Tag Archives: china

Amazon will not be part of the “Resistance”

I wanted to write this half a year ago, but with Trump’s tariffs back in the news, I figured I’d give it another go.

When Trump first enacted his so-called “Liberation Day” tariffs, many experts (mostly partisan experts though) predicted the apocalypse. It was bad enough that many news sources started educated their readers on the Smoot-Hawley tariffs, which anyone who watched Ferris Bueler’s Day Off will know were the tariffs enacted during the Great Depression. These tariffs have been blamed for contributing to the depth and intensity of the Great Depression, and naturally partisans wanted voters to make that connection to Trump’s Tariffs.

I myself also started watching out. I live in a major city with a major train hub, and as I commute past it I like to look out and check how many boxcars are being loaded and unloaded by trains. Earlier this year it seemed the tariffs might have actually been apocalyptic, the train yard was empty on some days. But despite partisans stoking fears of COVID-level shortages, tariffs have seemed to have a marginal effect on the US economy. Growth has remained strong in 2025, with the US well ahead of pretty much every advanced economy on earth in terms of growth rate. The EU may be a massive free trade area, and the USA may have become an increasingly protectionist autarky throughout the Trump-Biden years, but that hasn’t been enough to make the EU more competitive or the US less.

It’s likely because the tariffs are indeed marginal. Tariffs are a tax on imports, but like any other tax they can be avoided and mitigated by changing behaviors. Companies have shifted to sourcing their products from areas with lower tariffs, changing their production line to build more things in America, or in some cases are simply accepting lower profits and not passing the cost of the tariffs onto consumers because they need to maintain market share. In other cases the tariffs *are* leading to a rise in prices, but consumers still have the chance to substitute tariffed goods for other goods or just stop buying alltogether.

The tariffs have likely contributed to inflation remaining well-above target, and have likely made certain consumers much poorer without realizing it (as they purchase tariffed products and can’t find substitutes), but the tariffs have not had nearly the destructive effects that I and many others believed they would.

But the biggest problem for Trump’s detractors is highlighting the adverse effects of Trump’s tariffs. Remember that the American people seem to broadly like tariffs: Biden expanded Trump’s tariffs, Bernie surged in the Democratic Party by denouncing Clinton’s pro-corporate policies (which were usually also pro-trade policies) and Trump has completely remade the GOP into a protectionist party. America’s two parties are dominated by protectionists, and many free-trade Democrats have been furious that 2028 hopefuls have mostly denounced Trump’s tariffs as being “too high, too broad,” rather than hitting out that “tariffs are just plain bad and shouldn’t be used.”

It seems that Americans really do like tariffs, so trying to attack Trump for his tariff policy doesn’t hit as well as it “should.” This is a big problem for free-trade Democrats because to them it’s patently obvious that Trump’s tariffs have led to higher inflation and lower growth, but Americans aren’t necessarily buying it.

Enter Amazon. As the foremost distributor of direct-to-consumer goods, Amazon is acutely sensitive to trade policy. Any raise in tariffs will cause a raise in prices for imported goods, causing consumers to purchase less and that hurts Amazon’s bottom line. Amazon has every reason to lobby as strongly as possible *against* tariffs, and as a consumer-facing company that everyone knows, free-trade Democrats thought they’d found their edge.

The idea went like this: what if Amazon *shows consumers* how much higher their prices are because of tariffs? What if every time a consumer buys a 100$ imported product, Amazon shows its base cost but then hits them with a “+15$ because of tariffs” fee at the checkout? Consumers would be furious at these hidden costs, but their fury would be directed at Trump and his tariffs. The tariffs would become unpopular, Trump would become unpopular, the free-trade Democrats and Amazon would be the big winners in 2026 and 2028 when (hopefully) less protectionist Democrats would be swept into power on a wave of consumer backlash.

It all seemed so perfect, leaked reports even claimed that Amazon was openly considering this idea.

But then Amazon made an official statement that they would not under any condition display tariff prices. Their statement said that while such a move was considered, it was never approved, which isn’t unusual as companies are constantly considering many thousands of moves that are never approved. Furthermore Amazon spokesmen pointed out that the company had never shown consumers the cost of tariffs during the Biden administration, even though Biden had hiked tariffs to their highest point since Jimmy Carter.

Amazon felt the move would damage its own brand, worsen its political position, and bring basically no benefit. If Amazon was an arm of the Democratic party, then maybe it would make sense. But as a profit-maximizing entity, pissing off your customers with hidden fees *and* wading into the political arena with a nakedly partisan endorsement of the opposition (by blaming the current administration for high prices) just doesn’t make sense.

So Amazon will *not* be part of the Anti-Trump Resistance. As Michael Jordan once said, Republicans buy sneakers too, and most profit-maximizing companies find it best to *not* piss off half the country by taking overtly partisan stances. They may try to take political stances, but they will always present themselves as non-partisan to consumers, because they don’t want to lose business from angry voters. And directly blaming Trump’s Tariffs for high Amazon prices, after 4 years of never doing such for Biden’s Tariffs would indeed be an overtly partisan act, because it’s an attempt to blame Republicans for high prices and push consumers towards supporting the Democrats.

This then made Amazon a target of April’s 2-minute-hate in the eyes of free-trade democrats. These Democrats don’t see “showing the cost of tariffs” as partisan at all (because people always believe their own beliefs are just “the obvious truth,” and not a partisan stance). Rather, when Amazon *refused* to show the cost of tariffs, it was blamed for kowtowing to a “fascist” government, comparisons to 1930s German companies were ever-present, and Bezos himself was derided as a coward and a collaborator, rather than the profit-maximizing businessman that he is.

The simple fact is that obviously no multinational company is going to want to lose half its customers, so no multinational company is going to make their storefront an advertisement for the Democrats and against the Republicans. I’m sure Amazon is lobbying the administration on reducing tariffs, it was widely reported that tech giants did this exact same lobbying last time Trump was in power. But just because Amazon doesn’t like tariffs doesn’t mean they want to torch their credibility with Republican consumers. Because Republican consumers might angrily ask why Amazon is sourcing products from overseas (and showing people a tariff) rather than sourcing *American* products like Trump (and Joe Biden, and Bernie Sanders) would prefer they be doing.

Anyway I’ve found a dozen ways to restate this one point: Amazon is not going to become part of the Resistance, it will not show consumers what the price of Trump’s tariffs are in part because that would be a partisan move that would invite blowback and boycotts from Republicans: “why isn’t Amazon buying American instead, and why didn’t Amazon do this stunt during the Biden administration?”

But I wanted to note one additional reason Amazon won’t be showing consumers the price of tariffs, and it’s isn’t because of what Amazon wants, it’s because of what their suppliers want.

The relationship between Amazon and its legion of medium-sized suppliers is a tricky one. On the one hand some random clothing store like Shoes&Shirts LLC (fake name) probably likes that Amazon gives them a massive amount of customers to sell to. Amazon’s global consumer base makes it easier to scale up by just having a single contract with Amazon, rather than having to negotiate multiple deals with brick-and-mortar stores in every single country.

On the other hand, Amazon’s dominance of the market gives them a lot of power over their suppliers, they can negotiate a large cut of the proceeds, demand suppliers abide by Amazons rules and regulations, and overall an agreement with Amazon can be like a pair of golden handcuffs. If you’ve seen how indie developers complain about Steam, you’ll understand how small and medium suppliers complain about Amazon.

The situation can be even worse, since Amazon competes directly with its own suppliers. Say Shirts&Shoes LLC has a new style of Comfy Sweater that is flying off the digital shelves. Amazon can see this, and see that another company makes a nearly identical sweater for a fraction of the cost. Amazon can then source their own Comfy Sweater from this other company and try to undercut Shirts&Shoes LLC on price, fulfilling the orders themselves and taking Shirts&Shoes’s business out from under them.

Amazon suppliers are therefore very very cautious with what information they give to Amazon. They do *not* want to tell Amazon the price it costs them to make something, they only want to reveal the price they’re selling it for. Giving away the price to make something makes it even easier for Amazon to undercut them.

If Shirts&Shoes’s sweater is selling for 100$, and you can source it for 60$, you still don’t know for sure if you can undercut them. Maybe Amazon lists their own sweater for 75$, but Shirts&Shoes responds by cutting the price down to 50$ because they can actually make it for even less than that. Amazon would be putting a lot of money into a failed attempt at capturing new market share, Shirts&Shoes would be furious at the attempted betrayal, AND both would now be making less money because the shirt is selling for less so both sides get less of a cut. The only winners would be the consumers.

So Amazon’s suppliers DO NOT want to give Amazon any information more than they need to. And that by the way includes the price of tariffs.

When Shirts&Shoes brings a shirt into America, customs charges them a tariff based on the declared value of the shirt. Shirts&Shoes then has to set the sale price at a level high enough to cover not only the cost of the shirt, but also the cost of the tariff. If the value of the shirt is 20$ and there’s a 100% tariff, then they can’t sell the shirt for less than 40$ without taking a lose.

But they may be selling the shirt for 100$ anyway and taking 60$ of profit. Now, the shirt’s price may have gone up because there used to be no tariff and now there’s a 100% tariff. So the free-trade Democrats would love if the shirt was listed on Amazon for a price of 80$, but had an extra 20$ “tariff tax” at the checkout that would be directly blamed on Donald Trump.

But Shirts&Shoes doesn’t want to reveal that the base cost of their shirt is 20$ with a 20$ tariff on top. Because at that point if Amazon can source the same shirt for 35$, then they can undercut Shirts&Shoes and steal their business, and both sides know it. Instead, Shirts&Shoes would like the costs going into the shirt to be as obfuscated as possible.

They’d probably like their customers to think that it costs them 90$ to make a shirt and they’re selling it for 100$, because that way they don’t seem to be making “too” much profit. If customers knew Shirts&Shoes had such a high mark-up, customers might think they were getting ripped off, and would make nasty posts on the internet to complain about Shirts&Shoes’s prices. This could harm Shirts&Shoes’s brand.

And they’d probably like Amazon to think that it costs them 5$ to make a shirt and they’re selling it for 100$. Because they don’t want Amazon to attempt to undercut them and either steal their business or initiate a price war which harms their profit margins.

So ambiguity is entirely in Shirts&Shoes’s interests, and so they don’t want to reveal any tariff information to Amazon. That in turn means that even if Amazon wanted to, it wouldn’t be able to reveal tariff information on any third party products, only on products it sources itself. That could backfire if Amazon even decided to reveal tariff prices, as *only Amazon’s own goods would show the tariff as a hidden cost*. Buy a good sourced by Shirts&Shoes? What You See Is What You Get. Buy a good sourced by Amazon? You have no idea WHAT the real price will be.

To summarize, Amazon (and other profit-seeking companies) will NOT be part of the resistance, as they do not want to damage their brand in the eyes of partisans. Likewise, it’s not even a simple thing for Amazon to JOIN the resistance and reveal to customers the true price of tariffs. They’d be pissing off their own customers by making customers feel like the price is a bait-and-switch, they’d be demanding information from their suppliers that the suppliers don’t want to reveal, and if the suppliers DON’T reveal that information, then only Amazon-sourced products would show a tariff anyway, meaning Amazon gets all of the blowback for “high prices” while their suppliers can claim “Same Low Prices As Ever,” even if prices everywhere are actually rising.

Partisans think everyone should join their fight, and that the only reason not to is base cowardice. They’re usually wrong.

Ten Episodes in China’s Diplomacy: the uncanny resemblance between communist countries and monarchies

I’m reading Ten Episodes in China’s Diplomacy, a written account by former Chinese Diplomat Qian Qichen of ten episodes when China made a name for itself on the world stage. What strikes me though is how much of communist diplomacy in the 1980s revolved around funerals.

I don’t know how true this is, but I was told that funerals were important parts of diplomacy for European monarchs and states. The funeral of a sovereign is a time when even old enemies can be temporarily reconciled in a shared expression of mourning. The Christian funeral service allows the separate nations to find familiarity in their shared religious observances, and the priest may even give a sermon reminding us that every death is a new beginning: a time to bury the hatchet and forge bonds anew.

The event of a ruler dying in office, and of their neighbors coming together under the banner of their shared religion, gives a chance for old enemies to make amends. If the sovereign themselves had enemies, those enemies might take the opportunity to make nice with the sovereign’s successor. Or if his neighbors were enemies with each other but friends with him, they can at least exchange pleasantries at the Christian funeral and perhaps promise to meet again and bury the hatchet.

All this to say: this kind of funeral diplomacy was a key part of Chinese diplomacy in the 1980s. China was severely isolated in the 1980s, they had almost no relations with Russia, they had fought a war with Vietnam, their main ally was the economic basket case North Korea, and the West hated them only marginally less than their fellow communists.

But under Deng Xiaoping, China wanted to reset its foreign relations and normalize its borders in both the North and the South. But while Deng was ready, his fellow communists were non-committal. In fact Qian Qichen’s book makes clear how little China spoke to the other communist countries, and how little those countries listened to China.

But several moments came together to allow China to approach its neighbors in a more friendly manner. Several leaders of both the USSR and Vietnam died in rapid succession, and each funeral was a chance for the communist world to come together to mourn the leaders’ passing and forge new ties of friendship. China rapidly sent an emissary to Leonid Brezhnev’s funeral to make clear that they wanted to reset Sino-Soviet relations. And the death of Le Duan in Vietnam allowed the Chinese and Soviet ambassadors a chance to speak privately, even if they avoided each other in public.

The parallels between this communist “funeral diplomacy” and the Christian “funeral diplomacy” I outlined above are quite striking. And it does put into perspective how many communist countries acted like monarchies. Unlike in a Democracy, monarchies assume the ruler will reign until death, and reign undisputed. There are very few opportunities in a monarchy for policy change because the guy in charge probably believes the same things he believed 20 years ago. So the death of a monarch is a rare opportunity to bring about a policy change.

And like in the old Christian tradition, these communist monarchs could come together under a shared banner of mourning. They may denounce each other in public, but once a communist leader dies his fellow communists can usually agree that at least he was a Marxist instead of a capitalist. That alone creates a shared ideology which can underpin the “let’s bury the hatchet” feeling during the funerary events. Just as a priest may remind the attendants of their shared Christianity, so too may a communist orator remind the attendants of their shared communism.

Qian Qichen naturally asserts that it was China’s skillful policy and diplomacy that brought about the positive resolution to these 10 events, but many of the early events were mostly matters of circumstance. Leonid Brezhnev was a hardliner, so of course he wouldn’t accept resolving the Sino-Soviet border dispute in China’s favor, nor would he or Le Duan accept resolving Cambodia in China’s favor. But Gorbachev was a reformer (or a lightweight if you believe his critics) who was happy to make deals in China’s favor in order to reduce the political and military pressure on the Soviet Union while he tried to reform it economically.

In the end it’s likely all of these events would have been resolved one way or another as China industrialized and became a real player on the world’s stage. But communist funeral diplomacy allowed Deng Xiaoping to resolve most of these disputes in the 80s when China was still a mostly agricultural nation that still had to import food to survive.

It’s something to think about.

Draghi wants to unify Europe’s capital markets 

Note that this one’s more rambly than I wish, but I have a lot of thoughts and am not good at editing.  Suggestions for how to cut this down are appreciated if you want to leave a comment or an email. 

You might as well be lighting your money on fire…

When talking about the American vs European economies, the discussion always turns towards Tech.  “Europe missed the Tech boom” is a true, but surface level description of Europe’s stagnation in high tech industries.  Cloud computing, social media, AI, all the buzzwords of the last 20 years have been American, and some wonder why Europe doesn’t have trillion-dollar companies like Apple and Microsoft.  I’ve already pushed back on the “cultural” explanations for this, but I want to look deeper at some of the proposed solutions for helping Europe’s economy catch up. 

If you ask why Europe has a smaller Tech industry, there’s a few common answers given.  One is that Europe is fragmented linguistically, most people don’t speak each other’s language, while America has 300 million people all speaking one language.  But I’ve never been convinced by the argument that tech companies stop at the border.   

You can maybe make the argument that social media spreads fastest among people who speak the same language, but I’ve never seen this argument be well-quantified.  Facebook is used by half the earth’s population, they don’t all speak English, so why did it spread so easily even after maxing out in the English-speaking world?  And TikTok has been a viral hit among westerners, even though it started in China.  The language argument is often presented as obvious but without any evidence to support it, and I don’t think it’s reasonable until I see some evidence. 

Furthermore, social media is just a tiny piece of the Tech industry.  Apple, Microsoft, Spotify, Samsung, these aren’t social media companies.  So what explains why half of them are American, and the non-American ones aren’t even in the top 10? 

Another argument is that Europe is fragmented economically.  Still, I don’t really buy this.  It’s true that Europe is not wholly unified, different countries have different regulations.  But the EU is a common market of goods and services, overwhelmingly products sold in one country can likewise be sold in another.  If there was a European version of Apple or Samsung, their smartphones would almost certainly be buyable in any EU country.  Indeed, the market fragmentation never stopped Nokia from its 1-time dominance of cell phones, so why did this fragmentation prevent the emergence of a European smartphone company, if it never stopped the top European cell phone company? 

The final common answer is the one I want to discuss today: European investment is low because there is no unified capital market.  German investors invest in German companies, French investors in French companies, and this drastically limits how much capital is available for startups.  While Europe is trying to have 27 different capital markets, American capital is clustered in just 1 (Silicon Valley) or 2 (if you count Boston, New York, or one of the other “also rans”). 

I buy this argument more, but I want to start with some clarity on what it *really means* for a capital market to be “unified.” 

We’d say a market is unified when investors from one area are equally capable of investing in any other area.  Why might investors not invest across the border?  Tax and regulation mostly.   

Taxes don’t have to be *higher* to deter investment, *different* is more than enough.  Think of capital gains tax when an investor sells something they’ve invested in.  Some places allow a lower tax when you hold the investment longer (long-term capital gains), while others don’t make a distinction.  This may lead to a lower tax burden overall, but more tax-season headache in proving how long each investment was held, and proving it was held in the correct jurisdiction which allows this long-term capital gains distinction.  Sometimes it’s better to just invest everything in one place and hire less accountants. 

Different regulations would also be self-explanatory, there’s more bureaucratic overhead in understanding and applying different regulations for each different investment.  But here we come to the difficult part, and why I think Draghi’s drive for unification will face stiff headwinds.  Regulations have a moral component for lack of a better word.  When discussing regulations online, it’s not uncommon to see “regulations are written in blood” as an emotive argument put forth against deregulation.  Any attempt to pair back anything in the way of “red tape” faces a mountain of pushback from voters, and unifying the regulations will require *some* deregulation.   

*Some* country’s regulations will have to be cut, even if they’re simply replaced with those of another countries.  Even if regulations are “harmonized” by trying to bring them closer together, that still means some things get cut and some things get added.  And this will necessarily inflame the passions of the voters and commentators who say that “regulations are written in blood.”  Because while regulation of the capital markets might not have to do with healthcare and worker’s rights directly, they do have much to do with bankruptcy and ownership, which can be even more emotive. 

Trump is often jeered for his numerous corporate bankruptcies.  He in turn calls bankruptcy a smart business move when needed.  It’s true that an investor can expect 9 investments to go bust for every 1 that succeeds.  And it’s true that American bankruptcy laws are quite lenient.  And it’s also true that a smart investor be foolish to not take advantage of any edge the law can give them, lenient bankruptcy is one such edge. 

But bankruptcy stirs passions because someone’s left holding the bag.  If Europe is going to unify its capital markets, it’s going to inflame those passions.  When the banks went bankrupt in 2008, it stirred immense passion because of who had to pay and who was left holding the bag.  Changing these laws raises the specter of the financial crisis, and any recent bankruptcies will get put under a microscope to point out how things would be different in a unified EU capital market.   

To put some meat on these bones, let’s say a car company is going bankrupt in Bulgaria.  We’ll call it “Bulgarian Cars,” its owner and CEO is Mr Car, its workers belong to the “United Car Workers Union,” UCWU.  It has purchasing agreements for steel with “Steely Corp” and its sole creditor is “Big Banking,” who is unfortunately unaware that Mr Car is about to go bankrupt. 

Under the current Bulgarian system, Big Banking can (if they desire) simply take possession of all the “Bulgarian Cars” assets, and sell them in a fire sale to get back the money they are owed.  This means the factory, the showroom, and anything else could be closed down in an instant.  Big Banking gets back their money, Mr Car is broke, UCWU are out of their jobs, and Steely Corp lost its biggest customer. 

But how would this situation be effected by Draghi’s directive to unify EU capital markets?  How would the bankruptcy be altered?  Who would win, and who would lose? 

Draghi has already signaled that unified EU bankruptcy must allow for “debtor in possession,” meaning Mr Car can keep control of his company while working out a repayment plan with Big Banking.  This system allows Mr Car (or any investor) to try to rescue their company, even in bankruptcy. It’s part of what made Trump’s bankruptcies so painless. 

In France, a debtor is immediately granted relief from creditors upon filing restructuring plans.  In Germany, the debtor may *request relief*, but it isn’t automatic.  But if the capital markets are to be unified, Bulgaria must follow the direction of France and Germany and give Mr Car a reprieve from his creditors.

But should Mr Car even be *granted* relief?  He drove the company into the ground in the first place!  Why does he get to stay in charge, paying himself an obscene salary all the while?  Draghi’s unified capital markets would allow a lot more “Trump-like” bankruptcies ripe for this kind of outrage-bait, with a villainous CEO stiffing creditors, unions, and business partners while still bringing home fat checks. 

And what happens to UCWU?  They just finished negotiating a new contract with Bulgarian Cars. The contract included conditions and a long notice period before a new contract can be renegotiated.  But most EU countries allow the suspension of a union contract to help the company exit bankruptcy.  So Draghi’s unified capital market raises the possibility of workers losing out so that bankers and executives can keep the company going.  Workers’ pain for bosses’ gain. 

And through all this, what about Steely Corp, who just lost its biggest customer?  Bankruptcies are always politically fraught as they can cause a domino effect into other industries.  This is why some nations focus so much on business continuity, even if it comes at the expense of creditors and workers.  Steely Corp will want to lobby the government that UCWU and Big Banking can go to hell, they want to ensure that Bulgarian Cars returns to solvency no matter what.  Otherwise Steely Corp itself may go under, and the national news will blame the Government for letting not one, but *two* major employers go bankrupt.   

How much will Draghi’s unified capital market allow Governments to “save” companies this way?  Under certain restructuring scenarios, the Government will essentially be picking winners and losers in the market.  Demand Big Banking take a debt restructuring, demand UCWU accept a new contract, and you’re making banks and workers lose so that car and steel companies can win.  This doesn’t always fly with EU rules around fairness, and certainly won’t fly with some sections of the commentariat. 

This post was a lot less focused than usual, but it’s been in my mind for weeks.  “Unify the EU’s capital markets” sounds so obvious, why haven’t they done it?  They haven’t done it because it involves politically fraught trade-offs about ownership and hierarchy.  “Who wins and loses in a bankruptcy case” is just the top of the mountain.  Questions of equity investment, investor’s rights, corporate governance, union rights, these are also fraught questions that will have to be answered in a unified capital market.  Whatever answer is chosen will inevitably piss *someone* off, which is why countries are so slow to change these laws.  But until countries are willing to make big changes, the EU capital markets will never be unified. 

Not knowing your Enemies

One of the oldest maxims in military strategy is this: know your enemies. Colonel Santiago of the Spartans added “do not forget above all to yourself.” It’s amazing how badly people fail at this most basic maxim when “knowing your enemy” requires understanding their political goals and ideology instead of just guessing how many tanks and artillery pieces they have on hand.

a nuclear explosion

I’ve been watching a lot of Indy Neidell recently. For those who don’t know, he’s a youtube historian who presents a lot of programs where he recounts the history of a conflict in chronological order. He has presented “World War 1: Week by Week,” “The Cuban Missile Crisis: Day by Day,” and “The attack on Pearl Harbor: Minute by Minute.” It’s the Cuban Missile Crisis I’d like to talk about today.

I’m sure you all know the story of the Cuban Missile Crisis: the Soviet Union puts nukes in Cuba and the world sits on the brink of Armageddon as America and the Soviets decide if they want to nuke each other or not. Eventually the Soviets agree to remove the nukes on Cuba in exchange for America removing its nukes in Turkey, and a direct phone line is established between DC and Moscow so the leaders of the two superpowers can try to hash things out more peacefully in the future.

But what’s striking about the crisis is that no one involved understood each other’s motives, and that nearly led to ruin.

Soviet leader Nikita Khrushchev was the first mover. He was upset that America could threaten him with nukes from Turkey while he couldn’t threaten America with a similar first-strike. He placed nukes in Cuba so he could have such a threat in his back pocket.

Castro was mostly a bystander in the crisis, a sad state of affairs since it was his nation that the crisis was about. Castro was sold the idea that the nukes were there to protect Cuba from any future Bay Of Pigs style invasion. He thought the nukes were primarily for his benefit, and urged the Soviets to give him operational control over them.

When America found out about the nukes, they completely misunderstood things. They seemed primarily worried about West Germany, and thought the nukes were there to distract them from an upcoming West Berlin crisis. Or that the nukes were to dissuade them from coming to Germany’s aid if the Soviets invaded there. Throughout the crisis, many American decision-makers remained stuck on the question of “how does this relate to West Berlin?”

It’s somewhat understandable that the American thought this way, since West Berlin was so important to them. It was the shining beacon of freedom in the middle of Soviet Communism. And every East German who escaped to West Berlin was a diplomatic coup, proof positive that the Western system was better, and that Communism was *so bad* that it was the first government in history that needed to build a wall to keep citizens *in*.

But this fixation caused America to dangerously misjudge the USSR during the crisis. They didn’t understand that Khrushchev and Castro had their own motives for doing this, and American policy-makers were constantly looking for a West Berlin connection. America made plans to knock out the nuclear missiles in Cuba either with air strikes or a ground invasion. These ideas were ultimately shelved partly because “what if the Soviets want to tie us down here while they invade West Berlin?”

But what America *should* have realized was that the Soviets weren’t going to install nuclear missiles on Cuba without a *lot* of troops to guard them. The proposed American ground invasion would have been *severely* outnumbered by the USSR Red Army troops that America didn’t know were on the island. And that’s without even mentioning the tactical nukes that were also there to guard the strategic nukes. An American invasion would have been a slaughter, possibly including the use of said tactical nukes against the US Navy, but the Americans assumed Cuba was a small sideshow because that was how they saw it themselves.

And while the USSR was *more* interested in Cuba than the Americans thought, they were *less* interested in Cuba than Castro thought. When the USSR was moving the nukes out, Castro threw a fit and tried in vain to retain control of the tactical nukes. This earned him no favor in Moscow, as the USSR wanted to bring everything home and put the whole thing put behind them. The end of the crisis created a lot of bad blood between Cuba and the USSR, when it could have been a unifying moment instead.

In fact, I saw much the same level of American misunderstanding in Indy Neidell’s series on the Korean War. Yet again the Americans began this war being most worried about Germany, “what if they want us to pull our troops from Europe into this war in Korea?” This hamstrung troop movements and decision-making in the crucial early stages when South Korea was being overrun.

Later on, the Americans showed another failure of understanding that I’ve seen repeated in the modern day: the assumption that their enemies were united and working in lock-step against them.

The idea went like this: the USSR, China, and North Korea were all Communist. Communists were all opposed to America, and thus Communists all moved in lock-step to work against America. It became clear early on that the USSR wasn’t moving its European troops to support North Korea, and that the USSR would *not* join the Korean War with ground forces. That proved (in America’s mind) that the Korean War *was* just a side-show, and that they had to remain focused on protecting West Berlin.

It *also* proved that the “Forces of Communism” were willing to cut North Korea loose and not support them if US troops occupied the North. If the USSR wasn’t supporting them, you could be damn well sure China wasn’t supporting them either, because the two moved in lock-step. And that meant no ground forces would swoop in to aid North Korea, meaning America was free to occupy the whole country.

The USSR certainly treated Korea with less importance than its European commitments. But the Communists were *not* operating in lock-step, and China was willing, even eager to send ground forces to Korea. More than just fighting the Capitalists, China wanted to prove that the “Century of Humiliation” was over, and that the Communists had brought China back to being a super-power on the world’s stage, able to go toe to toe with anyone.

America took the lack of USSR ground troops as proof that the Forces of Communism were in no way prepared to fight them face to face in Korea. American generals and planners ignored the massive amount of Chinese ground troops even as those troops moved into Korea to start fighting. America failed to understand: China was willing to fight even if the Soviets weren’t.

This strange idea, that our enemies are all united and move in lock-step against us, is a common one amongst small-minded jingoists. Jingoists are often too intellectually stunted to understand other people having motives that don’t involve them. In the 50s that meant they didn’t realize how important Korea was to China, because Korea was a sideshow for the jingoists. In the modern day, I’ve seen jingoists propose that Iran, China, and Russia are acting in unison to oppose American interests, rather than each nation acting in its own interests even if their interest sometimes align with each other.

When Iran launched missiles at Israel, it was suggested by morons that this was in part because Russia wanted to take America’s attention and effort away from Ukraine. When the Houthis shut down Red Sea Trade, this was supposedly done because Iran wanted to help Russia by hurting Europe. And the whole war in Ukraine itself is supposedly part of China’s big strategy to put pressure on America and Europe so China can swoop in and take Taiwan.

Let’s get one thing clear: this is nonsense cooked up by morons. Russia, Iran, China, the Houthis, they all have their own beliefs, goals, and strategies. China is no more ordering Russia around than the USSR ordered China around in the Korean War. Iran is supporting the Houthis but the Houthis act mostly on their own initiative.

And this misunderstanding continues on to suggestions of strategy. There is a stupid video-game ideology that goes through the heads of jingoists: if we cut off the command center we end the rest of the war. So they propose war in Iran to stop the Houthis and war in Russia to contain China.

Yet history tells us that we time and time again misunderstand the motives of our enemies. America thought the Cuban missile crisis revolved around Europe, and believed that a resolution to the crisis must be sought there.

They were wrong.

Khrushchev offered to remove his nukes from Cuba in exchange for American nukes from Turkey, because that was what he was focused on all along. This surprised the Americans. In fact Khrushchev announced this “deal” before Kennedy and co had even agreed to it, or even heard of it, they learned it from the newspapers and were obliged to go along with it as the best way to exit the crisis.

Throughout the entire Cuban Missile Crisis and Korean War, America misunderstood its enemies, believed them to be united in opposing America, and was fixated only on what *it* saw as important. This led to failures and near catastrophe, as they didn’t predict China would enter Korea and didn’t think the Soviets would send tens of thousands of troops to guard a strategic “backwater” like Cuba.

If America had understood that China and the USSR were not joined at the hip, they might have stopped their troops half-way up the Korean peninsula and allowed the Republic of Korea to invade north on its own, since China had said that they wouldn’t attack if only Korean forces came north. Maybe Korea would have been unified. And if America had understood that the USSR was more worried about American nukes in Turkey than American bases in Germany, then they wouldn’t have courted disaster with a plan to send a few thousand troops against a vastly superior Red Army garrison in Cuba.

I’d hope that modern jingoists would take these lessons to heart, and understand that our enemies have initiative and agency all their own. Sadly most do not.

China is getting the trade war it deserves

And the US is getting the inflation it clearly wants.

Contrary to the title, this post will only be about America, because I don’t have any real insight into the CCP that hasn’t been covered elsewhere. But I read this article running cover for Biden’s disastrous policy of protectionism, and wanted to post my thoughts.

The central premise of the article is that cutting off trade with China is good because they’re a fascist and expansionist foreign adversary. Now, that’s also a great reason to cut off trade with Saudi Arabia, but America’s trade policy isn’t actually about foreign policy, as you’ll soon find out.

Even more importantly, tariffs don’t hurt the country you’re tariffing, or at least they hurt them *less* than they hurt your *own country*. Even Biden knows that, just ask the Biden of 2019

Tariffs are a great way to push up your own country’s inflation by taxing supply without reducing demand. Furthermore, even if you don’t buy Chinese products you will be paying for this inflation because of substitution effects: someone who is no longer able to buy a Chinese EV may instead purchase an American car, increasing demand for American cars and therefore driving up their price.

There’s two great ways to understand how terrible tariffs are. First, think of the oil shock in the 1970s: middle east nations cut off America’s access to oil and gas from their countries, causing spiraling prices and runaway inflation. By blocking America’s access to energy, they were able to put an economic squeeze that defined the decade.

China is being tariffed on solar power, wind power, and green industries of all kinds, and China makes up more of our imports than the middle east ever did. Spiraling prices are yet again on the menu.

Furthermore, think of Britain’s strategy against Germany during both World Wars. Britain used its powerful navy to prevent Germany from importing goods. This caused shortages and spiraling inflation, leading to riots that overthrew the government in the First World War and overwhelming shortages during the Second.

Tariffs are a way for us to do to ourselves what our enemies would do to us in war: restrict the import of needed goods.

Finally, consider Biden’s empty words about the “existential threat” posed by Climate Change. If Climate Change is dire, then why is Biden raising tariffs on solar power, wind power, and EVs, rather than Chinese oil and Chinese airplanes? Biden is essentially setting up an “anti-carbon tax,” in which polluting industries are exempt from a tax being paid by green industries.

The truth is that none of this is about national security, anymore than the Japan Scare of the 1980s was about national security. Just look at how Japan’s peaceful economic expansion was seen back then:

“The Danger from Japan.” Mr. White warned that the Japanese were seeking to create another “East Asia Co‐prosperity Sphere”-this time by their “martial” trade policies, and that they would do well to “remember the course that ran from Pearl Harbor to the deck of the USS Missouri in Tokyo Bay.

Biden is a 1980s style politician, with the (failed) economic outlook of that time. When he sees foreigners being successful it makes him scared, so he raises tariffs to “protect” American industries. But far from protecting industries, tariffs only harm them.

Industries rely on consumers to sustain them, but tariffs are a tax on consumers, sucking up consumer surplus and leaving less money for consumers to spend on domestic industries. Politicians think that domestic industries can magically appear to replace all the foreign ones, but simply put: no man is an island and nor is any country. Autarky is the failed economic policy of fascism, not an economic model for democracies.

Just look at a country like Brazil. Heavy tariffs were supposed to promote domestic industries and help consumers. Instead, consumers pay exorbitant prices for things like video games, while Brazil’s gaming industry remains anemic relative to the nation’s size and wealth. Brazilian cars, Brazilian microchips, and Brazilian steel are not the envy of the world.

And it isn’t because Brazilians are bad at industry, its because their government is doing everything it can to stop them. The high tariffs on everything from steel to cars to microchips are supposed to spur domestic industry, but who’s going to open up a factory when you have to pay those high tariffs just to import the machines and inputs needed to make your products?

Biden is a protectionist because he’s a protectionist. Not because China or Canada are scary or because he needs to fight climate change. But to be fair, Trump is just as protectionist as Biden if not more-so. It’s clear that the current crop of American politicians supports higher inflation and poorer consumers. And that bodes ill if you want to see America succeed and its enemies fail.