← Tom Bilyeu's Impact Theory
Tom Bilyeu's Impact Theory
Trump’s Trade War w/ Canada Is Just Getting Started!" | Edward Fishman PT 1
00:46:04
Loading summary
Transcript85 lines
- [00:00]
A
A vacation rental should come with support, not surprises. That's why VRBO comes with a VRBoCare guarantee and 24. 7 life support from real people. So if something goes sideways, VRBoCare can help. If the host cancels Verbocare if the
- [00:13]
B
listing says heated pool but there's actually
- [00:14]
A
no pool to heat, Definitely a verbocare thing.
- [00:17]
C
If my teenager starts calling me Leslie
- [00:19]
A
instead of mom, that's a family thing. Leslie.
- [00:21]
C
That makes sense.
- [00:22]
B
Sorry.
- [00:22]
A
Book with support, not surprises, verbo care and 24. 7 life support. If you know you're Verbo terms apply. See vvrbo.com trust for details.
- [00:30]
D
If you work in university maintenance, Grainger considers you an MVP because your playbook ensures your arena is always ready for tip off. And Grainger is your trusted partner, offering the products you need all in one place, from H Vac and plumbing supplies to lighting and more. And all delivered with plenty of time left on the clock. So your team always gets the win. Call 1-800-GRAINGER visit grainger.com or just stop by Granger for the ones who get it done.
- [01:00]
B
Sun Tzu famously said the supreme art of war is to subdue the enemy without fighting. But in today's high stakes tensions between America, China and Russia, what if the ultimate battlefield isn't military? It's economic. Today's guest, Edward Fishman, former lead in the State Department, reveals the unspoken methods of the US Economic warfare machine, including the risk and reward of weaponized tariffs, the hidden ripple effects of sanctions, and how you you can topple a government without firing a single shot. As China threatens to fight America in whatever kind of war it wants, and tensions continue to rise in the Russia, Ukraine war, this is an episode you do not want to miss. Let me ask is Trump making a strategic error by putting tariff on friend and foe alike?
- [01:50]
A
I do think he is. Tariffs can be a useful tool, right? I think for too long the US has not protected strategic industries from competition from countries like China. China has become the dominant player in things like electric vehicles, and the most recent administration put 100% tariffs on Chinese electric vehicles. I thought that was a smart move because what are you going to do if every single electric vehicle on the road is made in China? Not only is that bad for US Car companies, but in the event that we're in a conflict with China, what are we going to do, right? They can stop selling cars to us. So I think tariffs have a place. The thing I'm a little worried about though, when it comes to tariffs on friends like Canada and Mexico, is that if you do this, companies can't make investments anywhere really that they feel confident about. Besides being in the United States, you basically move towards something that looks like autarky when everything is made domestically from an economic standpoint, that leads to higher prices, slower economic growth. But actually, the thing that worries me more is if you look at history, when states can't acquire markets and resources through open trade, the temptation to conquer or go to war with other countries goes up quite a bit. It's one thing to impose tariffs or sanctions on an adversary like China, which is something I'm very much in favor of. But then when you start wielding these weapons against Canada, Mexico, the eu, Brazil, everyone sort of starts hedging and no one really feels confident that you can have a long term relationship with the United States.
- [03:22]
B
How do you create a situation where the US isn't vulnerable to China cutting them off not just from electric cars, but from medication chips, Whatever the case, all the things that give us our modern way of life. So much is manufactured in China, we without tariffing to incentivize people to manufacture in the US it feels like we went so far in the other direction in the globalist period that we really did put ourselves at pretty high risk.
- [03:50]
A
The reason is that the global economy we live in is still designed for the benign geopolitical environment of the 1990s, the halcyon days of the 90s. But we have intense geopolitical competition between the US and China, principally, but also Russia, Iran and other countries. So I think you're right. I think we need to incentivize domestic manufacturing of strategic goods, things like automobiles, like technologies, like semiconductors. Right. And I think that's why the Chips act was a smart move. Right. You're putting in $50 billion to incentivize the production of semiconductors here at home instead of relying on countries like Taiwan. Right. The thing that I worry about is tariffs against everybody because you can't go toward a hundred percent domestic production in your supply chain. It's just not how the economy works. So what I would support would be higher tariffs on countries like China, where we have really significant trade deficits. And we're really worried about China weaponizing things like critical minerals against the United States. The reason I called my book Choke Points are these are areas of the global economy where one country has a dominant position and there's very little redundancy. There are a lot of these tow points that China controls. So I think taking proactive steps to reduce our vulnerability is essential. Whether we should be doing that against Canada, where we actually have balanced trade. Doesn't really add up or make sense to me.
- [05:12]
B
Why do you think Trump is doing it, and what do you think is going to be the knock on effect?
- [05:16]
A
It's a good question. He's doing it actually under a 1977 law called the International Emergency Economic Powers Act. This law is specifically for national security uses. So if you look at what Trump is saying about the Canada and Mexico tariffs, as well as the actual legal authorities that are being used for them, it's all about this idea of fentanyl and migrants coming into the United States. He's basically trying to use the tariffs as a cudgel to force the Canadian and Mexican governments to take the migrant and fentanyl issue more seriously. That's not necessarily a bad thing, right? I mean, that's how you use things like sanctions or tariffs to a certain extent. A 25% tariff on Canada, I think, is out of step with the degree of the fentanyl issue coming from Canada. I think last year there was a couple dozen kilograms of fentanyl seized at the U.S. canadian border. So it's not a massive problem. On the northern border with Mexico, it's a bigger problem. And I think there's a fair question whether or not we should be applying pressure to the Mexican government. And I support that. The challenge with tariffs is that most American production industries, like the car industry, are heavily dependent on inputs from places like Canada and Mexico. And frankly, this is largely because of the US Mexico Canada Agreement or the usmca, which Trump negotiated during his first term with his US Trade representative, Bob Lighthizer. You know, who. Who sort of pioneered that deal. And what it did was it created a highly interdependent North American supply chain for things like autos. Right? So for Ford or GM to produce automobiles in the United States, they're sometimes relying on goods that are coming back and forth between the US And Mexico multiple times. If you put those tariffs on for Mexico and Canada, it's actually going to benefit companies like Honda who are making their cars in Korea with no US Content over an American car manufacturer who needs to buy inputs that are going into their vehicles from Mexico or Canada.
- [07:12]
B
Okay, so if you had to steal man, Trump, do you just see him? He's a loose cannon. He doesn't know what he's doing. He wants to slap people around. Or is there. Is there at least something internally consistent to Trump where you're like, he's wrong. It's not going to have the effect that he wants, but at least I understand what he thinks.
- [07:32]
A
Look, I think that Trump clearly likes using economic warfare. He loves tariffs. He said it's the most beautiful word in the English language.
- [07:40]
B
He downgraded it to fourth.
- [07:41]
A
Oh, really?
- [07:42]
B
People gave him so much love. God, religion, maybe.
- [07:46]
A
I think are the first three having served in government. I understand the appeal of sanctions and tariffs. For one. They're very easy to impose back. If you go back to the 1990s, for instance, when the US had an embargo against Iraq. This was when Saddam Hussein had invaded Kuwait in 1990, to actually do effective sanctions on Iraq back then, you needed 13 years of US Navy ships patrolling the Persian Gulf 24, 7 to ensure that oil wasn't going out of Iraqi ports. Right. So that was a pretty burdensome type of an operation. What happened is, in the wake of hyper globalization in the 1990s, when you start getting these deeply integrated financial markets and supply chains, today President Trump can sign a document in the Oval Office and just with that signature, impose economic harm on another country order of orders of magnitude more than that 1990s embargo just by weaponizing these choke points like the US dollar financial system, like semiconductor supply chains, like oil supply chains. So I think that there's a temptation to use these tools because they're powerful and they're very easy to use. It just takes a presidential signature. And so I, I understand why he likes using them. I think the other thing, and this is just so far, kind of reading between the lines of his first month back in the White House, is it seems like Trump is a little bit more comfortable using these tools against countries who may not be able to retaliate aggressively against the United States. What you haven't seen as much of is really, really aggressive measures against Russia or China. And so it could be that Trump is sizing up the situation and thinking, well, what's Canada going to do? Right. They're totally dependent on us. And so we could wield this cudgel over the Canadian government, and they frankly, just don't have an alternative.
- [09:33]
B
One of my favorite quotes about history is that the only constant in history is the law of unintended consequences, which. What do you think the unintended consequences are going to be here?
- [09:42]
A
Yeah. So I think in the short run, the type of unintended consequences you'll see are higher prices. Right. And I think this is the thing that might lead Trump to eventually backtrack from some of these tariffs, because I think big reason he was elected was to bring down things like the price of eggs. Right. I think a lot of the things we're buying from Canada and Mexico are basic goods, right? Mexico is providing a lot of the fruits and vegetables that Americans eat in the wintertime because it's warmer there than it is here. You know, Canada is providing, you know, millions of barrels of oil a day to the United States. I think you it could wind up worsening inflation. I think it also could wind up hurting American manufacturers. And I think this is arguably the reason that Trump would move away faster. And just going back to this car example, right, the autos that are produced in the US are not 100% US content, right? Most of the inputs that are going into them, whether it's the brakes or the windshield, might be coming from Canada or Mexico. So the costs for manufacturers in the US Are going to go up. And if there are no, if there's a 25% tariff in Canada and Mexico, but a 0% tariff on South Korea or Japan or Germany for that matter, you know, BMW or Honda or Toyota, who are making vehicles outside of the United States not using content from Mexico and Canada are actually going to have a benefit over US Made cars. So to me, this is the biggest unintended consequence, which is you actually might wind up hurting domestic manufacturing if you tariff Canada and Mexico in particular, a
- [11:15]
B
company like Ford, so many of their parts are touching something in Canada that they're going to end up raising the costs on those elements, which ends up hurting them. But if I'm Trump and I'm trying to incentivize people to manufacture everything in the U.S. so, hey, you're doing the windshield up in Canada, but I want you to stop. I want you to start doing it in America. Feels like he knows in the short term, there's going to be the raising of prices, but in the long term, it's going to push people to come here to America to do their manufacturing, that's going to create a lot of jobs. And if he can create the jobs faster than prices rise or prices are going to temporarily rise, he's going to blame Canada and say all they had to do was solve the fentanyl crisis. If they had dealt with that, no one's going to understand how much you're talking about. He's going to have a spin story for that anyway. If they had just addressed that seriously, if we had a serious partner or they became the 51st state, we'd be fine. There'd be no problem. And by the way, you can buy, there's all these other Cars coming in from all these great manufacturers and they're doing fine. And in the long run, trust me, your manufacturers are going to bring everything home here. It's going to be better for you. Given that he isn't applying it to Japan, where we get a ton of cars, he's not applying it to South Korea, he's not applying it to Germany. Won't the prices go up on certain things, but migrate over to others, which buys him time to force people's hand to bring manufacturing home to the U.S.
- [12:38]
A
look, in an ideal world, that would happen. I'm, I'm skeptical and I think this is why you've seen things like even, you know, unions for automakers come out against these tariffs because car makers don't have that much time. Right. I mean, how long would it actually take to build a fully indigenized supply chain for autosomal? It would probably take.
- [12:57]
B
Musk is doing it. Elon Musk pulled that stuff together a lot faster than that.
- [13:00]
A
I don't think that the US Car industry could survive that long. On, on the one hand, he talks about using tariffs for structural reasons like bringing jobs back to America or raising revenue for the government. Right. But then on the other hand, he talks about tariffs as a tool in negotiation. Right. Where he could use tariffs and then trade them away in exchange for, you know, Canada beefing up security at the U.S. canada border. Right. For the first thing to happen, for any structural change like the investment to come into the U.S. you need tariffs to be permanent. Right. Because any investment that's going to be made in the US in a new factory, you're not going to make that investment. If you're going to say, oh, well, these tariffs could come off in two years and all of a sudden I'm going to be undercut on price by the Mexicans yet again. Right. Whoever building that factory has to have assurance that these tariffs are going to stay in place for at least as long as it takes for that factory to get set up to, to start making their product and to start selling their product. So it's a long proposition. Right? But then if you're just using these as sort of cards to play at a table, that's not going to. Then, you know, you're going to keep. Basically the US investors are going to wait till the very last minute to actually start re on shoring their supply chains. Right. And so I think that ultimately, and look, this is normal for any US Administration, There are always different factions who want policies for different reasons. There are definitely people in the current Trump administration who see tariffs as something that are just good and they should be in place forever and we should never trade them away. That's. That is like the pro tariff faction. Right. But then there are other people in the administration who see tariffs as a tool that Trump can use as a deal maker. And frankly, I think that is personally where Trump stands. Like, I think Trump sees himself above all as someone who loves making deals.
- [14:39]
B
He's definitely beat that drum to death.
- [14:41]
A
Yes. And so even with the Chinese, Right. You'd be surprised at what he'd be willing to give up in exchange for a big trade deal with. With Xi Jinping. And in fact, he was prepared to do that during his first term. He got a phase one trade deal with the Chinese in January of 2020, and then that quickly unraveled after Covid started. What did that look like?
- [15:00]
B
Like what was going to be the give and take.
- [15:01]
A
The Chinese were promising to buy a bunch of stuff from the United States. What Trump doesn't like about the US Chinese trade relationship is the deficit. Right. We import a whole lot more from China than China imports from us.
- [15:14]
B
Right.
- [15:15]
A
And so there are two ways that you could really address that. Right. One would be we buy less from China. And that's probably the most practical way to actually close the deficit. What Trump wanted, which makes sense because he's a businessman, he wanted China to buy more stuff from us. And so the Chinese were promising to buy large amounts of agricultural products from the United States, like soybeans and whatnot. Most studies that have shown sort of how China behaved since the phase one trade deal show that China did not live up to its commitments. They did not buy the goods that they said they would.
- [15:47]
B
Interesting. So did that play out during the Trump term or. That was all. After Biden comes into office, Covid's in full swing, and they're like, oh, disruption. Can't do it. Sorry. Was it something like that?
- [15:57]
A
So this deal was signed in January 2020. I think even as during 2020, they weren't living up to their commitments. The US China relationship collapsed in 2020 because I think Trump believed that Xi Jinping lied to him about COVID which I think is true. He did lie to him about COVID
- [16:11]
B
Xi Jinping lied to everybody.
- [16:13]
A
Yeah, right, exactly. So. And I think Trump rightfully thought that that was what undercut his presidency. And so. And so China never lived up to its phase one trade deal commitments. And Robert Lighthizer, who's the U.S. trade representative during the first term, who was really the architect of Trump's China tariffs on the Phase one deal, as well as the architect of the usmca, which is the US Canada Mexico Agreement. I spoke to him at length when I was researching and writing Choke Points and I think for good reason. He's very proud of USMCA, of the U.S. mexico Canada Agreement, and not quite as proud of the China Phase one trade deal.
- [16:50]
B
Yeah. Hang tight. When we're back, Edward is breaking down how China is weaponizing trade and why the US Might not be ready for what's coming. Stay tuned.
- [17:02]
C
When you manage procurement for multiple facilities, every order matters. But when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery so you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done. When you manage procurement for multiple facilities, every order matters. But when it's for a hospital system, they matter even more. Grainger gets it and knows there's no time for managing multiple suppliers and no room for shipping delays. That's why Grainger offers millions of products in fast, dependable delivery so you, you can keep your facility stocked, safe and running smoothly. Call 1-800-GRAINGER Click grainger.com or just stop by Granger for the ones who get it done.
- [18:04]
B
All right, we're back. Let's get into it. I want to quote something you said in the book. In the years to come, fighting and winning economic wars will only get harder, especially as China and other countries strengthen both their offensive capabilities and their defensive fortifications. And the US Is not going to be able to be a one way bully. And China has spent a long time with a lot of different initiatives, not the least of which is the Belt and Road Initiative. Building a bunch of allies, building a smaller reliance on the American economy, becoming more self sufficient. If I'm Trump and I'm looking at that trade imbalance and I know that there's a potential hot war that needs to be avoided, how does he play that game? Well, so he just doubled the tariffs. They're now at 20%. If he has a partner in Xi Jinping who he can't trust, is this going to work? Does this fall flat? Like, where do we go from here?
- [19:04]
A
Yeah, look, I'm glad that you picked that out because I think there's a fundamental difference between the risks of an economic conflict with China today than during Trump's first term. I think one of the sort of biggest legacies of Trump's first term, and one of the stories that, you know, was most interesting for me to sort of retell in choke points is how Trump really broke the taboo during his first term that China was too big to sanction. You know, for. For decades, China had been waging economic war against the United States, and there'd been very little reaction from US Presidents. And I think that they were afraid of China.
- [19:37]
B
Like, why not react?
- [19:39]
A
So many US Companies were basically so heavily invested in China and so dependent. Exactly. And so dependent on, frankly, Che. Chinese labor to make profits. And those companies were so influential that there was just never a significant constituency to do anything against China. I also think China skillfully took advantage of the WTO rules, basically, where they joined the World Trade Organization. The US Helped them join the World Trade Organization right after the turn of the 21st century. And what they did basically was they stayed within the very narrow letter of the law of the wto, but broke the spirit of it over and over again, you know, forcing US Companies to transfer intellectual property to them in order to operate in the Chinese market, you know, manipulating their currency, which, of course, this is something that is a little confusing. If you're artificially devaluing your currency, you're basically making your exports more competitive than other countries. Right. And so what China was doing was almost equivalent of putting a tariff on us. And that's what they did last time. When Trump imposed tariffs on China, they devalued their currency. It sort of offsets the impact of the tariff. Right. And what happened during the first Trump turn is, is that China was surprised by all this. They were like, hold on a second. Like, US Presidents don't, you know, impose sanctions on big Chinese companies. But Trump did this a number of times. He oftentimes was kind of walked back from, you know, from sort of delivering a knockout blow to companies like ZTE and Huawei, because Xi Jinping was pretty skilled at flattering Trump and kind of persuading him not to, you know, not to, like, you know, deliver the coup de grace to some of these big Chinese companies. But ultimately, like, Trump changed the paradigm on US China relations. And Biden, in fact, built upon a lot of the China policies that Trump put in place. But I think what's different this time, Tom, is that, you know, that trade and technology war that Trump started in 2018, that was seven years ago. Right. And so China's had a long time to prepare. And the way they've prepared is really in two different ways. They've insulated themselves by investing hundreds of billions of dollars in domestic self sufficiency. This is a program called made in China 2025, where they basically tried to decrease their vulnerability to these American controlled choke points like the US Dollar or semiconductor technology. But then they've also built out their own retaliatory capabilities. And I think this is the area that I'm a little concerned that Trump may not fully grasp because I haven't heard him say anything to this effect. But he seems to think that in any trade war with China, we can win because we import so much more from them than than they import from us that we can always impose more tariffs than they can. Right. Because if we impose tariffs on all $500 billion of imports from China, they only have 150 billion of American imports that they can tariff. Right. But what China can do now because of the sort of retaliatory preparation is they can retaliate asymmetrically. They can impose sanctions on individual U.S. companies. And in fact, when Trump put his first 10% tariffs in place in early February, China retaliated not just with tariffs, they actually imposed sanctions on Illumina, which is a DNA sequencer company, as well as pvh, the American apparel company that owns Tommy Hilfiger. They put sanctions on skydio, an American drone maker, the largest drone maker in the US and it caused the company to ration batteries, where now they're battlefield drones that the Ukrainians are using. They only have one battery per drone because of these sanctions. And so I think that's what you're going to get more of. And you know, even the antitrust investigations into Nvidia and Google that China launched, I think that's direct retaliation, right? So they can pinpoint US Companies and impose targeted pain on them. And of course, they can also restrict the sales of things like critical minerals to the US Which I think have been in the news lately for good reason because it's an area that China has a complete dominant role in.
- [23:32]
B
We are very much going to have to talk about minerals and Russia and the madness that's going on there. But sticking with China for a minute. So a couple things on the table. You've got Apple making a $50 billion investment. So going back to your, they have to believe that something's going to be permanent. I have no idea what Trump said to Tim Cook that made him go, this is a good idea. But that to me is a huge Signal that Trump is saying something that is very compelling. Now, if they're going to just, you know, shuffle and dance and hope that, you know, they can make it to four years before they have to do anything, maybe that's what's at play there. But also in the book, you had another quote. The gist of it was that the China and America are finally waking up to the reality that they are in a technological rivalry that is zero sum. And that the wild globalization of the 90s and the 2000s, like that has really come to an end. And now that these two really understand each other as pure competitors, if diplomacy fails, you move to economics, but if economics fails, you move to kinetic. And for the first time, it really feels like we're on this really shaky ground of diplomacy. Didn't get us very far. Certainly not if Trump feels lied to. Economic sanctions they've hardened themselves against. And so the final chip on the table here is kinetic. How do you see, like, when I read the Tim Cook move, I admit I concede that maybe your Trump read is right and people are just going to try to buy time. But another reading of this would be that Tim Cook knows. I can't say, I can't even acknowledge Taiwan as like a separate entity. I have to be very careful what I say, that if anything, if China cut off manufacturing there for us as a company, we are, we're in the most dangerous position ever. So they're diversifying now into India. They're diversifying theoretically now here in the US do you think that read is plausible, that people are realizing, okay, hold on, this is a zero sum game, technologically charged, meaning it's happening at the tech level more than anything. And even our own manufacturers want the Trump song to be sung, which is why they were all at his inauguration, because they realize we need somebody to give us the economic incentive to onshore what you call friend shoring?
- [25:54]
A
Yeah, I think with respect to China, I fully agree. And that's, you know, why I talk about the age of economic warfare. Right. We've, we've. It's been clear, I think, to anyone who's paying attention that globalization's been dead for a while. Right. I mean, it's crazy, man.
- [26:08]
B
I'm really slow to wake up to that.
- [26:10]
A
You can't unravel a full economic system overnight. But when I say it's dead, it's the belief that economic relations are win, win. You really have to have, you know, you have to be wearing some real rose tinted glasses to think that American economic relations with China or Russia are win, win. Right. I mean, I think there, there have been zero sum for quite some time in, in certainly in specific sectors. I think with a country like Russia, they're in zero sum in almost every sector. There may be a couple exceptions. So these tariffs, these sanctions, these export controls that the US imposes, that China imposes, that the EU imposes, brick by brick, they're building a new world economy. That's what's happening. It's taking time. Right. It's not overnight. It's not like 1944 when a bunch of world leaders went to the Bretton woods conference in New Hampshire and negotiated the terms of the world economy. It's a different process. Right. It's a more haphazard process that's happening.
- [27:01]
B
Polytunistic, it feels to me.
- [27:04]
A
Exactly. And so I do think that companies, especially a company like Apple, where they're just incredibly dependent on China, it is within, you know, very smart move by Tim Cook to try to reduce Apple's exposure to China. It's hard for them to do just given the depth of it. I was happy to see this announcement. So I support decoupling from China, especially in critical areas that involve technology. I think it becomes much harder to actually decouple with China if you're also picking fights with our other big trading partners like Canada and Mexico, where they're not really national security threats. You know, economic relations with Canada I think are almost exclusively positive sum, probably the same with Mexico. So, you know, it becomes harder because at that point, you know, you're, you're picking trade fights with all three of our biggest trading partners. Right. I'd rather see a strategy where Trump corrals other countries like the Canadians, like the Mexicans, like the Europeans into a block, a block of democracies that can be stronger against sort of Chinese led bloc. Right. And that, that's this concept of friend shoring. That was a word that Janet Yellen, who was the treasury secretary in the Biden administration used. But even Lighthizer, who's sort of the architect of the Trump tariffs, he put out an op ed recently where he made the, he, he was, it was an op ed in the New York Times that was explaining why tariffs are actually good. And I think he did this because there was kind of a, an onslaught of anti tariff writing both in the Times and in the Wall Street Journal and, and Lighthi. Actually they're good. But the argument if you read between the lines was what we need is a block of democracies where we all have Very low tariffs against each other, but then big tariffs on, you know, the dictatorships, like, like the Chinas of the world.
- [28:54]
B
Okay. As we go into the Russia of it all, one thing that I found really compelling about your book is in getting to look at the history of how this stuff came to be. I had the same sort of shock that I had when I realized that oil is a relatively recent phenomenon. Like oil's like the last hundred years. And reading about Churchill and realizing, oh, there was like a moment where he was like, wait a second, our naval fleet could move a lot faster if we used oil instead of coal. And so he goes on this big pitch to get them to switch over to oil. And then you realize, oh, wait a second, this is why they were trying to have relationships with the Middle East. This is all about economics. Might it. It wasn't a just sort of inevitable law of nature. I felt the same way about tariffs that the playbook sort of happened and people realized, oh, wait, this was really awkward and last minute, and it was like reactive instead of being proactive. But then a playbook started forming. And so now people know, oh, with an executive order, I can stroke this and I can really do damage to another country and I can get them to. To heed, given that playbook of things that have been put together relatively recently, what is happening right now with Russia. Because as somebody who didn't really understand the economic warfare of it all, it was like sort of dimly in the back of my mind, but I didn't really engage with it. My initial reaction was, why would you weaponize the dollar? Like now you're just giving them every incentive to say, oh, we want to be a part of brics. We want to get rid of the hegemony of the American dollar. We no longer want them to be the reserve currency. Other people, like China, started selling their US Debt like crazy, and I didn't. I'm still not sure what to make of the way that we have treated Russia. Confused even more now with what just happened recently, at least as of this recording, with Trump and Zelensky breaking down over the mineral rights and then Putin coming in and saying, hey, I've got some minerals too. Look over here, baby. What do you make of all that? Is this Putin just trying to get out from under all those sanctions and get back in the financial good graces?
- [31:12]
A
Yeah, look, I think just reading between the lines. And look, I've dealt with Russian officials for many years. Back when I was the Russia and Europe sanctions lead in the US State Department I myself have been sanctioned by Russia. When I hear Putin come out and saying, hey, check out our minerals, what that tells me as somebody who has spent a big part of my career negotiating deals with other countries, it's a sign of desperation. It's a sign that he needs something. He doesn't want the US And Ukraine to sign this minerals deal because he realizes that his best chance at getting what he really wants, which is sort of a get out of jail free card where you lift sanctions on Russia and even more than that, a rupture in the transatlantic relationship, basically breaking the US And Europe right across the Atlantic Ocean and destroying NATO. His best way of doing that is by preventing this US Ukraine minerals deal because he knows that Trump doesn't care about the appeals to alliances and liberal international order. These are things that when Trump hears it, he says, you know, I could care less. Right? But what he does care about is investment for U.S. companies, you know, mineral resources for the U.S. economy, and of course, being less vulnerable to these choke points that China has over the US like critical minerals like graphite, like lithium. These are areas that China dominates that we could potentially have an even better and more reliable source from in Ukraine. So when I hear Putin basically trying to, you know, stymie this deal at the last minute, I think he realizes that Zelenskyy actually has come up with potentially a wedge issue to get Trump back into the Ukrainian side. That, of course, I think has been called into significant jeopardy after the whole blow up in the Oval Office. And, you know, it's hard for me to explain exactly what happened if I, you know, just sort of watching the tape and studying does kind of seem like JD Vance was sort of picking a fight to a certain extent with Zelensky. And then I think Trump kind of came to Vance's aid sort of in that fight.
- [33:19]
B
Had a very different take. Don't go anywhere. Edward reveals how economic sanctions are reshaping global power and why most people are completely blind to what's happening.
- [33:30]
A
We'll be right back.
- [33:32]
D
If you work in university maintenance, Granger considers you an MVP because your playbook ensures your arena is always ready for tip off. And Grainger is your trusted partner, offering the products you need all in one place, from H VAC and plumbing supplies to lighting and more. And all delivered with plenty of time left on the clock. So your team always gets the win. Call 1-800-GRAINGER visit grainger.com or just stop by Grainger for the ones who get it done.
- [34:04]
B
All right, we're back. Let's get into it.
- [34:06]
A
Oh, interesting. What was your thought?
- [34:07]
B
Do you know Robert Greene's 48 laws of power?
- [34:09]
A
I'm familiar with it, but I haven't read it.
- [34:11]
B
Okay, so law number one is never outshine the master. Zelensky needs something from Trump. So in this case, love him or hate him, he's the guy that you don't want to outshine. You've got all the cameras of the world on you. The tenor in the room changes when he turns to Vance and says, what diplomacy you're talking about. Like, Russia has broken treaties over and over and over. And the thing is, I feel for the guy like he is on the front line, risking his own life, watching people who I will choose to believe because people are going to say what they're going to say. But these are his countrymen dying on the front lines. And he's seen God knows how many mothers who have lost children have the weight of having to send these young men into battle to die. And he's like, this guy will break this stuff all the time. I'm not going to give you mineral rights unless there's some security guarantees. We can talk about that in a minute.
- [35:07]
A
Yeah.
- [35:08]
B
Then you've got Vance, who takes the emotional bait and is annoyed that this guy's not being thankful enough and gets put in a weird position where, in fairness, I think Zelensky had a killer question, though he never should have asked it, not. Not in that situation. You have a goal in mind. You were trying to get this war ended. You're sitting across from the guy that can make it happen, and you literally fumble the ball. Any one of them could have defused the situation. None of them did. But I feel like if. Don't outshine the master, know who you're dealing with. It's like Law 22. And he was not thinking about what Trump and Vance are like. And so he totally misplayed that. He's got to. In another one of the laws, I forget the number, but is play the surrender card. Like, know when to show your vulnerability. Know when to roll over and show your belly and let that person, like, trigger that desire for them to take care of you. And once I started looking at the moment through Robert Greene's lens of the 48 laws of power, which is basically Machiavelli, you're like, oh, my God, Zelensky misplayed that moment because if he had, I mean, you even said, like, xi knows how to play Trump and Zelensky doesn't. And if, again, I'm I'm not saying I'm on Trump's side. I so wish he had been the bigger man and just gone. Look, we're not going to talk that right now, guys. Everybody clear the room. I need to talk to these two with the cameras off, and then, fine, slap him around all you want, but the way that it all became theatrical, you've got JD Vance playing to the crowd, because I think he realized he'd been backed into a corner and he didn't have a great argument, which never should have been brought up, but it was, and he didn't know what to do with it. So anyway, it just becomes this total clusterfuck. But I think Zelensky could have just come in known, okay, I have to show my belly. I have to make them look like the hero. I've got to be grateful. On and on. And God, it would have been such a different play.
- [37:03]
A
Yeah, well, Tom, I'm kind of surprised you've never done diplomacy, because I thought that was a brilliant analysis, to be honest.
- [37:07]
B
Shout out to Robert Green.
- [37:08]
A
Yeah, no, I, I, I, I agree. I think that I understand. I mean, look, it's, it's hard to, it's hard to put yourself in Zelensky's shoes, right? He's a wartime leader. This country's been invaded. And so I can imagine being triggered when you hear things like, you know, no doubt you were, you provoked them or something. You know, dude, that shit was crazy.
- [37:28]
B
He was like, he, he did it, or he's a dictator and this is his fault. I forget the words that Trump used. Forgive me, forgive me, but the sentiment was gone.
- [37:36]
A
But I'm, I'm with you, though. I think that, you know, U.S. support for Ukraine is existential for Zelensky. And so if that means he has to come and show his belly to Trump, I think it's worth doing that. So I, I, I don't dispute what you're saying. I do wonder if J.D. vance was also, like you said, sort of playing to the crowd or trying to show, show up, you know, the, you know, the MAGA folks that, you know, he's just as, as badass as Trump is or something. Hard for me to say, you know, but that, that was sort of how I interpret it, just because it's so rare. I mean, I, like I said, I've been doing this stuff for a while. I've never seen anything like that. Right. The idea that you have, like, a public diplomatic spat in the Oval Office while the cameras are rolling, I mean,
- [38:18]
B
do you love or hate that they did that on camera.
- [38:20]
A
I hate it. I hate it.
- [38:21]
B
I am conflicted.
- [38:22]
A
I hate it.
- [38:24]
B
But I love it so much. I hate it because the cameras were what made it fall apart. Because privately I think Trump could have. And I'm not saying this is good, I'm just saying it's what he would have done. He would have re established his dominance. He would have told him, don't tell me how we're going to feel, don't tell me how we're going to feel. Like he would have shut it down and been like, like, you're out of your fucking mind. You need to thank me right now. And Zelensky hopefully would have come to his senses and gone. Even though I have to eat crow in this moment and not saying I should have to, but I do have to and would have done it because there's nobody watching. But everyone was playing to their base. The reason I love it is because we live in an age where for the first time, transparency is really possible and it's a double edged sword. It's not going to be all good, but wow, we can really see how this stuff is done now.
- [39:08]
A
Yeah, yeah. No, and look, I think if that was all genuine and there wasn't any playing to the crowd, I'm with you. I do worry, though, at least in the Vance side of the equation, there did feel like an theatrical, all of them element.
- [39:21]
B
He was the one that felt theatrical. They were all aware of their base watching for sure.
- [39:25]
A
Yes. And of course, and people forget this, like, Zelensky is a democratic politician too. And it's hard for him as well in Ukraine to be seen to, you know, sit in the Oval Office as comments are being made about his country's shared culpability in the war, when anyone can see that they were invaded by their neighbor and not respond. But I'm with you. I think, you know, at some point you got to sort of, you know, you know, bite your, bite your tongue and do what it takes to get your country going. But I would say, though, Tom is, you know, there is this narrative out there that I hear sometimes that, you know, the sanctions on Russia haven't been that painful to Russia and everything's fine. And, you know, if you go to Moscow, everyone's buying things in department stores and everyone's happy. I think what that tells you though is that it's more something just about like the limits of economic warfare where, like, it's pretty hard to impoverish a billionaire oligarch. Right? Like, that's not actually Something sanctions do. But if you look across Russian society and the Russian economy, it's in very, very bad shape right now. I mean, they've got interest rates at 21%.
- [40:30]
B
Is this because of the sanctions? Yeah.
- [40:32]
A
So you got a benchmark interest rate at 21%. Whoa. You can't get a home mortgage in Russia for anything below 30%. Yo. And so it's, it's at the point now where if you're a Russian, the only rational thing to do with money is let it sit in your bank account. Like, there's zero investment in that economy, except for the government investment in military production, in weapons. And those weapons are just getting blown up on the battlefield in Ukraine. Right. So they're not actually building anything. Right. Like, they're not. It's not investing in the productive capacity of the Russian economy. So I think what Putin sees and what, you know, the one area of the Russian government that's still pretty technocratic, that still has experts, is the central bank. So the governor of the central bank of Russia, it's a character in my book named Elvira Nabulina. She's been there for over a decade. I mean, if she lived in the US she could be like the chair of the Fed. You know, she's brilliant economist and well respected around the world. She knows that Russia's economy is going nowhere fast. They project that they're going to have zero growth this year. And so, you know, you, you know, study Kremlin statements long enough, that usually means, you know, something like probably a significant recession as opposed to zero growth. I mean, the Official inflation rate's 10%, so you gotta imagine it's quite a bit higher than that.
- [41:47]
B
Oh, God, you just gave me the chills.
- [41:48]
A
Yeah, right. That's brutal. So, like, you think what we've gone through in US in the last few years is bad? I mean, things are really rough in Russia right now. And I think Putin sees this opportunity with Trump as like, his one chance to get everything that he wants, which is he doesn't have to give up what he's taken in Ukraine and he can get out from under the weight of sanctions. That's what he's trying to do. Whether or not Trump goes for it, I'm not so sure, because Trump obviously is always attracted to these ideas of business deals, and I think that's why the Russians are playing to that. But there really aren't business opportunities in Russia for the United States right now. And in fact, it's quite the opposite. I think the key sector of Russia's economy is the oil and gas sector. Right. So if you were to remove all the sanctions on Russian oil and gas, what would it do? You'd have more Russian oil on the market and more Russian liquefied natural gas in the market. What would that do to American companies? American lng, the liquefied natural gas producers in the Gulf coast, they've been making bank because Russian gas has stopped going to Europe. Right. I mean, they've taken market share away from the Gazproms of the world. You know, Gazproms, a big Russian gas giant. If Russian crude oil floods the market and you get lower prices, American shale producers can't make money at an oil price that's below 60 or $70 a barrel. So if you get lower, much lower oil prices, you're going to wipe out the American shale industry. And so I'm skeptical that Trump will ultimately go for this. I understand why Putin wants it. I don't really understand from a dollars and cents perspective what's in it for the United States.
- [43:21]
B
Okay, let me throw out a hypothesis here. Tell me if this is crazy. Okay, so I'm Trump. I'm looking at, I'm racing towards conflict with China on a technological front. I understand that the future of everything, warfare, AI, drones, all of it is, it's all tech, it's all chips, it's, it's batteries and phones. It's the things that rare earth minerals are going to be necessary for. The US Is distressingly low in rare earth minerals. My major players are going to be China and Russia. Stroke Ukraine. I go to Ukraine first because if I'm Trump, do I care about the moral high ground? I'm not sure, but certainly he knows how to read the public. And the public was on the side of Zelensky, I would say, until recently, where it's become a little bit shakier, a little bit less clear. Certainly the mega right is got some question marks or some are, I think, swinging the other way. I'll finish that thought in a minute. So you've got this play where you have an opportunity to rebalance your reliance on China with at least somebody else. Maybe you can switch entirely. But you, you now have options. And when you're the art of the deal guy, you always want options. Leverage is when you can walk away. And if you can't walk away, which right now we can't walk away from China, you, you're really in a tough spot. So cool. I go to Zielinski. Public is going to like that better. He was aggressed on. Plus, everybody already thinks I'm a Putin public puppet. So let me go to Zelensky, goes to Zelensky, thinks he's got a deal. And theoretically, if they can be believed that multiple times Zelenskyy has said, we've got a deal, only to then bulk. Now, given what was said publicly in that meeting, I have a feeling Zelensky has been very clear and Trump has been very clear, but neither of them understand each other. And what's being said is Trump is saying, I'm not going to do security guarantees while you're at war. That's crazy. I'm not going to promise that America will come to your. They're actively shooting at your people right now. What kind of security guarantee can I give you? So I'm going to intertwine our economies. I now care about what happens to your mineral rights. So I'm going to leverage as an economic warrior. I'm going to engage in economic warfare against Russia the likes of which they've never seen. This is me trying to channel Trump and Zelensky saying, bro, this guy has broken treaties multiple times. That means nothing to me. If you can get him to do a ceasefire, what am I supposed to do with that? He's gonna just disregard it. So what I need, I will happily share in these mineral rights with you because it's existential for my country, but I need you to sign on that dotted line. And so they just keep missing each other. Where you've got Zelensky, who doesn't believe, I would say, at a minimum, or let's all remember, Zelensky has a right ring as well. And so they're not going to love him coming back and be like, no, no, no, Trump said that he'll care now about our country's sovereignty because of the mineral rights. Would you get it in writing?
- [46:28]
A
No.
- [46:28]
B
Well, he was a little weird about that.
- [46:30]
A
Promised.
- [46:30]
B
Yeah. Right. So I think they'll be super sketched. So he's like, wait, I've got to get this in writing. Like, you don't understand. And Trump is like, that's just a. It's a non starter. So the thing that I find hard to reconcile is the part of me that, despite understanding realpolitik, hates realpolitik because it's so amoral. And so here we've got. I'm setting aside the NATO pushed up against his border, which, if you have a take on that, I'll definitely like to hear that. But you've got Trump. Excuse me, you've got Putin, who's like, you guys have pushed NATO right up to my doorstep, and this I will not abide. And so we're going to reclaim what he sees as his rifle territory anyway. We're going to reclaim that. But you've got a dictator who poisons his enemies, going into a sovereign nation, invading it, killing God knows how many people, and we're all, like, ignoring that all of a sudden. Not everybody, but, like, it's suddenly, like, receding into the background of the conversation. And I'm like, whoa, whoa, whoa, wait a second. Like, the reason we don't negotiate mineral rights with him is the same reason that we don't negotiate oil prices with Iran. Like, what's happening right now.
- [47:49]
A
Yes.
- [47:49]
B
So I don't know how to reconcile those two impulses in my own mind. That's it for part one with Edward Fishman, but trust me, we are just getting started. In part two, we're breaking down how the US And China are using trade as a whole weapon, the real impact of Russia's sanctions, and whether Trump's economic policies could shake up the entire global order. Plus, Edward lays out exactly what all of this means for you. Your finances, your job, and your future. Thank you for listening. And if you haven't already, make sure to follow the podcast so you don't miss part two when it drops. I'll see you back here soon. Until then, my friends, be legendary.