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We are talking about individual plants with 200,000 workers. That is the low end estimate, by the way, of those numbers. We don't actually have very good numbers on how big some of these Foxconn facilities are. The low end estimate is 200,000. Right. And again, this is just in time production. So okay, what does it actually mean? Right. This means that the production cycles work a lot of, for example, the way that UPS works, right. We're like, like you have a bunch of people who are effectively seasonal or part time workers who only come in when demand increases. So for ups, right. And it's actually a relatively similar schedule to the way it works in China. But it's like there's these massive surges around the holidays. With Apple, it's, it's more like September, November, roughly. But it's, it's, it's in order to like massively be able to ramp up production in time for, you know, the sort of like massive holiday increase of orders. Right. But in order to do this, you need to have a production apparatus where you have 200,000 workers there, but you can also get rid of most of them and they can support themselves doing other stuff for the rest of the year and then you have to be able to bring them back in during peak season. We just do not have the populations to replicate this. Right. Even if you're trying to replace it with prison labor. The thing about the American prison system is that it's decentralized. Right. This is actually a key element of how the US economy is structured. Prisons are one of the sort of three major sources of jobs in rural areas. The other two are like Walmart style service jobs which replace anything else that was in the economy and then military bases, which is part of why, you know, like, like this is part of why rural politics have gone so reactionary. Because like, okay, so if you're, if your options in the economy are soldier, prison, guard service, labor, you're going to generate a bunch of unhinged reactionary bullshit. But again, even though the American prison system has a really high population, these people are really spread out. And iPhone production requires sort of like mass centralization, right? That's the only way to get these things to work. Plus, the workers that you're bringing in have to be skilled enough to be able to do this shit. And this is a capacity that's been built up in China over the course of like, decades, right? And we don't really have this now. People have tried moving this production to other places, like Vietnam, for example. The tariff rates there are also making this extremely difficult, but it's been really, really hard to replace. And the other issue, and this is a technological issue, not just a sort of issue of the systemic elements of the population of China. The infrastructure to build microchips in the US and it's not just that the infrastructure to build the chips doesn't exist. It's actually way worse than that. And this is why all of the attempts and the Biden administration has put an enormous amount of money into this. The Chinese government also has put an enormous amount of money specifically into the microchip angle, and none of them have been able to do it. And part of it's a technological problem, but part of it is that the machines that you need to make the chips don't exist, right? But the machines you need to make, the machines that make the chips also don't exist. And the machines you need to make, the machines that make. The machines that make the chips also don't exist. We are so far up the supply chain, right? And this is one of the, you know, one of the things, the thing that they're trying to do through sort of like pure politics, right? Through like, just like the pure exertion of state power, is to reshape the fundamental structural way that the supply chain has worked. And the way the supply chain has worked is by intense specialization in very, very, very small areas, right? So Taiwan, for example, becomes the only place basically that can manufacture these chips. And that intense specification means that, like, the machines that make. The machines that are used to build this thing are only made by like one company in Switzerland. And like machines that make those machines, like, who the fuck knows where they're built? And this is a thing where the technology involved has become so complicated and the labor has become so specialized that you're dealing with machines that, like, just straight up, not many people in the world know how to use. And how many people in the world know how to create. And so we're so far up the supply chain, right? And this is also, if you want to look at, like, what the impact of these tariffs are going to be, right, because these supply chains are so specialized. You know, you can think of these supply chains as like incredibly complicated machines, right? And any sort of like little rock that you throw into the machine or, you know, you throw sand into the machine and suddenly the ball bearing doesn't work at quite the right efficiency. And so and things just start breaking down across the entire supply chain. And they think that they can just replicate all of this with just like pure tariffs and like throwing money at it and. No, you can't. These are, these are actual structural things of how the economy works. Now. Do you know what else is a structural element of how the economy works? It is these products and services and the fact that they fund this podcast. Woo Foreign. We are so back. Now. One of the other kind of tariffs, the thing that I've been calling, I guess, like defiance tariffs, one of the things the Trump administration has been doing is threatening to impose a 50% tariff on anyone who buys oil from Russia. India has been threatened with this. India's current tariff rate is 25%. They're right now threatening with another 25% to get them to 50%. But it's sort of unclear exactly who's going to back down here. More interestingly, and we've talked a little bit about this, Brazil, There is a 50% turf tariff on Brazil again for refusing to release Bolsonaro, which is very funny because this has managed to piss off the entire sort of political sphere in Brazil to the extent that, like Bolsonaro has had to come out and denounce this because Bolsonaro was getting fucking torn to shreds by the Brazilian right for being basically a traitor sort of lap dog of the US as they're sort of, you know, imposing this direct attack on Brazil through this 50% tariff, right? It's backfired so spectacularly that like Lula, who was floundering, is now riding this incredible wave of sort of anti American Brazilian nationalism from both the left and the right. So Lula, who is, who is again in a pretty strong political position because of this, has refused to do direct talks with the US because he was like, absolutely not. Fuck this. Here's a quote from Reuters. We had already pardoned the US intervention in the 1964 coup, said Lula, who got his political start as a union leader protesting against the military government. That followed a US backed ouster of a democratically elected president. But this is now not a small intervention. It's the President of the United States thinking he can dictate rules for a sovereign country like Brazil. It's unacceptable. Now again, as I said in the Ed, there's a lot of things that are worth looking at here, right? We have on the one hand this direct connection from Lula, from, you know, the sort of subtle CIA backing of military coup stuff which happens under the table to, you know, this just like the President of the United States is telling you how to run your country. And that is a substantive shift even if like the CIA overthrowing your government, like, has more of a direct political impact on it. Right. The thing about, the thing about the way American power worked was that it was mostly supposed to be under the table and it's not now. It is just, it's just, it's just out there in the open. Right, right. The premise that the US governments, like the President of the United States should just be able to tell another country what to do is the fucking premise of American imperialism. And now they're just saying it out loud. And it's also worth noting that it's not like Lula is some kind of like anti American radical right. Like Lula worked really well during his first term in office with George W. Bush, but again, because of the way that the political winds have shifted here, right? To the extent that like Bolsonaro has had to condemn an attempt to get him released from prison, which is so funny because he's doing this. He is, he is, he is pushing very hard. Now, there hasn't really been a response yet for Lula's like, call for organized tariff resistance from China and India and brics. I don't know if there's going to be. It's worth talking a little bit about what BRICS actually is here. So BRICS stands for Brazil, Russia, India, China, South Africa. It was originally like an asset class designed by some guys at Goldman Sachs who were, you know, trying to like classify the assets of this kind of like developing economy thing. It was like, you know, you can buy bonds and these things and maybe you can classify their asset rates together and has kind of become a political alliance. But you know, there's a lot of people who will attempt to sell you on bricks being this sort of like leftist anti imperial alliance, you know, and as a sort of socialist thing. And like, like I will simply ask, right, who is doing the socialism here? Right? Is it the Butcher of Gujarat? Is it xi? Quote we must oppose welfarism. Jim Ping, is it Vladimir? We will show Ukraine true decommunization. Putin, is it the African National Congress of selling your country to bank of America? Is it the Butcher of Haiti? Like, what, what are we doing here? Right? Like, this is not actually a substantively anti American political alliance. India is a close American ally. South Africa is a close American ally. None of this really makes any sense. It's not a substantive political alliance, really. People periodically make noise about it, trying to be a substantive political alliance. But like, I mean, like India and China are periodically like at war or like almost at war with each other over the border, right? These are a bunch of countries that absolutely fucking hate each other. It's never been a coherent political project. Lula is trying to turn it into one, but like, I fuck it, I don't think that's going to work. So, you know, that's sort of what's been going on on the front of sort of national resistance. But Lula does have, you know, a kind of very, very large and powerful political force behind him domestically to resist this. We'll see what happens going forward. It's also worth noting that China has been negotiating with the US and their tariff increases, which are supposed to go into effect have been delayed for another 90 days. So we're stuck in this holding pattern again. But let's talk about what this means for the economy, right? And I think the very short term answer is that I don't think anyone really knows, right? Like the actual macro effects of this are things that we've only just started to see. No one's ever really tried to model this out because there's no reason why it would ever happen, you know, and you're starting to see things behind the scenes like medical supplies being incredibly difficult to acquire. You're starting to see a bunch of very, very weird items. And supply chains become increasingly difficult to find. But again, the supply chains are going to break down in ways that we just don't really understand what is going to happen. And what has started to happen is inflation is increasing. I want to sort of again review our kind of inflation theory, right, which is largely derived from our friends at Strange Matter sort of supply chain theory of inflation. Their thesis of inflation is that that it's not set by just supply and demand. It's set by cost plus markup, because price is not set by an autonomous thing called the market. Price is set by a guy with a price gun. It's directly set by people. And the way that those people Set the price is the cost of acquiring the item plus a markup for their profit. Now one of their fundamental like insights here is that price is sort of sticky until it isn't right? Which is that like, okay, so the actual thing that controls price is sort of like how pissed off consumers get at price increases, but also comma, that is also very, very much tied to brand, right? And if you raise your prices and consumers get pissed at you, even if you drop them again, that doesn't necessarily mean those people will come back. Right? Right. So a lot of times when there's price increases, companies try to eat it. And that's been what's happening with a lot of these things, right, where at each point in the supply chain, people are having to sort of pay for the tariff parts, right? And when someone has to pay for the tariff, they increase their prices, that they sell it to the next person in the supply chain. The next person in the supply chain increases their prices right? Now so the way that these tariffs play out, right, is that each person in the supply chain is doing cost plus markup, but their costs are going to up. So your options are either you sell it at the same price and you reduce the amount of markup you're getting, which is just reducing the raw profit you're taking in, or you raise your prices. And these things are trying to not raise their prices. And part of this is from direct political pressure, right? Like Trump has been threatening companies to not raise their prices from the tariffs. But comma, prices are starting to increase. And as this goes on and as more and more tariffs come into effect and it becomes more and more difficult to evade the tariffs, the prices are going to keep increasing because they're driven by these supply chain price increases. So, you know, cost is going to go up, it is going to have absolutely devastating impacts on workers across the world. Primarily not in the US but the workers who are in these export oriented economies are going to have to deal with just the absolute horror of large scale economic collapse. You know what, who else hopefully doesn't have to deal with the absolute horror of large scale economic collapse? It is the products and services that support this podcast. We are back. Now, the thing I want to close this episode on is not actually a look at the economy because I think, you know, we kind of don't know exactly what's going to happen in with the economy other than bad. But there is something that I think we can look at that's been broadly ignored or miscovered, which is what these tariffs say about the nature of the state. And I think what's happening is that we're seeing a fundamental change in the way that the state functions from the previous sort of neoliberal regime to this, like, just really openly fascist one. And I think the most clear example of this isn't necessarily the tariffs, as they are a pretty clear example. It's this extremely weird, like, extortion agreement reached between Trump, AMD and Nvidia. Gonna read this from CBS. Quote, US chip makers Nvidia and AMD will pay the US government 15% of revenue generated by sales of their AI chips in China. A White House official confirmed to CBS News. This is just a shakedown, right?
