Arnaud Bertrand Profile picture
Feb 19 1 tweets 4 min read Read on X
I see many people commenting that the US is trying to pull a reverse Kissinger, wooing Russia away from China, completely missing the obvious truth right before their eyes: if there's a split happening, it's a Euro-US split.

That's a common flaw in human nature, we're often incapable to conceive that the status quo we've lived with our entire lives has fundamentally changed. We look to patterns from the past, seek to refight the previous war; it's far easier and more comforting to believe you're still in the box even when the box has disappeared.

Russia isn't going to split again from China, there is not a single chance in hell, it learned that lesson the hard way... Putin, as a famously keen student of history, understands how much damage that did.

And why would he? What benefit would Russia possibly derive from this? The world has changed: as we've seen during the Ukraine war the West unleashed its entire economic arsenal against Russia, only to demonstrate its own impotence. Russia last year was Europe's fastest-growing economy even when completely cut off from Western markets. So if the West's maximum pressure amounts to so little, its maximum friendship isn't worth much more.

It's utterly delusional to think that the two torch bearers of the Global South would split just as the emergence of the long sought multipolar order is finally coming true, all in exchange for a return of Western trade which they now know is dispensable, and an end to sanctions which they now know don't hurt much.

Also, kind reminder that Kissinger didn't actually split Russia and China: he took advantage of an already existing split. Geopolitically speaking, it's incredibly hard to split powers - especially great powers, but it's much easier to leverage an existing split. And looking at the landscape, those that are already split - or rather splitting - aren't Russia and China, but very much the U.S. and Europe.

A Euro-US split was bound to happen sooner or later, as the cost of the alliance increasingly outweighed the benefits on both sides. Especially with the rise of the Global South, China in particular, which initiated a profound identity crisis: suddenly you had countries "not like us" being far more successful, taking over an unsurmountable lead in manufacturing, and increasingly science and technology.

At some point there are three choices in front of you: join them, beat them, or isolate yourself from them and slowly decay into irrelevance. The West has been trying the "beat them" approach for the better part of the past 10 years and we've seen the results: an increasingly desperate series of failed strategies that only accelerated Western decline while strengthening the very powers they meant to weaken.

It also tried the "isolate yourself" approach with the various plans of "friend-shoring", "de-risking", "small yard, high fence", etc. That wasn't much more successful and the West undoubtedly sees the writing on the wall: the more you isolate yourself from a more dynamic economy, the further behind you get.

This leaves us with "join them", and here Trump's calculation seems to be that if the U.S. does so first, it undoubtedly can negotiate much better terms for the U.S., much like China did with Kissinger back in the late 1970s when it joined what was at the time still the U.S.-led international order. With Europe, like the Soviet Union back then, left with no choice but to accept whatever crumbs remain.

The situation of course isn't exactly similar. We're outside the box, remember... For one the U.S. isn't remotely in the same conditions as those of China back then and, unlike the Soviet Union, Europe lacks both the military might to resist this new arrangement and the economic autonomy to chart its own course. Which means that in many ways, geopolitically speaking, the U.S. is in better conditions and with more leverage than China had (and therefore able to get itself a better deal), and the EU ends up in worse conditions than the Soviets.

Still, the fundamental reality remains that Trump, for all his faults, seems to have understood earlier than Europeans that the world has changed and he'd better be the first to adapt. This was clear from Rubio's very first major interview in his new role as Secretary of State when he declared that we're now in a multipolar world with "multi-great powers in different parts of the planet" (state.gov/secretary-marc…).

As a European though, I can only despair at the incompetence and naivety of our leaders who didn't see this coming and didn't adapt first, despite all the opportunities and incentives to do so. They foolishly preferred to cling to their role as America's junior partner, even as that partnership was increasingly against their own interests, something which I've personally warned about for years.

Turns out, strangely, that the Europeans were in fact in many ways more hubristic and more trapped in the delusions of Western supremacy than the Americans. The price for this hubris will be very steep, because instead of proactively shaping their role in the emerging multipolar order, they will now have to accept whatever terms are decided for them.

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More from @RnaudBertrand

Apr 3
To illustrate just how nonsensically these tariffs were calculated, take the example of Lesotho, one of the poorest countries in Africa with just $2.4 billion in annual GDP, which is being struck with a 50% tariff rate under the Trump plan, the highest rate among all countries on the list.

Why? Does Lesotho apply extortionate tariffs on U.S. products and the U.S. is merely being "reciprocal" here? Not at all, despite what Trump is saying, it's NOT the way these tariffs are defined.

As a matter of fact Lesotho, as a member of the Southern African Customs Union (SACU), applies the common external tariff structure established by this regional trade bloc.

Which means it applies the same tariffs on U.S. products as South Africa does, as well as the 3 other members of the bloc: Namibia, Eswatini and Botswana.

So since the tariffs charged by these 5 countries on U.S. products are exactly the same, they must all be struck with a 50% tariff rate by the U.S., right? Not at all: South Africa is getting 30%, Namibia 21%, Botswana 37% and Eswatini just 10%, the lowest rate possible among all countries.

So what gives? Again, the way these tariffs are calculated has absolutely zero relationship with actual tariffs imposed by these countries on U.S. products. Instead, they appear to be simply derived from trade deficit calculations.

Looking at Lesotho specifically, every year the U.S. imports approximately $236 million in goods from Lesotho (primarily diamonds, textiles and apparel) while exporting only about $7 million worth of goods to Lesotho (wits.worldbank.org/CountryProfile…).

Why do they export so little? Again this is an extremely poor country where 56.2% of the population lives with less than $3.65 a day (databankfiles.worldbank.org/public/ddpext_…), i.e. $1,300 a year. They simply can't afford U.S. products, no-one is going to buy an iPhone or a Tesla on that sort of income...

The way the tariffs are ACTUALLY calculated appears to be based on a simplistic and economically senseless formula: you take the trade deficit the U.S. has with a country, divide it by that country's exports to the U.S and declare this - falsely - "the tariff they charge on the U.S."

And then as Trump did in his speech last night, you magnanimously declare that you'll only "reciprocate" by charging half that "tariff" on them.

As such, for Lesotho, the calculation goes like this: ($236M - $7M)/$235M = 97%. That's the "tariff" Lesotho is deemed to charge this U.S. and half of that, i.e. roughly 50% is what the U.S. "reciprocates" with.

It's extremely easy to see why this makes no sense at all.

First of all, there's nothing Lesotho can do about it: they can't change tariffs they allegedly charge the U.S. to reduce the tariff rate the U.S. "reciprocates" with because, again, it's NOT based on any tariff that they charge.

Similarly they can't do much about reducing the trade deficit they have with the U.S. because, again, they simply don't have enough money to buy U.S. products.

Also the main rational Trump gave for the tariffs is to get production back to the U.S., to "bring manufacturing back". 47.3% of Lesotho's exports are diamonds: how do you bring the "manufacturing" of that "back to the U.S."? Anyone can see it makes just about zero sense.

The Lesotho example exposes the fundamental economic incoherence of these tariffs. Rather than addressing actual trade barriers, they punish countries based on trade deficits that arise from structural economic realities. All the more countries like Lesotho which pose zero competitive threat to American industry.

Worse yet, these tariffs will likely make these structural realities even worse: the U.S. is Lesotho's second most important export destination so it's a fair bet that applying 50% tariffs on their products will make people in Lesotho even poorer, and therefore even LESS able to afford U.S. products.

But perhaps the most unfair and detrimental aspect of all this is that these tariffs represent a complete reversal of longstanding U.S. development policy, and therefore a betrayal of countries - like Lesotho - who chose to follow U.S. advice in the past.

For decades the U.S. has used preferential trade access to encourage economic development in the world's poorest nations, recognizing that trade, not just aid, could get them out of poverty and ultimately put them in a position where they too could afford iPhones or Tesla.

They're now effectively penalizing countries for following previous U.S. policy, a lesson which I bet they won't forget anytime soon.

So all in all the irony is painful: in the name of fighting unfair trade, America has just demonstrated what truly unfair trade looks like.

This isn't something designed to address genuine trade issues, but simply a mechanism based on arbitrary math to punish countries for the affront of selling more to the United States than they buy.
The arbitrary math used to define the tariffs (which has nothing to do with tariffs charged on the U.S.) was just unwittingly confirmed by Deputy White House Press Secretary Kush Desai, in a way that shows he himself doesn't understand it 👇😅
Read 6 tweets
Mar 24
This could potentially be quite transformational for peace in Ukraine and for Europe generally: welt.de/politik/auslan…

German newspaper Welt Am Sonntag, citing "EU diplomatic sources familiar with the matter", reports that "China proposed to the EU to participate in the 'Coalition of the Willing'" so as to "increase Russia's acceptance of peacekeeping forces in Ukraine."

Russia has so far vehemently rejected the idea of European peacekeeping troops in Ukraine but could indeed potentially be swayed if China were to be part of the coalition.

Such a move would also of course have the potential to fundamentally change the nature of EU-China relations and mark a huge shift in the continent's security architecture, where China would be an alternative security partner to the US in European affairs.

It would also strategically position Europe in a much more enviable position were it wouldn't be at the mercy of Washington's every whims, and could leverage competition between Beijing and Washington in a way that'd enhance its sovereignty and bargaining position.

All that being said, given the EU's proven history of diplomatic incompetence and strategic inertia, this scenario is more likely than not to remain theoretical.
Some people reply that this could be fake news because this is inconsistent with China's historical position BUT it isn't: China was already one of the guarantor states in the 2022 draft "Treaty on Permanent Neutrality and Security Guarantees for Ukraine" negotiated in Istanbul (see screenshot, from here static01.nyt.com/newsgraphics/d…).

2022 treaty on which Lavrov said a peace deal must be based ("Our approach to the potential settlement has not changed: we are ready for dialogue on the basis of the 2022 agreements", mid.ru/en/foreign_pol…) 🤷Image
Retired PLA Senior Colonel Zhou Bo had also recently said on the sidelines of the Munich Security Conference that "China could also be part of security guarantees, alongside other powers," depending on the conditions.
scmp.com/news/china/dip…
Read 4 tweets
Feb 26
This "China is depleting the oceans with its huge fishing fleets" story is yet another utterly shameless piece of propaganda when China actually proportionally fishes much less than the rest of the world, since - unlike others - it gets the immense majority of its fish supply from aquaculture 👇 (src: openknowledge.fao.org/items/06690fd0…)

The worst culprit when it comes to depleting the oceans is actually Europe, relative to its population size. They fish about 33kg of fish per person per year compared with 10kg for China, a crazy 230% more!Image
Actually if you read the report it's 13 million tones for China x.com/realSandkraken… Which corresponds to 14.3% of global captures of aquatic animals, which is less than Europe with 15.2 million tones or 16.7% of global captures. This is of course despite China having twice Europe's population...

In other words, Europe has 9% of the world's population but fishes 16.7% of the fishes while China has 18% of the world's population but fishes 14.3% of the fishes.

Now you tell me who is overfishing and who isn't...
Can you even read a graph? China is fishing only about a third the amount of the rest of Asia (13 million tones for China vs 30 million tones for the rest of Asia) 🤷‍♂️
Read 4 tweets
Feb 17
If anyone wonders how to constitute the China allocation of their portfolio, these tickers, based on seating arrangements, are probably not a bad place to start.

That was actually the basic strategy of a friend of mine, very successful investor in China: he simply studied policy statements very deeply as well as signals like this meeting 👇 to understand what were China's strategic economic objectives and which companies would benefit from this. Just like the US has a "don't fight the fed" investment principle, China has in some way a "don't fight the government" equivalent.

(Not investment advice 😉)Image
A list of some of the attendees 👇
And for your portfolio, it's also important to check who was NOT at the meeting 😅
Read 4 tweets
Jan 19
Wow, this is huge. I just tried it myself with a foreign phone number (you can apparently choose any country, see screenshot) and it's true: you can now join Douyin - the Chinese version of TikTok - as an international user.

Which means the Great Firewall is coming down in the most unexpected way: with the world joining the China side of the wall.

Really feels like a Berlin wall moment, except in the opposite direction.Image
Image
For people wondering where the hell I found the app, given it's not on Western app stores: apkpure.com/douyin/com.ss.…
Zero "TikTok refugee" on here so far that I've seen, pure Chinese content
Read 5 tweets
Dec 27, 2024
This 👇 is arguably an even bigger Sputnik moment for China than the 6th generation fighter jet: a Chinese AI Model called DeepSeek v3 rivals - and often surpasses - the latest ChatGPT and Claude models in pretty much all respects for a tiny fraction of the training cost (only $5.5m), and it's open sourced (meaning anyone can use, modify, and improve it).

The fact that it's so cheap to train is particularly important as it completely changes the game of who can participate in advanced AI development. Up until now, the assumption was that you needed hundreds of millions or even billions of dollars to train such a model, yet DeepSeek did it with just $5.5m, a sum of money accessible to just about any startup anywhere. Concretely, this means that DeepSeek has just proven that serious AI development is not limited to tech giants.

And their model is not only cheap to train, it's also extremely efficient to run. They use an architecture called Mixture-of-Experts (MoE) where, while their full model has 671 billion parameters (which is huge), it only uses 37 billion at a time. To compare, Meta has 405 billion parameters in their latest Llama3.1 model and uses all 405 billion at a time. DeepSeek V3 is more than 10 times more efficient, yet performs better than Llama3.1 at almost all benchmarks (English, Math, Coding, etc.).

DeepSeek V3's performance at key benchmarks is impressive across the board:
- Crushes advanced math problems (90.2% on MATH-500, vs 78.3% for Claude-3.5-Sonnet and 74.6% for GPT-4o)
- Excels at coding (82.6% on HumanEval, vs 81.7% for Claude-3.5-Sonnet and 80.5% for GPT-4o)
- Can process huge amounts of text at once (128K tokens, roughly equivalent to 100,000 words in English)
- Processes text at 60 tokens per second, about twice faster than GPT-4o

And the craziest part is that it's open-source, meaning that:
- Anyone can download and study the code
- Developers can modify and improve it
- Companies can integrate it into their products without paying API fees
- The entire AI community can learn from it

Lastly, this obviously comes during an interesting context in China-US relations where the US is doing its utmost to prevent China from progressing technologically, especially in AI. As such, this is an absolutely beautiful response by China: "despite all your restrictions, we just built a world-class AI model for 1% of your cost, made it more efficient than anything you have, and open-sourced it for the whole world to use."

It's also a triumph of brains over money and raw power: with its restrictions the US placed China in a situation where it had to use resources more intelligently. As the saying goes "necessity is the mother of inventions"... And here we now are: China may have just changed the rules of the game forever, democratizing the very technology the US tried to restrict and proving, once more, that human ingenuity always finds a way.
Interesting background on the company behind the model 👇
Read 4 tweets

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