The Isolation Endgame.
Nobody predicts Donald Trump 100% of the time—that includes me.
When he decided to exempt electronics exports from the "Liberation Day" reciprocal tariffs, that wasn't something I predicted.
I was never against it. Tariffs are best understood as levers through which outcomes can be achieved. Not policy in and of itself. I just never thought of it. I want to be honest about that.
When it happened, my initial instincts were to see how that move transforms the conditions of the game.
The initial thought was actually one of "controlling damage."
How much does this dilute our play?
How much of China's exports are electronics in any form? 35%.
It's a sizable dilution, but not a gamechanger. The pressure on China remains unbelievable.
The relief to American companies is real. Probably more significant for them than for China.
Through that lens, it makes sense. Moreover, it was easy to spin that from a political standpoint. That was the advantage I picked up on immediately.
However, the economic play was something I didn't realize until later.
This isn't taking a sledgehammer to the Chinese economy. It's downloading a virus into their operating system.
Less flashy, but equally pernicious.
People think decoupling is the endgame.
It isn't.
Isolation is the endgame.
See, when decoupling happens, it's the nature of the interwoven global economy that someone will be left out in the cold.
Should we have gone full throttle towards decoupling, then both the USA and China would be rushing to build or expand alliances and economic relationships. There'd be a mad dash to freeze out the other by both parties.
America could win that race. But it's messy. Risky. And it doesn't come without short-term pain.
What if there was a way to isolate China in the same breath as the decoupling? Bypass the frantic scramble entirely.
It starts with the structure that Trump has assembled, which is why I'm confident that this is the road we're on.
10% tariffs on the globe.
145% tariffs on non-electronics out of China.
20% tariffs on electronics out of China.
Off the rip, for China to be priced out of 65% of their largest export market is a brain scrambling blow.
But what happens when allies want to get below the 10% tariff rate? Trump won't let that happen easily, but he will let it happen. For the right price.
First, eliminate all of your transshiping routes. No more China exporting to you—to export to the USA.
That's already happening. Vietnam is working on that right now, and they won't be the last.
That will mean China's largest buyer just completely frozen them out of 65% of their business.
Meanwhile, non-electronic goods are the easiest to absorb initial price increases while American companies get online elsewhere. The cost? Nothing to cry about.
Their electronics exports aren't safe either.
China's being charged 20%. That's not brutal. Companies can bare that while they work their way out of China, but make no mistake... they'll be moving out ASAP.
The rest of the world is at 10%.
It'll happen slower with electronics, but the result will be the same. China will lose all of their electronics exports to the USA. And they'll lose it to market competition.
Meanwhile, the lack of a 145% tariff means China loses while Americans barely pay more on electronic goods.
Things get worse, though. That wasn't the only condition.
Want your tariff lowered? Here's another thing:
Tariff China yourselves.
Now, China's rapidly losing its export market entirely.
We are talking upwards of a trillion dollars simply vanishing from their economy.
And the USA? Prices stay easily manageable.
For the price of bankrupting China.
Donald Trump defined his endgame today as it relates to his game against China.
The endgame isn't decoupling.
He's not that merciful.
The endgame is—isolation.
Nobody predicts Donald Trump 100% of the time—that includes me.
When he decided to exempt electronics exports from the "Liberation Day" reciprocal tariffs, that wasn't something I predicted.
I was never against it. Tariffs are best understood as levers through which outcomes can be achieved. Not policy in and of itself. I just never thought of it. I want to be honest about that.
When it happened, my initial instincts were to see how that move transforms the conditions of the game.
The initial thought was actually one of "controlling damage."
How much does this dilute our play?
How much of China's exports are electronics in any form? 35%.
It's a sizable dilution, but not a gamechanger. The pressure on China remains unbelievable.
The relief to American companies is real. Probably more significant for them than for China.
Through that lens, it makes sense. Moreover, it was easy to spin that from a political standpoint. That was the advantage I picked up on immediately.
However, the economic play was something I didn't realize until later.
This isn't taking a sledgehammer to the Chinese economy. It's downloading a virus into their operating system.
Less flashy, but equally pernicious.
People think decoupling is the endgame.
It isn't.
Isolation is the endgame.
See, when decoupling happens, it's the nature of the interwoven global economy that someone will be left out in the cold.
Should we have gone full throttle towards decoupling, then both the USA and China would be rushing to build or expand alliances and economic relationships. There'd be a mad dash to freeze out the other by both parties.
America could win that race. But it's messy. Risky. And it doesn't come without short-term pain.
What if there was a way to isolate China in the same breath as the decoupling? Bypass the frantic scramble entirely.
It starts with the structure that Trump has assembled, which is why I'm confident that this is the road we're on.
10% tariffs on the globe.
145% tariffs on non-electronics out of China.
20% tariffs on electronics out of China.
Off the rip, for China to be priced out of 65% of their largest export market is a brain scrambling blow.
But what happens when allies want to get below the 10% tariff rate? Trump won't let that happen easily, but he will let it happen. For the right price.
First, eliminate all of your transshiping routes. No more China exporting to you—to export to the USA.
That's already happening. Vietnam is working on that right now, and they won't be the last.
That will mean China's largest buyer just completely frozen them out of 65% of their business.
Meanwhile, non-electronic goods are the easiest to absorb initial price increases while American companies get online elsewhere. The cost? Nothing to cry about.
Their electronics exports aren't safe either.
China's being charged 20%. That's not brutal. Companies can bare that while they work their way out of China, but make no mistake... they'll be moving out ASAP.
The rest of the world is at 10%.
It'll happen slower with electronics, but the result will be the same. China will lose all of their electronics exports to the USA. And they'll lose it to market competition.
Meanwhile, the lack of a 145% tariff means China loses while Americans barely pay more on electronic goods.
Things get worse, though. That wasn't the only condition.
Want your tariff lowered? Here's another thing:
Tariff China yourselves.
Now, China's rapidly losing its export market entirely.
We are talking upwards of a trillion dollars simply vanishing from their economy.
And the USA? Prices stay easily manageable.
For the price of bankrupting China.
Donald Trump defined his endgame today as it relates to his game against China.
The endgame isn't decoupling.
He's not that merciful.
The endgame is—isolation.
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