Deglobalization is over-determined
President Trump has announced sweeping tariffs on almost every country on earth.
This is being treated by mainstream commentators as an act of profound recklessness on the part of the Trump Administration— and, in their defense, it does seem like a crazy move.
Maybe that’s the point — if it looks like sane, reasonable policy, the Chinese might get the idea that they can talk him out of it. Trump has gotten an awful lot of mileage out of people assuming he’s mindlessly, suicidally belligerent.
But even if Trump is playing a deliberate, calculated game of chicken, chicken is a dangerous game. You can’t really be “good” at it in a way that guarantees you win. When he threatened North Korea with nuclear war, there was always the possibility that Kim Jong-Un would escalate, and things would get out of hand. It all worked out, but it didn’t have to.
I don’t have a strong opinion about how all this will go, but I’m basically certain of this:
The death of globalization is over-determined.
President Trump will get the credit or the blame for whatever happens next — but it was always going to happen. The Administration has simply chosen to have the reckoning and dismantle the postwar economic order here and now, instead of later.
Historians will have opinions about whether waiting would have been better or worse, and the counterfactual will never be known — but there is no plausible scenario in which we could have forestalled it by more than a decade.
There are clear political reasons for this:
The US Government, as presently constituted, will be insolvent by 2035.
DOGE notwithstanding, USG burns ten billion dollars it doesn’t have every single day. The costs of this spending fall upon ordinary Americans, but also on foreign capital markets, and both parties are seeing less and less reason to prop it up.
In an important sense, the money printer is the empire:
The money printer finances the carrier strike groups,
the carrier strike groups provide global Security Guarantees,
the Security Guarantees keep everyone using dollars,
the global use of dollars allows the money printing
The problem with this arrangement is that the US Government cannot restrain itself from spending the money on stupid shit, and I mean that technically: there is no mechanism for the US Government to meaningfully decrease spending, short of a coup d’etat.
In fact, it’s precisely the insulation of the money printer from the political process that generates this runaway spending: the short-run costs fall on foreigners who don’t vote, while the short-run benefits accrue to American political constituencies who do.
This creates a constant political pressure gradient, a suction toward ever-increasing deficit spending — and the hypertrophy of the domestic constituencies that absorb the spending, who use their power to vote for more spending, ad infinitum.
This is a structural phenomenon — inherent in the shape of the empire.
As long as there is a democratically accountable government in Washington with global money-printer gibs to disburse, the gibs will flow.
The only things that can interrupt the suction are:
Internal political transformation: Trump (or “some ambitious colonel”) overpowers the money printer and its beneficiaries, and either ends American global hegemony, or ends American democracy, or both.
External political transformation: An alliance of vassal nations provides a credible alternative to the dollar (and the carrier strike groups), which makes US deficit spending immediately unsustainable via hyperinflation, which triggers option 1.
Economic exhaustion: Spending simply grows, uncontrolled, until markets cannot support it any longer. The empire’s vassals experience sovereign bankruptcies and extreme privation, which triggers option 2, which triggers option 1.
Every day that the suction continues, the resistance to internal change hardens — Americans’ dependence on the money printer grows, the constituencies who benefit from it grow stronger, and the necessary correction becomes more extreme and more politically unpalatable.
Simultaneously, the external pressure for change increases, as China deepens its control of US supply chains, American vassals grow increasingly tired of the global sheep-shearing operation, and USG becomes increasingly incapable of maintaining a military edge without a healthy industrial base.
In summary, delaying the collapse of globalism does not prevent it — it simply weakens America’s control over the time and conditions of the break, and puts that decision in the hands of the Chinese.
And China is absolutely committed to the collapse of the American world order.
The Chinese are actively and openly undermining the empire in every domain where they can do so without provoking a direct military confrontation.
On a dozen or more metrics of state power, China is already more powerful than the US — and while it is always cheaper to tear down infrastructure than to defend it, it is especially true with cheap submarine kamikaze drones.
So if they want to blow up the global economic order, they can — and they want to.
In a way, the situation is analogous to the war in Ukraine.
Trump is the aggressor, in the naive sense that it was his decision to escalate the conflict; but the US could not afford to ignore the drumbeat of unconcealed hostile encroachment from China, and every day he waited his optionality decreased.
There has been virtually no discussion of the recklessness of this encroachment on the part of the Chinese.
Partly this is because of the media’s hostility toward Trump, and partly because they’re on the take — but it’s also because everyone on both sides assumes that this conflict is straightforwardly in China’s interest, and they are risking very little.
But China has built their entire military around a confrontation with the US Navy in the South China Sea — radars and missile batteries to target F-35, hypersonics and submarine drones to overwhelm aircraft carriers, cyber and anti-satellite weapons to defeat America’s highly networked doctrine of warfighting.
China can almost certainly sink a carrier strike group, and thus destroy the security guarantees that undergird the empire, but:
there’s very little evidence that they can take America’s place as global hegemon (or that they even want to try), and:
The Chinese state, more so than the average American, is a dependent and beneficiary of the global empire, and cannot survive without it.
20% of Chinese economic activity is exports — more than half of which is well outside its plausible zone of force projection (maximally, the Western Pacific as far as Australia.) Another 40% of their economy is fixed capital investment — investments which are highly levered and utterly dependent on the export market.
Chinese domestic consumption isn’t going to catch up to this massive gap between production and demand, ever, because their population is already declining. They import 35% of their food, with about half coming from Brazil and the US alone, and they import 50% of their fuel from the Middle East. They have gotten very good at making TVs, but they will not be able to eat them.
China has the ability to cause problems for the US in Latin America (see: Panama and the Darien Gap) and the Middle East (see: the Houthis), but that is not remotely the same thing as securing their own access to resources in a genuinely-anarchic, post-Pax world.
But this, too, is a structural phenomenon.
It isn’t just that China is unprepared to step into America’s shoes as global hegemon. The technology that China is using to destabilize the empire doesn’t offer them any clear means to replace it.
Carrier strike groups are probably obsolete now, but that doesn’t mean that American carriers will be replaced by Chinese kamikaze drone swarms patrolling the sea lanes. It’s not obvious that drone swarms can patrol the sea lanes.
The introduction of gunpowder did not produce Gun Feudalism: instead, it rendered armored knights and castles obsolete, overthrowing and transforming every society it touched — especially its most skilled and enthusiastic adopters.
Globalization happened in the first place because the dominant military technology of the 20th century favored consolidated democratic mobilization of labor and capital at the largest possible scale — tanks, planes, artillery, and large, complex logistical trains. Bureaucratic giga-states could produce these weapons most effectively, and so dominated all smaller and less-organized polities.
But today, the dominant military technology strongly disfavors those weapons, because they are big, slow, legible, expensive, and vulnerable — so bureaucratic giga-states will increasingly face challenges that they are simply not equipped to confront, and will probably collapse.
Autarky is basically just “prepping” at the nation-state scale.
Trump’s objective in sparking the trade war is to encourage big, otherwise-unprofitable, inefficient investments that will make the nation robust to the catastrophic breakdown of the global system.
It is of course much easier and more efficient to get bread from Wal-Mart than to grow wheat in your backyard, but nobody gets into prepping because they think it’s more comfortable, or will make them wealthier, or that it’s an efficient way to live. They get into prepping because they believe they have to.
Of course, one dilemma of prepping is that, even if you’re right about what’s coming, you can bug out too early, and miss years of opportunity to build and earn in the regular economy, acquiring liquidity and optionality that would be useful in an emergency.
In the end, I don’t know if President Trump will be celebrated or mocked for breaking up the postwar global order on his own terms. It will almost certainly make Americans poorer — but the emergency for which he is preparing is obviously coming, within a decade, for half a dozen inescapable reasons.
Given that understanding, we are building businesses, connections, and options that will carry our families through the coming volatility. Learn more at exitgroup.us.
EXIT News:
Last week’s full-group call (4/1) was our NatalCon Recap. Great discussion
This week’s full-group call (4/8) was on EXIT Acquisitions. Several of us are involved in acquiring distressed or undervalued businesses. In the coming weeks we will launch an acquisitions call for small teams to collaborate and share notes.
Dallas meetup will be Saturday, 4/19.
Seattle meetup will be Saturday 4/26.
Monthly Ham Radio Licensing Call tomorrow, April 9.
Meetups for Substack Subscribers will be announced next week.