This battle between centralization and decentralization is the true struggle of our era. At the end of the day, the Chinese government and the U.S. government are both obsessed with controlling, tracking and manipulating their own people via propaganda, coercion and threats of imprisonment. We all know about the draconian state of affairs in China with its rampant surveillance and social credit system, but we’d be foolish to dismiss the fact that these same trends are unfolding right here in America, albeit at a slower and stealthier pace. For instance, with no fanfare or public debate, we recently learned that the Department of Homeland Security is determined to use facial recognition on 97% of departing air passengers by 2023. This is being rolled out by airports and airlines across the country with little notice and is catching some passengers off guard (it’s worth reading the entire twitter conversation below).

While it’s certainly important to recognize that tensions between global powers are set to increase in the years ahead and likely alter geopolitical dynamics forever, there are many other very meaningful things occurring simultaneously. We should never lose sight of the fact all governments around the world are becoming increasingly obsessed with centralizing their own power base while controlling and manipulating their citizenry. Just as the public has tools it never had before to empower individuals in a variety of ways, so too do governments.

The biggest opportunity and challenge our generation faces isn’t related to geopolitical games of global empire, but whether or not we can ensure modern technology enhances freedom and decentralizes power, rather than enslave us in a centralized, corporate-government surveillance state. This is the central struggle of our era.


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