Decoder with Nilay Patel

Episode: How Trump's tariff chaos is already changing global trade

Date: March 17, 2025
Host: Nilay Patel (A)
Guest: Evan Smith, Co-Founder & CEO of Altana (B)

Episode Overview

This episode explores the rapidly shifting landscape of global trade triggered by the Trump administration's new wave of tariffs and economic nationalism, and how these trends are upending decades-old models of globalization. Nilay Patel speaks with Evan Smith, founder and CEO of Altana, whose company tracks and models the global supply chain, offering unique real-time insights into how trade disruptions, policies, and geopolitical conflict are reshaping manufacturing and economic interdependence—especially between the US, China, and North America.

Main Discussion Points

1. The End of the Old Globalization (04:35–08:27)

• Altana’s Origin and the “Breaking Down” of Globalization

  • Evan Smith explains that Altana was built on the thesis that classic post-WWII globalization was breaking down:
    • Geopolitical Competition: “It’s the US and China playing out a great power competition, principally in the supply chain and economic theater.” (05:20)
    • Climate Crisis: Outsourcing fueled a “race to the bottom” leading to “dirtier and dirtier and dirtier” physical production. (05:41)
    • Collapse of Western Middle Classes: Rapid outsourcing triggered populist responses.
    • Supply Chain Fragility: “Just-in-time supply chains are only efficient... under conditions of stability. And... the world was getting a whole lot less stable.” (06:24)

• Impact of Global Manufacturing

  • Nilay reflects on iconic global products like the iPhone as both cause and deterrent to great power conflict, noting how economic interdependence has maintained peace—until now.

2. Re-Thinking Economic Ties and Peace (08:27–10:49)

• From "Golden Arches" to “Peace Before Trade”
  • Smith rejects the old “McDonald’s theory” ("Countries with McDonald's don't go to war"), arguing that history shows:
    • “Peace gives rise to free trade and not the other way around… In moments of disequilibrium and big shifts in power, those become more violent, usually, and then trade collapses.” (09:45)
  • The current era is one of “disequilibrium”—multipolarity, weakening US hegemony, and policy volatility that follows.

3. Altana's Role in the New Era (15:22–20:38)

• What Altana Does
  • Altana builds a real-time map of the global supply chain, or value chain, tracing products from raw materials to end-users—enabling companies and governments to “see, connect, and have some control over that whole network.” (18:13)
  • Key Value: Compliance (e.g., forced labor bans), resilience, sustainability, and risk management.
    • “Apple doesn’t even manufacture anything… they just create the software and the designs and everybody else manufactures it.” (18:45)
  • Innovative “federated” data sharing ensures sovereignty, privacy, and network learning.

4. Tariffs, Policy Chaos, and the Feasibility of 'Re-shoring' (12:09–15:22, 35:39–43:34)

• Trump Tariffs—Can They Really Bring Manufacturing Back?
  • Smith:
    • “It’s possible to bring some manufacturing back to the United States… and a lot more into North America… Will that happen entirely? No. Will it happen immediately? No.” (12:09)
    • Trump’s administration seeks “strategic decoupling” from China in critical industries by end of term—a huge challenge for sectors like chips, minerals, pharmaceuticals (13:45).
  • The US is “trying to bring Mexico and Canada into tighter alignment with the United States and its trade policy vis-à-vis China.” (39:05)
• How Quickly Can the System Adjust?
  • Altana sees immediate aftershocks in data: supply chains reconfiguring, Chinese companies opening subsidiaries in Mexico/Canada, the rise of “de minimis” shipping, and “chaotic” ownership and manufacturing shifts.
  • “Is that kind of [Chinese manufacturing] capex possible to replicate elsewhere within a four-year time frame? That's going to be pretty tough.” (41:23)

5. Limits of Industrial Policy—Positive vs. Negative Incentives (46:32–51:19)

• US Approaches vs. China’s ‘Directed Industrial Policy’
  • Biden administration used incentives/subsidies (e.g., CHIPS Act); Trump is using trade barriers/deregulation, mostly “negative incentives.”
    • “The United States can’t possibly out-centralize China. …Our comparative advantage… is through innovation.” (49:11)
• Biggest Bottleneck: Critical Minerals
  • China controls up to 98% of global refining. Relocating/refining capacity would require “a radical sort of World War II style change.” (44:19)
  • Environmental and regulatory barriers remain steep—US unlikely to replicate China’s aggressive investment.

6. Systemic Instability and the Future of Trade (55:47–61:13)

• Increasing Destabilization
  • Patel: “All of that seems new in destabilizing…”—policy, economics, and data are all now “wobbly foundations.”
  • Smith: Sees this destabilization as “inevitability,” driven by history's big gears—“the system as I grew up in… has come to an end.” (55:47)
• Economic Blocs Emerge
  • “I see it mostly going there—at least for the more sensitive, critical value chains… a US-and-allies value chain and a China-and-allies value chain.” (57:25)
  • China’s explicit strategy is “to create economic resilience and dominance… and to ensure the value chains… are secured.” (57:49)
  • US policy is now reactive, a “consequence” of multidecade trends, not just leader-driven.

7. Resilience, Risk, and Prevention of Conflict (61:13–66:00)

• Altana’s Mission—'Fix' Globalization
  • Smith: Hopes Altana “bent the arc of history” by helping both public and private sectors de-risk supply chains and simulate policies: “If we succeed, our mission is to fix globalization… [so] business in the West, business in the East, continues to be transnational and you have these miracles of productivity.” (61:26)
• Averting War through De-risking
  • “In a world where we’re more de-risked… that’s a world… less likely to actually go to war.” (63:33)

8. Where to Build—Opportunities in the New Map (66:00–68:45)

• Smith’s Advice to Founders
  • “The thing I'd be most excited about is building a software-enabled and sort of AI-driven manufacturing value chain for advanced electronics in North America.” (66:13)
  • Go “long” on Mexico—demographics, economy, proximity, and USMCA alignment for high value manufacturing.
• Labor Gaps
  • The US lags greatly in skilled manufacturing labor; Mexico is “a lot better at it.” (68:11)
  • Some reconciliation possible via automation, but not fully.

Notable Quotes & Memorable Moments

• On Globalization’s Fragility
  “Just-in-time supply chains are only efficient… under conditions of stability. And… the world was getting a whole lot less stable.”
  —Evan Smith (06:24)

• On Economic Interdependence and Peace
  “Peace gives rise to free trade and not the other way around.”
  —Evan Smith (09:45)

• On Policy Shocks in the Data
  “Yeah, [the Canada bourbon tariffs] do show up [in the network]. …You see a redistribution of imports… and the ownership structures associated with these big global supply chain networks change.”
  —Evan Smith (36:11, 36:19)

• On US’ Limits vs. China
  “The United States can’t possibly out-centralize China. It can’t possibly out-execute top down economic control better than China does. Our comparative advantage… is through innovation.”
  —Evan Smith (49:11)

• On the Critical Minerals Bottleneck
  “China now has between 60 and 98% of the world's critical minerals on lockdown… They use that market position now to basically kill any emergent refining in a country or a company that they don't control.”
  —Evan Smith (44:19)

• On the Chances of Decoupling
  “Some of these things are going to move a lot more quickly and some of these things are going to be pretty tough. ...The most intractable one… is critical minerals.”
  —Evan Smith (43:34)

• On US Instability and Systemic Change
  “The system as I grew up in… has come to an end. ...These trends [are] playing out almost irrespective of who’s in office.”
  —Evan Smith (55:47)

• On Rebuilding Advanced Manufacturing
  “I'd be focused on producing in Mexico, sourcing most of my components from North America... and try to build a Shenzhen of North America.”
  —Evan Smith (66:32)

• On US Skilled Labor Shortage
  “We're nowhere close to having the skilled labor necessary to execute on the industrialization objectives of… the Biden administration or the Trump administration.”
  —Evan Smith (68:11)

Timestamps for Key Segments

• Altana’s founding vision & breakdown of globalization — 04:35–08:27
• From economics to great power conflict: , economic ties no longer ensure peace — 08:27–10:49
• How Altana models the world’s supply chain — 15:22–20:38
• Trump/Biden trade policy, decoupling from China, and can the iPhone be made in the US? — 12:09–15:22
• Real-world impacts of tariffs; loopholes and supply chain maneuvering — 35:39–39:05
• Critical minerals bottleneck and why the US can’t easily decouple from China — 43:34–46:32
• Limits of US industrial policy vs. China, is there a ‘third way’? — 46:32–51:19
• Destabilization and emergence of US-allied vs. China-allied value chains — 55:47–59:39
• Opportunities for new builders (“the Shenzhen of North America”) & skilled labor gap — 66:00–68:45

Summary Takeaways

• The old era of free trade-driven globalization has fractured due to great power rivalry, climate pressures, and populist backlash in the West.
• Both US party approaches (Biden's subsidies, Trump's trade barriers) struggle to match China's unified, industrial-policy-driven strategy—especially regarding critical minerals and advanced manufacturing.
• Altana’s supply chain mapping reveals real-time shifts as companies scramble to reconfigure around new tariffs, loopholes, and policy instability.
• Decoupling from China for key industries is extremely difficult in the near term. Some movement is underway, but fundamental issues—especially in resource processing and skilled labor—persist.
• North America (especially Mexico) is emerging as the best near-shoring opportunity, but the US must address labor and regulatory constraints to capitalize fully.
• The world is trending toward parallel, somewhat decoupled regional supply chains—especially in sensitive sectors like electronics, aerospace, and defense.
• Only a blend of innovation, resilience, and precise industrial policy may prevent further escalation—or outright conflict—in a destabilized global order.