Everything Everywhere All at Once
If the past week didn’t give you whiplash, you weren’t paying attention.
Friends,
What a week, it felt a bit like the 2022 A24 film, Everything Everywhere All at Once, in which reality unravels and we’re tempted to fall into the vortex of nihilism as things cease to make sense and what we once thought impossible becomes probable.
To start the week, the Biden Administration demonstrated that they could ‘run through the tape’ with some of the most consequential actions against the PRC of the entire term in office.
Here’s just six of the most important:
Issuance of an Interim Final Rule on Artificial Intelligence Diffusion (January 13, 2025)
Executive Order on Artificial Intelligence Infrastructure (January 14, 2025)
Issuance of a Final Rule prohibiting the sales or import of Connected Vehicles from the PRC or Russia (January 14, 2025)
Extension of the Deferred Enforced Departure of Certain Hong Kong Residents (January 15, 2025)
Executive Order on Strengthening and Promoting Innovation in the Nation’s Cybersecurity (January 16, 2025)
Finding of a Section 301 Investigation against the PRC Maritime, Logistics, and Shipbuilding Sectors (January 16, 2025)
In any “normal” week, the first two would have deserved an entire issue dedicated to them. The Interim Final Rule (IFR) on AI Diffusion is an extension of the October 7, 2022 advanced semiconductor export controls, which in turn was an extension of actions taken by the Trump Administration to limit the PRC’s access to advanced technologies and semiconductors.
The IFR does four things: 1) it creates a global regime for restricting access to the most advanced chips to ensure they do not get smuggled to places like the PRC; 2) it ensures that the most advanced Artificial Intelligence stays in the United States; 3) it seeks to prevent the emergence of problematic dependencies on countries with questionable loyalties; and 4) it pushes manufacturing and infrastructure development for Artificial Intelligence to the United States.
It will take full effect on May 13, 2025 (120 days after its issuance) as long as the next Administration and Congress leaves the IFR in place.
There has been grumbling, particularly by Nvidia, that the IFR should be withdrawn, and Senator Cruz (R-TX) has even suggested the that the Congressional Review Act (CRA) should be used to overturn the IFR on AI Diffusion.
That would be a serious mistake.
If the IFR is overturned by the CRA, then the incoming administration would be prohibited from making any similar regulations or rules. I’m sure Nvidia would love this as it would gut the restrictions in place on providing advanced chips to places like the PRC.
In conjunction with the AI Diffusion regime, the Biden Administration also issued an Executive Order incentivizing the development, construction, and operation of AI infrastructure, including data centers, in the United States (including on land owned by the Department of Defense which would presumably end-run state and local restrictions that have slowed down other efforts at building necessary infrastructure).
While I would encourage the incoming Administration to lift the “clean energy” requirements, the rest should stay in place with the AI Diffusion regime and the AI Infrastructure EO being used in tandem to massively accelerate AI in the United States.
Also of critical importance is the issuance of the final rule prohibiting the sale and import of connected vehicles (aka vehicles from the PRC) to ensure that U.S. citizens aren’t exposed to the dangers that became abundantly obvious after Israel’s pager attacks against Hezbollah. The week before, the DoD listed additional PRC companies on its 1260H list:
Listing of Tencent and CATL (among others) as PRC military companies (January 6, 2025)
This action opens companies like Tencent and CATL to further sanctions under the International Emergency Economic Powers Act (IEEPA).
The Administration also issued an order extending sanctuary for Hong Kong citizens in the United States who face persecution by the PRC and a long-overdue EO on strengthening cybersecurity after a year of brazen attacks against U.S. critical infrastructure and communications systems by the PRC. By Friday, the Treasury Department imposed sanctions on individuals and firms associated with Salt Typhoon.
Almost without notice, the U.S. Trade Representative, Ambassador Katherine Tai, issued a findings from her Section 301 investigation on Thursday.
It seems like an eternity has passed, but in March 2024 five major U.S. labor unions filed a petition with the Office of the U.S. Trade Representative requesting that USTR conduct an investigation under Section 301 of the Trade Act of 1974 to determine if policies and actions by the PRC were harming the maritime, logistics and shipbuilding sectors. Lo and behold, USTR’s investigation revealed that the PRC is harming the U.S. in these sectors.
You may recall that it was that same authority (Section 301 of the Trade Act of 1974) that President Trump used to initiate an investigation into the PRC’s illegal and harmful trade practices around “forced technology transfer” in August 2017 which led to a March 2018 finding of harm. That finding opened authorities for the President to impose the first round of major tariffs on the PRC in the summer of 2018.
Now we have the Biden Administration’s USTR finding similar harmful practices by the PRC and that finding immediately activates authorities for the U.S. President to impose significant penalties on the offender (the PRC).
Nearly everyone predicts that President-elect Trump intends to impose additional tariffs on the PRC… and Ambassador Katherine Tai has just provided the incoming Administration with a new legal authority to do it. Buckle up!
Of course, the incoming Administration still has its original Section 301 against the PRC’s “forced technology transfer” because the Biden Administration kept it in place, reaffirmed its findings and used the authority themselves to continue tariffs on the PRC. This latest action gives the Trump Administration even more options.
Whew… that’s a lot!
But of course, all of that was superseded this week by the drama that is TikTok.
The Supreme Court ruled unanimously that the law directing TikTok’s divestment or ban is constitutional… the TikTok CEO continued to push his now rejected narrative that the law would violate the First Amendment… and the world seemed to go haywire, at least for folks living their lives on Twitter and other social media platforms.
As of this writing, TikTok has been shut down… by TikTok itself. President-elect Trump, along with Senate Minority Leaders Chuck Schumer (D-NY) are calling for an extension of the law to allow TikTok to continue operation, with President-elect Trump promising an EO tomorrow (January 20) to activate the extension period of 90 days.
Assuming TikTok agrees to restart the service, it is unclear whether the App Stores are legally allowed to support the app.
Based on my reading, an Executive Order issued by the President on January 20 isn’t able to grant a 90-day extension.
To be honest, I don’t know how this will play out.
My assumption is that the end game will draw out into the spring as the incoming Trump Administration tries hard to force a sale of TikTok from ByteDance to a U.S. firm. That will require the cooperation of Xi Jinping who has from the beginning exercised control over the business decisions of ByteDance since at least 2021, when the Party forced out the founder and CEO, taking control of the company.
To me, this meme captures best what’s been going on:
I’m certain that we haven’t seen the last of this story, so stay tuned.
[NOTE – As I post this online, it appears that TikTok will resume service within the next few minutes or hours after getting assurances from President-elect Trump]
***
Before we jump into the other news of the week, I encourage you to read Thomas Barnett’s article in Politico magazine (the first Opinion piece below).
If we are at the kind of geopolitical inflection point that Xi and Putin believe we are in (“Changes unseen in a century…” kind of stuff), then Barnett’s bold thinking is worth considering. Some will assert that this stuff is crazy, but I tend to think that clinging to a set of norms and international institutions that were designed for a very different world, is even more crazy.
Regardless of what happens… it won’t be boring.
Please sign up for a subscription with the button below, if you find this newsletter valuable.
Thanks for reading!
Matt
MUST READ
1. How Much Does Party Membership Pay? Measuring the Impact of Communist Party Membership on Wealth in China
Matteo Targa and Li Yang, Stanford SCCEI China Briefs, Substack, January 15, 2025
Insights:
Analysis of two nationally representative surveys in China spanning 1995 to 2017 reveals that wealth (assets minus liabilities)of households with at least one CCP member is 21–24% higher than similar households without CCP members.
The CCP wealth premium is explained in part by preferential access for CCP households to more valuable housing at lower prices compared to similar non-CCP households during the early years of housing privatization.
The most recent survey (2013–2017) reveals the wealth of CCP households grew faster than similar non-CCP households, especially among the wealthiest 5%, driven primarily by higher levels of capital gains.
For all wealth levels, CCP membership was a stronger predictor of wealth growth than level of education.
Since 1988, between 11% and 16% of China’s adult population has belonged to the Chinese Communist Party (CCP). Obtaining CCP membership is widely viewed as an important step in becoming part of China’s elite. But how much wealth advantage does CCP membership confer? New research provides the first empirical account of the evolution of the wealth gap between CCP and non-CCP households in urban China from 1995 to 2017.
The data. Researchers base their analysis on two nationally representative surveys: the 1995 and 2002 samples of the Urban Chinese Household Income Project (CHIP) and the 2011, 2013, 2015, and 2017 waves of the China Household Finance Survey (CHFS). Both surveys provide detailed information on household wealth, including financial assets and debts, housing wealth, assets for household production and business activities, as well as information on income and expenditure. The researchers calculate net household wealth by subtracting household debt from assets and adjust all data for inflation. Besides party membership, the researchers also control for gender, education, age, occupation, and employer. Together, the two surveys allow for detailed analysis of the wealth composition and distribution in urban China over a 20-year time span.
CCP households consistently wealthier than non-CCP households. CCP households — those with at least one CCP member — accounted for 27% of all urban-registered households in 2017. Among the wealthiest decile of urban-registered households, 40% are CCP households. The share of CCP households at the bottom decile of the wealth distribution is much smaller (14%). The researchers find that between 1995 and 2017, CCP households were on average between 21% and 24% wealthier than non-CCP households.
…
CCP membership larger predictor of wealth growth than education. The researchers compared wealth accumulation between CCP and non-CCP households between 2013 and 2017, finding that the net wealth of CCP households grew 9 percentage points faster on average. The difference in growth rates widened at the top of the distribution, with a 9 percentage point difference in the bottom 50% versus a 27 percentage point difference in the top 5%. Wealth became increasingly concentrated among CCP households, especially at the top, where their share of net wealth rose from 41% to 47% in four years. At the lower end of the income distribution, the difference in growth is explained by savings (the difference between income and expenditures), while at the top, it is explained by capital gains (profits from the sale of investments or assets).
Importantly, CCP membership predicts net wealth growth more than education levels, particularly for those at the top end of the wealth distribution, contributing 14 percentage points for the middle 40% and 24 percentage points for the top 5%. While education influences savings for the middle 40% and top 10%, it does not significantly affect capital gains, which are strongly associated with CCP membership in the upper wealth tiers.
CCP membership has paid. The findings underscore the enduring wealth advantages CCP households enjoy compared to similar non-CCP households up and down the wealth distribution. The mechanisms identified in this research include preferential access to housing in the early phases of urban real estate privatization and faster wealth accumulation through capital gains in recent years.
COMMENT – I’m pleased to see this research, but of course it isn’t surprising.
The Chinese Communist Party is China’s new aristocracy.
Member of the CCP will defend (with force) their privileges and prosperity like any other aristocracy.
2. EU Debates Dropping China Trade Case, Frustrating Trump Advisers
Jenny Leonard and Alberto Nardelli, Bloomberg, January 17, 2025
The European Union is debating whether to drop a sensitive trade investigation against China over alleged coercive activity targeting Lithuania, a prospect that’s frustrated officials in Washington, where the incoming Trump team sees it as capitulation to Beijing.
President-elect Donald Trump has vowed to take a tough line on China and the possible EU move would reinforce for his team how the bloc will approach dealing with Beijing, according to people familiar with the matter. Officials from the outgoing administration of President Joe Biden are also urging Europe to stay the course.
Trump, who will be inaugurated next week, has threatened the EU with tariffs and his team has criticized the bloc for being weak on China. The manner in which the EU handles the dispute will present an early test of how the world approaches trade under the new administration in Washington and the resilience of the transatlantic relationship.
A spokesperson for the European Commission declined to comment, while a spokesperson for the Trump transition team didn’t respond to a request for comment.
“The case is as strong today as the day it was filed,” the United States Trade Representative’s office said in a response to questions. “It is very hard to understand why the commission, one year after suspending this dispute on China’s coercion, has still not resumed it.”
The EU filed a complaint against China at the World Trade Organization in 2022 as a result of trade restrictions Beijing imposed on Lithuania after the Baltic country opened a Taiwanese representative office in its capital. China, which considers Taiwan its territory, has repeatedly voiced opposition to countries engaging in official contact with the government in Taipei.
The commission, the EU’s executive arm, said at the time that China was using economic coercion against one of its member states — a claim that the US and 17 other countries supported as third parties in the case.
Lithuania’s foreign minister said the country had suffered from “economic coercion” and had been removed from China’s customs system. The EU criticized Beijing’s actions in December 2021 and brought the matter to the WTO a few weeks later. Lithuania said in 2023 that trade with China was “stabilizing” and that the customs restrictions had been lifted.
In January 2024, the EU decided to suspend the proceedings, setting off a year-long lobbying frenzy, with other capitals pushing Brussels not to give up for fear that it would set a bad precedent.
The logic was that the EU would have likely lost the case because the required evidence was no longer there, some of the people said, which would leave the EU looking weak. Suspending the case was tactical and a political decision on whether to resume it has yet to be taken, one of the people said. Commission President Ursula von der Leyen has the final word on the matter.
Talks between US officials and their European counterparts got heated at times, but in the end went nowhere, said the people, who spoke on the condition of anonymity. If Europe doesn’t resume the complaint by the end of next week, it will lapse.
European officials have repeatedly pledged to work with the Trump team on China but have made that contingent on not being targeted by tariffs themselves.
The Biden administration is perplexed by Europe’s explanation that the evidence to continue the complaint was no longer strong enough, even though US officials say the facts haven’t changed, according to the people.
Economic Coercion
US officials — both in the current administration and in Trump’s orbit — said the takeaway for Beijing will be that it can get away with bullying an EU member state without repercussions. Some in Brussels, however, accused the Biden team of coercion for trying to keep the case alive, one of the people said.
“The EU’s actions may confirm the incoming administration’s conviction that the Europeans are feckless and lack resolve in standing up to China,” Aaron Friedberg, a professor of politics and international affairs at Princeton University, said in an interview. “It’s kind of like they went out to bat and then decided not to swing.”
But there’s even division among EU officials over whether the case should resume, with some arguing there’s little to gain from potentially losing, one of the people said. Member states are also split.
Lithuania wasn’t informed of the decision to suspend the WTO complaint last year and is frustrated with the commission, the people said. Another person said the EU is talking to Vilnius about next steps.
It’s unclear if Beijing did anything to sway the outcome but some officials suspect China applied pressure to get the commission to drop the case.
For the Biden team, dropping the case would represent a missed opportunity to advance the US and EU’s joint competition with China. And even if the case is lost, they say, it will prove that the WTO is not able to deal with fundamental challenges China poses to the international trading system.
The EU, on the other hand, believes the WTO instead needs to be reformed and has to work to solve disputes, one of the people said.
The EU has numerous cases at the WTO involving China and it has probed the second-largest economy in several areas including public tenders, the procurement of medical devices and electric vehicles, where the bloc applied tariffs last year despite immense pressure from Beijing.
“If the Europeans are really hoping the Chinese will let the pressure off, they’re kidding themselves,” Friedberg said. “I don’t see that the Europeans have a choice but to cooperate more closely with us on China.”
COMMENT – I think this article is absolutely fascinating and provides a look into the divisions within the EU over their broader China policy.
Next week is the deadline for the EU to resume this case at the WTO against the PRC’s obvious economic coercion of an EU member state. If Brussels doesn’t resume the compliant by January 24, the case lapses (abandoning the support of the United States and 17 other countries that joined as third parties in this WTO case the EU brought in 2022).
For a bloc that supposedly supports the centrality of the WTO in the global trading system, Brussels will inadvertently send the message that even obvious malign actions by the PRC that harm one of its members can’t be addressed inside the WTO system.
The other interesting aspect is this dichotomy: “European officials have repeatedly pledged to work with the Trump team on China but have made that contingent on not being targeted by tariffs themselves.”
I’ve heard this communicated by EU officials to me directly just after the election and my reaction was this: this sounds like a quid pro quo and suggests that the EU is NOT serious about working with the United States on China. Its primary motivation is countering potential actions by Washington NOT addressing the existing harm that Beijing is doing to the European economy AND its national security interests (cough… Ukraine… cough).
By dropping completely its own WTO case against the PRC simply adds to the perception that Brussels, and a number of its members, aren’t serious at all about the challenge posed by the PRC.
This reminds me of the same exact dynamic when French President Macron came to Washington for a State visit in April 2018. This was just after the Section 301 investigation on China was released and just after some relatively modest tariffs had been applied on Europe in limited sectors. Macron made a similar quid pro quo request (paraphrased as: “we can work with you on China, as long as you drop these tariffs on us”).
Unsurprisingly, President Trump rejected that deal… and I suspect the exact same thing will happen again.
He rejected it because he judged that Macron and other European leaders were still in deep denial about the harm Beijing was doing to the global economic and trading system. He simply did not believe that Macron et al would follow through on their end of the bargain (to be honest, I think Trump was right to doubt Macron’s sincerity). This whole debacle with the Lithuania-PRC WTO case reinforces that belief and undermines faith in European resiliency in the face of Chinese pressure.
I, and others, have tried on numerous occasions to warn our European friends that this approach is a recipe for failure. There are folks on this newsletter in Brussels who heard that from me and others, but it appears that those appeals were ignored.
I know that there are officials in Brussels (and Berlin and Paris and Rome and Prague and Stockholm) who “get it,” but given European political dysfunction and Beijing’s ability to divide and conquer the Europeans, I suspect that the EU will remain in policy paralysis. By default, they will continue to try to straddle the Sino-American rivalry and hope for a miracle to deliver them from a worsening dilemma.
As you all read this, European elites will be descending on an alpine village in Switzerland for the World Economic Forum. I won’t be there this year (and I suspect there will be fewer Americans than ever). There is bound to be plenty of discussions about balancing between the United States and the People’s Republic. Folks will try to talk themselves into this being a feature, not a bug… but they will be wrong.
3. Chinese buyers interested in unwanted German Volkswagen factories, source says
John O'Donnell and Victoria Waldersee, Reuters, January 16, 2025
Chinese officials and automakers are eyeing German factories slated for closure and are particularly interested in Volkswagen's sites (VOWG_p.DE), opens new tab, a person with knowledge of Chinese government thinking told Reuters.
Buying a factory would allow China to build influence in Germany's prized auto industry, home to some of the oldest and most prestigious car brands, the person said.
Chinese companies have invested across a range of industries in Europe's biggest economy, from telecommunications to robotics, but have yet to set up traditional car manufacturing there despite Mercedes-Benz having two large Chinese shareholders.
Any such move could mark China's most politically sensitive investment yet. VW has long been a symbol of Germany's industrial prowess, now threatened by a global economic slowdown hitting demand and creaking transition to green technologies.
Building cars in Germany for sale in Europe would allow China's EV makers to avoid paying EU tariffs on electric cars imported from China and could pose a further threat to European manufacturers' competitiveness.
4. Marvel Rivals Censorship Explained
Connor O'Keefe, Game Rant, January 9, 2025
Marvel Rivals exploded onto the scene in a big way last month, with more than 20 million active players queuing up as their favorite Marvel heroes and villains. Although the game has yet to complete a full season of gameplay, the early reactions are extremely positive from the community, who’ve been looking for a hero shooter to satisfy the itch that NetEase has managed to scratch. And with the developers seemingly establishing an ambitious hero release schedule, the future is looking very bright for the latest Marvel game.
But despite a better launch than anyone could have hoped for, Marvel Rivals isn’t entirely clear from controversy. Some users, including high-profile streamers such as AsmonGold, have discovered that certain, apparently innocuous words and phrases are banned in the game’s in-game chat; players can type them in and be flagged as inappropriate despite not containing any obviously offensive content. This has left some players very confused as to the meaning behind this seemingly random bout of censorship.
The Censored Phrases in Marvel Rivals
The phrases in question range from real world locations to Disney characters like Winnie the Pooh. The banned phases and words include, but are not necessarily limited to:
· Winnie the Pooh
· Free Taiwan, and other phrases speaking positively of the country
· Free Tibet, and other phrases speaking positively of the country
· Free Hong Kong and other phrases related to the city
· Tiananmen Square
· 1989
· Wuhan Virus
· Mao Zedong
Marvel Rivals Censored Phrases Explained
NetEase, the company responsible for the development of Marvel Rivals, is a Chinese company. As a result of how the Chinese economy works, the government has a lot of control over the products that companies within its borders produce. Meaning that it’s almost a guarantee that these terms, which are almost exclusively related to the governance and geopolitics of China, were banned at the command of Chinese Communist Party (CCP) officials rather than the developers themselves.
China has a well-documented history censoring video games and the censored terms in Marvel Rivals all tie back into topics and concepts that the CCP would actively seek to suppress or otherwise take issue with. The sitting Chinese government does not recognize Taiwan, Tibet, or Hong Kong as their own individual states. Instead, the CCP refers to these locations as special administrative regions of China itself, rather than unique places with their own sovereignty. Similarly, the banned phrase “Wuhan Virus” is in reference to several theories that speculate that the COVID-19 virus originated in Wuhan. The phrase “Tiananmen Square” and year 1989 are used to reference the Tiananmen Square Massacre, wherein the Chinese government deployed the military on pro-democracy demonstrators, killing as many as 200 individuals and injuring as many as 3,000 more.
5. China Suddenly Building Fleet of Special Barges Suitable for Taiwan Landings
H I Sutton, Naval News, January 10, 2025
China is building at least five new special purpose barges which appear tailor made for amphibious assault. The barges may provide the PRC (People's Republic of China) with a unique way to offload large numbers of tanks directly onto Taiwanese roads.
Anyone wondering what an invasion of Taiwan might look like now has a fresh visual clue. Defence analysts watching Chinese shipyards have noticed an increase in a particular type of vessel.
A number of special and unusual barges, at least 3 but likely 5 or more, have been observed in Guangzhou Shipyard in southern China. These have unusually long road bridges extending from their bows. This configuration makes them particularly relevant to any future landing of PRC (People’s Republic of China) forces on Taiwanese islands.
Naval News has seen multiple sources confirming their construction, and has shared information with naval experts to validate our preliminary analysis. The consensus is that these are most likely for amphibious landings.
Unusual Barges Similar To D-Day Mulberry Harbours
Each barge has a very long road span which is extended out from the front. At over 120 meters (393 ft) this can be used to reach a coastal road or hard surface beyond a beach. At the aft end is an open platform which allows other ships to dock and unload. Some of the barges have ‘jack up’ pillars which can be lowered to provide a stable platform even in poor weather. In operation the barge would act as a pier to allow the unloading of trucks and tanks from cargo ships.
The Guangzhou Shipyard International (GSI) on Longxue Island has been a key part in China’s naval expansion. It is particularly associated with construction of unusual vessels including a very large uncrewed surface vessel and a light aircraft carrier.
The barges are reminiscent of the Mulberry Harbours built for the allied invasion of Normandy during World War Two. Like those, these have been built extremely quickly and to novel designs. Although there appears to have been a smaller prototype as early as 2022, the batch of these barges have appeared only recently.
A Possible Indication Of Readiness To Invade?
The construction of specialist barges like this is one of the indicators defense analysts watching to provide early warning of a potential invasion. It is possible that these ships can be explained away as having a civilian role. But the construction of so many, much larger than similar civilian vessels seen before, makes this implausible. There are several distinct designs of these barges which also points away from a commercial order. These vessels are only suited to moving large amounts of heavy equipment ashore in a short period of time. They appear greatly over-spec for civilians uses.
Dr Emma Salisbury, Sea Power Research Fellow at the Council on Geostrategy, told Naval News that “Any invasion of Taiwan from the mainland would require a large number of ships to transport personnel and equipment across the Strait quickly, particularly land assets like armoured vehicles”. These mobile piers appear particularly suited to an invasion. Dr Salisbury continues “As preparation for an invasion, or at least to give China the option as leverage, I would expect to see a build-up of construction of ships that could accomplish this transportation”.
Damien Symon, a respected defence analyst who reviewed material shared, noted their suitability for docking with China’s large fleet of civilian ferries. China’s roll-on/roll-off (RORO) ferries are built to carry military vehicles including heavy main battle tanks. They are exercised in this role regularly.
Dr Salisbury agreed: “China is constructing a huge fleet of dual-use ships – commercial vessels that could be easily requisitioned for military use when needed. These include in particular roll-on/roll-off ships that would be perfect for transporting military vehicles – and have indeed been built with military specs in mind.”
What This Means For Taiwan
The traditional view is that there are only a small number of beaches on the main island of Taiwan which are suitable for amphibious landings. And these could be heavily defended. The PRC could seize fishing villages or a port for larger scale landings. But the view has been that any attempt to take the islands by force would mean landing in predictable places. These new barges change that.
The extreme reach of the Bailey Bridges means that the PRC could land at sites previously considered unsuitable. They can land across rocky, or soft, beaches, delivering the tanks directly to firmer ground or a coastal road. This allows China to pick new landing sites and complicate attempts to organize defences. Instead of relying on Taiwanese ports, China can now sail its own mobile port across the straits.
COMMENT – For those of us with a history of analyzing PRC military modernization and expansion, one of the things we always watched for was whether the PRC was producing ships specifically designed for amphibious operations against Taiwan.
We appear to now have that.
U.S. Trade Representative, January 16, 2025
The U.S. Trade Representative has issued findings in the Section 301 investigation of the People’s Republic of China’s (PRC) targeting the maritime, logistics, and shipbuilding sectors for dominance, concluding that the PRC’s targeted dominance in these sectors is unreasonable and burdens or restricts U.S. commerce, and is therefore “actionable” under Section 301.
“Today, the U.S. ranks 19th in the world in commercial shipbuilding, and we build less than 5 ships each year, while the PRC is building more than 1,700 ships. In 1975, the United States ranked number one, and we were building more than 70 ships a year,” Ambassador Katherine Tai said. “Beijing’s targeted dominance of these sectors undermines fair, market-oriented competition, increases economic security risks, and is the greatest barrier to revitalization of U.S. industries, as well as the communities that rely on them. These findings under Section 301 set the stage for urgent action to invest in America and strengthen our supply chains.”
The determination is supported by a comprehensive report, which is available here.
USTR’s investigation found the PRC’s targeting for dominance unreasonable because it displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition and creates dependencies on the PRC, increasing risk and reducing supply chain resilience. The PRC’s targeting for dominance is also unreasonable because of Beijing’s extraordinary control over its economic actors and these sectors.
USTR further found that PRC targeting for dominance burdens or restricts U.S. commerce by undercutting business opportunities for and investments in the U.S. maritime, logistics, and shipbuilding sectors; restricting competition and choice; creating economic security risks from dependence and vulnerabilities in sectors critical to the functioning of the U.S. economy; and undermining supply chain resilience.
COMMENT – So glad this got issued… under “normal” circumstances, this would be huge news. The Biden Administration initiated a Section 301 investigation against the PRC in a massive industry sector and found that:
“[T]he PRC’s targeting for dominance unreasonable because it displaces foreign firms, deprives market-oriented businesses and their workers of commercial opportunities, and lessens competition and creates dependencies on the PRC, increasing risk and reducing supply chain resilience. The PRC’s targeting for dominance is also unreasonable because of Beijing’s extraordinary control over its economic actors and these sectors.”
This opens up a wealth of Presidential authorities that the next Administration can use against the PRC.
To me this is the most significant action by Katherine Tai and her team… GREAT JOB!
7. China’s Trade Surplus Reaches a Record of Nearly $1 Trillion
Keith Bradsher, New York Times, January 12, 2025
China’s vast exports in 2024 exceeded its imports on a scale seldom seen anywhere except during or immediately after the two world wars.
China announced on Monday that its trade surplus reached almost $1 trillion last year as its exports swamped the globe, while the country’s own businesses and households spent cautiously on imports.
When adjusted for inflation, China’s trade surplus last year far exceeded any in the world in the past century, even those of export powerhouses like Germany, Japan or the United States. Chinese factories are dominating global manufacturing on a scale not experienced by any country since the United States after World War II.
The outpouring of goods from Chinese factories has drawn criticism from an ever-lengthening list of China’s trade partners. Industrialized and developing countries alike have erected tariffs, attempting to slow the tide. In many instances, China has retaliated in kind, bringing the world closer to a trade war that could further destabilize the global economy.
President-elect Donald J. Trump, who will take office next week, has threatened to escalate already aggressive American trade policies aimed at China.
On Monday, China’s General Administration of Customs said the country exported $3.58 trillion worth of goods and services last year, while importing $2.59 trillion. The surplus of $990 billion broke China’s previous record, which was $838 billion in 2022.
Strong exports in December, including some that may have been rushed to the United States before Mr. Trump can take office and start raising tariffs, propelled China to a new single-month record surplus of $104.8 billion.
While China ran a deficit in oil and other natural resources, its trade surplus in manufactured goods represented 10 percent of China’s economy. By comparison, U.S. reliance on trade surpluses in manufactured goods peaked at 6 percent of American output early in World War I, when factories in Europe had mostly stopped exporting and shifted to wartime production.
Many countries seek trade surpluses in manufactured goods because factories create jobs and are important for national security. A trade surplus is the amount by which exports exceed imports.
China’s exports of everything from cars to solar panels have been an economic bonanza for the country. Exports have created millions of jobs not just for factory workers, whose inflation-adjusted wages have about doubled in the past decade, but also for high-earning engineers, designers and research scientists.
At the same time, China’s imports of factory goods have slowed sharply. The country has pursued national self-reliance over the last two decades, most notably through its Made in China 2025 policy, for which Beijing pledged $300 billion to promote advanced manufacturing.
China has gone from importing cars to becoming the world’s largest car exporter, surpassing Japan, South Korea, Mexico and Germany. A Chinese state-owned enterprise has started making single-aisle commercial jetliners, in an attempt to replace Airbus and Boeing jets someday. Chinese companies produce almost all of the world’s solar panels.
COMMENT – This is absurd.
8. Joe Biden signs executive order to speed AI data center construction
Justine Calma, The Verge, January 14, 2025
The Biden administration will make federal land available to construct new AI data centers.
President Biden issued an executive order today aimed at speeding the development of AI data centers in the US.
It directs the Department of Defense (DOD) and Department of Energy (DOE) to lease federal sites to private companies building gigawatt-scale AI data centers and clean power facilities. It also tells federal agencies to “prioritize” and speed up permitting of AI infrastructure. The measure could create “categorial exclusions” to speed environmental review under the National Environmental Protection Act.
Developing new AI tools is an increasingly energy-hungry endeavor. Nevertheless, the Biden administration seems to think it’s worth the risk of further derailing US climate goals and putting additional pressure on already stressed power grids.
“We will not let America be out-built when it comes to the technology that will define the future,” Joe Biden said in a statement today.
Prior to the announcement today — in response to reports that the White House was considering measures to fast track data center development — environmental and consumer advocacy groups as well as Democratic lawmakers had urged the White House to avoid exempting AI from typical permitting procedures and environmental standards.
“We urge you to reconsider any potential executive action that could lead to increased pollution and costs for consumers,” says a letter sent by senators Sheldon Whitehouse (D-RI), Elizabeth Warren (D-MA), Edward Markey (D-MA), Brian Schatz (D-HI), and Peter Welch (D-VT) to the Biden administration on December 17th. “We are the United States of America; there is no doubt that we can win the AI race while accelerating our decarbonization efforts,” it reads.
Electricity demand from data centers has tripled over the past decade, according to estimates published by the Lawrence Berkeley National Laboratory (LBNL) on December 20th. It’s likely to double or triple again by 2028, according to the report. Data centers used about 4.4 percent of US electricity in 2023, which could rise to as much as 12 percent by 2028.
9. Trump Told Advisers He Wants to Visit China as President
Alex Leary, Alexander Ward, and Lingling Wei, Wall Street Journal, January 18, 2025
The possibility of a visit to China comes as Trump has threatened to impose stiff tariffs on Chinese imports.
Authoritarianism
10. Trump, China’s Xi Discuss Trade, TikTok Before Inauguration
Bloomberg, January 17, 2025
US President-elect Donald Trump and Chinese President Xi Jinping discussed trade, TikTok and fentanyl on Friday in a pre-inauguration conversation that could set the tone for relations between the world’s two largest economies and main geopolitical rivals.
“The call was a very good one for both China and the U.S.A.,” Trump wrote in a post to his Truth Social platform. “President Xi and I will do everything possible to make the World more peaceful and safe!”
11. Supreme Court upholds law banning TikTok if it’s not sold by its Chinese parent company
Mark Sherman, Associated Press, January 17, 2025
The Supreme Court on Friday unanimously upheld the federal law banning TikTok beginning Sunday unless it’s sold by its China-based parent company, holding that the risk to national security posed by its ties to China overcomes concerns about limiting speech by the app or its 170 million users in the United States.
A sale does not appear imminent and, although experts have said the app will not disappear from existing users’ phones once the law takes effect on Jan. 19, new users won’t be able to download it and updates won’t be available. That will eventually render the app unworkable, the Justice Department has said in court filings.
The decision came against the backdrop of unusual political agitation by President-elect Donald Trump, who vowed that he could negotiate a solution and the administration of President Joe Biden, which has signaled it won’t enforce the law beginning Sunday, his final full day in office.
12. TikTok ban is upheld by the Supreme Court as time is running out for the popular app
Britney Nguyen, Quartz, January 17, 2025
13. Biden won’t enforce TikTok ban, official says, leaving fate of app to Trump
Zeke Miller, Michelle L. Price, Josh Boak, and Mary Clare Jalonick, Associated Press, January 17, 2025
President Joe Biden won’t enforce a ban on the social media app TikTok that is set to take effect a day before he leaves office on Monday, a U.S. official said Thursday, leaving its fate in the hands of President-elect Donald Trump.
Congress last year, in a law signed by Biden, required that TikTok’s China-based parent company ByteDance divest the company by Jan. 19, a day before the presidential inauguration. The official said the outgoing administration was leaving the implementation of the law — and the potential enforcement of the ban — to Trump.
The official spoke on condition of anonymity in order to discuss internal Biden administration thinking.
Trump, who once called to ban the app, has since pledged to keep it available in the U.S., though his transition team has not said how they intend to accomplish that.
COMMENT – When NBC News first reported this on January 16, I got word that it wasn’t true… but it appears that it was. Particularly as Congressional Democrats came out in support of not enforcing the law even before the unanimous Supreme Court ruling upholding the law.
14. TikTok Poised for Reprieve as Trump Team Pledges Extension
Josh Wingrove, Jenny Leonard, and Alexandra S. Levine, Bloomberg, January 16, 2025
Biden officials see issue as one for next administration Incoming Trump adviser says they will keep app from going dark.
TikTok is poised to win a reprieve from a law that would ban the popular social media app thanks to a holiday weekend and a pledge from President-elect Donald Trump’s incoming administration to give its Chinese owner more time to divest.
Under the law, ByteDance Ltd. is required to find a buyer for TikTok or face a shutdown on Jan. 19, while a president can grant a 90-day extension on that deadline if a serious purchase negotiation is underway. While no such deal is imminent, two current Biden administration officials say that the Sunday deadline — and Martin Luther King Jr. federal holiday on Monday — essentially punts enforcement to the next administration. That opens the door for Trump to extend the deadline.
COMMENT – I suspect TikTok will get the 90-day reprieve… and this whole drama will get drug out.
I also suspect that the ultimate outcome will be that TikTok is sold or banned, as the law requires.
15. Chinese AI Censors Truth, Spreads Propaganda in Push for Global Dominance
American Edge Project, December 21, 2024
16. China Reins In Its Once-Freewheeling Finance Sector with Purges and Pay Cuts
Rebecca Feng and Chun Han Wong, Wall Street Journal, January 13, 2025
17. AI Chip Curbs Trigger Rare Public Fight: Tech Giants vs. China Hawks
Liza Lin and Alexander Ward, Wall Street Journal, January 9, 2025
18. Biden Administration Ignites Firestorm with Rules Governing A.I.’s Global Spread
Ana Swanson and Tripp Mickle, New York Times, January 9, 2025
19. Biden unveils last round of AI chip curbs aimed at China, Russia
Nikki Carvajal and Juliana Liu, CNN, January 13, 2025
20. Biden Toughens China Curbs with AI Order, Smart Car Tech Ban
Josh Wingrove and Mackenzie Hawkins, Bloomberg, January 14, 2025
21. Nvidia CEO Tours China During Beijing Antitrust Probe, AI Curbs
Bloomberg, January 13, 2025
22. PODCAST - AI Diffusion Framework - Emergency Podcast
Gregory C. Allen and H. Andrew Schwartz, CSIS, January 13, 2025
23. UK treasurer Rachel Reeves says London ‘natural home’ for Chinese finance
Hong Kong Free Press, January 11, 2025
24. China slows supply chain shifts by Apple, others as Trump 2.0 looms
Lauly Li, Nikkei Asia, January 14, 2025
25. U.S. to Ban Chinese, Russian Components in Connected Vehicles
Jiahui Huang and Asa Fitch, Wall Street Journal, January 14, 2025
Environmental Harms
26. How do China and America think about the energy transition?
Samantha Gross and Louison Sall, Brookings Institution, January 13, 2025
27. Charged Up: China Driving Thailand’s EV Industry
Nayan Seth, New Security Beat, January 9, 2025
28. China torments and titillates seaborne coal market
Clyde Russell, Reuters, January 14, 2025
Foreign Interference and Coercion
29. University of Michigan to End Joint Institute with Chinese University
The Select Committee on the CCP, January 10, 2025
30. How Trump can break China's tightening grip on Central Asia
Andrew Korybko, Asia Times, January 13, 2025
31. Vietnam Wants U.S. Help at Sea and Chinese Help at Home
Sheena Chestnut Greitens and Isaac B. Kardon, Foreign Policy, January 13, 2025
32. How to Slay a Giant: Reviving the South China Sea Arbitration
Gregory B. Poling, CSIS, January 10, 2025
33. China's Xi to send top-level envoy to Trump's inauguration, FT reports
Reuters, January 9, 2025
Human Rights and Religious Persecution
34. US proposes to increase oversight of ‘de minimis’ exemption for low-value imports
Igor Patrick, South China Morning Post, January 14, 2025
35. In Tibet, Chinese Boarding Schools Reshape the ‘Souls of Children’
Chris Buckley, New York Times, January 9, 2025
36. China Opens ICC to Rebrand Xinjiang
Alex Colville, China Media Project, January 10, 2025
37. U.S. Blocks Imports From 37 More Chinese Companies Over Forced-Labor Concerns
Kimberley Kao, Wall Street Journal, January 15, 2025
38. Chinese rights lawyer Xie Yang ‘won’t bow' despite 3 years of pretrial detention
Chen Zifei, Radio Free Asia, January 13, 2025
39. Uyghur woman sentenced to 17 years for teaching Islam to her kids and a neighbor
Shohret Hoshur, Radio Free Asia, January 10, 2025
Industrial Policies and Economic Espionage
40. China makes inroads in DRAM chips in challenge to Samsung and Micron
Cheng Ting-Fang and Lauly Li, Nikkei Asia, January 15, 2025
41. Beijing-based cyber group protests US sanctions for its alleged role in hacks
Elaine Kurtenbach, ABC News, January 5, 2025
42. China Is Scouring the Globe in Search of New Food Suppliers
Andy Lin, Hallie Gu, Nguyen Xuan Quynh, Helen Nyambura, and Sergio Mendoza
Bloomberg, January 14, 2025
43. Silicon Island: Assessing Taiwan’s Importance to U.S. Economic Growth and Security
William Alan Reinsch and Jack Whitney, CSIS, January 10, 2025
44. China’s Local Governments Settle Overdue Bills with Apartments, Not Cash
Rebecca Feng, Wall Street Journal, January 12, 2025
45. Europe Accuses China of Unfairly Blocking EU Companies
Kim Mackrael, Wall Street Journal, January 14, 2025
46. China Faces Harsh Dilemma as Yuan Comes Under Pressure
Jacky Wong, Wall Street Journal, January 14, 2025
47. China's retail investor sours quickly on stocks
Samuel Shen and Summer Zhen, Reuters, January 13, 2025
48. China’s Hytera Pleads Guilty to U.S. Charge in Motorola Solutions’ Trade Secrets Theft Case
Richard Vanderford, Wall Street Journal, January 14, 2025
49. Country Garden Lost $24.33 Billion in 2023
Jiahui Huang, Wall Street Journal, January 14, 2025
Cyber & Information Technology
50. Tencent Makes Biggest Buyback Since 2006 After US Blacklist
Charlotte Yang, Bloomberg, January 7, 2025
51. Huawei eyes global smartphone comeback with in-house chips
Itsuro Fujino, Nikkei Asia, January 15, 2025
52. Japan courts ASEAN on AI tech to check China's influence
Kiu Sagano, Nikkei Asia, January 15, 2025
53. Foxconn stops sending Chinese workers to India iPhone factories
Selina Cheng and Viola Zhou, Rest of World, January 10, 2025
54. TSMC cuts ties with Singapore firm over chip found in Huawei processor: sources
Che Pan, South China Morning Post, January 10, 2025
55. Exclusive: Chinese tech firm founded by Huawei veterans in the FBI's crosshairs
Alexandra Alper, Reuters, January 16, 2025
56. Biden’s sweeping new AI export controls cover most of the world
Gerrit De Vynck and Eva Dou, Washington Post, January 14, 2025
Military and Security Threats
57. Chinese hackers breached US government office that assesses foreign investments for national security risks
Sean Lyngaas, CNN, January 10, 2025
58. China’s Top Drone Maker Removes Security Features at a Very Weird Time
Faine Greenwood, Foreign Policy, January 15, 2025
59. Japan links Chinese hacker MirrorFace to dozens of cyberattacks targeting security and tech data
Mari Yamaguchi, Associated Press, January 8, 2025
60. Taiwan's spy agency says China is working with gangs, shell companies to gain intelligence on Taiwan
Christopher Bodeen, Associated Press, January 13, 2025
61. Baltic subsea sabotage: China gets away with non-cooperation
Jakub Janda and James Corera, Australian Strategic Policy Institute, December 30, 2024
62. Pentagon Reveals 134 'Chinese Military Companies' Operating in US
Hugh Cameron, Newsweek, January 8, 2025
63. Exclusive—Chinese Patents Reveal Aim to Cut Undersea Cables
Didi Kirsten Tatlow, Newsweek, January 10, 2025
64. VIDEO - Farewell to pacifism: Japan is rearming
DW Documentary, January 11, 2025
65. Handling our cargo: how the People's Republic of China invests strategically in the U.S. maritime industry
The Select Committee on the CCP, September 2024
66. Outgoing FBI director calls China and its cyber program the ‘defining threat of our generation’
Alex Wilson, Star and Stripes, January 13, 2025
67. Biotech Battlefield
Craig Singleton, FDD, January 15, 2025
68. China confirms PLA Navy’s new Type 076 amphibious assault ship will be a drone carrier
Enoch Wong, South China Morning Post, January 13, 2025
69. Chinese cyberattacks on Taiwan government averaged 2.4 mln a day in 2024, report says
Yimou Lee, Reuters, January 5, 2025
One Belt, One Road Strategy
70. What China Wants in Panama: More Trade, Projects and Influence
Vivian Wang, New York Times, January 15, 2025
71. Pakistan poised to tap China capital markets, finance minister says
Kenji Kawase, Nikkei Asia, January 14, 2025
Opinion Pieces
72. An Expert in Grand Strategy Thinks Trump Is on to Something
Thomas P.M. Barnett, Politico, January 16, 2025
Do you want a future in which Canada defects to the EU, Russia rules the Arctic and China runs Latin America? That’s the default outcome of non-action.
Our inbound president Donald Trump generates torrents of diplomatic angst with statements about Canada being America’s “51st state,” the national security logic of buying Greenland from allied Denmark, and snatching back the Panama Canal to counter China’s growing economic footprint throughout our hemisphere. Where is all this expansionist energy coming from? How did Trump’s America First isolationism suddenly morph into an Americas First mergers and acquisition (M&A) strategy?
Let’s be clear on who Trump is: The man does not come with a vision of his own making but with a stunningly effective capacity to sense fear within the ranks and weaponize it for political mobilization.
Americans are scared and angry right now, feeling deeply uncertain about the nation’s trajectory and globalization’s increasingly fierce competitive landscape. We want someone strong and confident to tell us how we can be great again without assuming undue global responsibilities and a return to Boomer-esque Cold War-standoffs with both China and Russia.
A tough needle to thread alright, but Trump’s instincts are correct, and he’s uniquely suited for the task.
There is an only-Nixon-can-go-to-China opportunity here. Nixon shocked the world in 1972 by formally recognizing China’s communist regime. Americans trusted him on that bold, history-bending move because he was the quintessential anti-communist. If Trump, the quintessential isolationist and climate change-denier, negotiates US expansionism across North America (Canada, Greenland), then Americans may well trust his national security logic that we’re in a “Race for the Arctic” with both China and Russia amid rising climate change.
Three key trends animate the globe right now: (a) an East-West decoupling dynamic, (b) a re-regionalization imperative along North-South lines that brings “near-shoring” production close to home markets, and (c) a growing superpower clash animating all these “races” — namely, adapting to climate change, winning the energy transition, achieving AI supremacy, etc.
Trump, love him or loath him, sees just enough of this world and the fear it generates to know the right plan of attack.
Trump’s approach to international affairs reflects Americans’ judgment that we are done building a world order — which we’ve overseen from 1954 to 2008 —and now must vigorously embrace an aggressively competitive approach to this multipolar world; in other words, be less the generous market-maker and more the selfish market-player.
The world’s superpowers (U.S., Europe, Russia, India, China) fear one another more and more. We sense an imperative in this re-regionalization/decoupling era — one that screams get yours now before somebody else does!
Russia evinces that ambition in the nastiest ways (see Georgia, Ukraine). China, presently globalization’s premier integrating power, does so systematically with its Belt and Road Initiative, securing long and critical supply chains across the world through that multi-trillion-dollar infrastructure building scheme. India is just beginning to think and act along such lines, for now instinctively pushing back against China’s efforts to integrate South Asia into its global value chains — in effect, boxing in New Delhi’s ongoing “rise.”
Europe and the U.S., with Trump’s return, seem destined to complete their conscious uncoupling like two self-absorbed celebrities whose career needs no longer jibe. And just as Russia has sought to put the pieces back together of its empire, we now spot the same acquisitive rumblings within Western ranks.
Trump has long argued that Europe and Canada both “owe” America vast sums of money for defending them for decades against the Soviet/Russian threat. He now implies that America deserves Greenland as compensation for that strategic debt, arguing that we’ll do a better job of developing and defending Greenland than tiny Denmark has ever managed.
In seeming reply, the august British newspaper, The Economist, calls for the EU, having just cut a landmark trade deal with South America’s Mercosur bloc, to now vigorously invite Canada into its economic union. If that deal makes sense for the European Union, why doesn’t it make similar sense for America when it comes to Canada and Greenland?
Together with Alaska (which we bought from Imperial Russia in 1867), Greenland and Canada comprise North America’s “crown jewels” when it comes to an Arctic revealed by climate change. The warming Arctic possesses almost one-third of the world’s remaining hydrocarbon (oil, natural gas) reserves, along with prodigious amounts of minerals (nickel, zinc, rare earths) critical to both national security and the energy transition.
Does anybody think Canada and Greenland won’t need serious help in standing up to Russia and China’s aggressive ambitions across that vast and strategically crucial landscape?
Or how about China’s recent emergence as primary trade partner and source of investment throughout South America? The Chinese will be more than happy to beggar our neighbors of energy, minerals, and food while climate change devastates these vulnerable economies in the years ahead, knowing full well that the vast numbers of climate migrants escaping that desperate situation will head to North America — not China.
Humanity now enters a decades-long Zone of Turbulence that I describe in my 2023 book America’s New Map: Restoring Our Global Leadership in an Era of Climate Change and Demographic Collapse. Our world system and its major players are being compelled to evolve at what feels like warp speed.
Just like species are compelled by climate change to evolve at thousands of times normal speed, globalization and its pillars are being similarly stressed by a collision of history-twisting transformations ranging from a birth dearth and rapid aging across the Global North to the drought-driven strangulation of agriculture across the Global South to AI’s profound destruction of job markets just as that Global South seeks to cash-in its demographic dividend and achieve deep integration in global value chains.
Up until now, globalization’s integrating forces have unfolded largely along East-West lines. Now, thanks to climate change, our planet’s lower latitudes (closer to the equator) will suffer extreme environmental devastation and thus economic tumult.
The North can build all the walls it wants, but the logic of North-to-South political integration will prevail, echoing the European Union’s logic in integration of former socialist states following the Cold War — namely, it’s better to pre-emptively integrate than suffer long-term disintegrating dynamics.
And here’s the national security kicker: all that North-to-South integration is really an economic and technological race among the North’s superpowers (U.S., EU, India, Russia, China) to capture the long-term brand loyalty of that emergent global majority middle class concentrated across those very same lower latitudes increasingly tormented by climate change.
That evolution of our world system thus requires a very strong empire-building phase. The Tech Bros recognize it for what it is, as does the Kremlin and the Chinese Communist Party. Now Trump seems increasingly locked onto it as the means to establish his legacy: the real-estate magnate who not only bettered America but biggered it.
This is why we must take all this diplomatic jousting seriously: It’s not just Trump, and it’s not just climate change, and it’s not just the “Race for the Arctic,” and it’s not just North-South demographic disparities, and it’s not just the AI sprint or superpowers competing to lock-in strategic resources.
It’s everything everywhere all at once.
Successful grand strategy is all about flowing with history’s tides instead of swimming against them. That’s how you expand your ranks (more people, more territory, more member-states) while denying such growth to your rivals.
In crass realist terms, this is the world we live in right now — a super-competitive moment. By mid-century, we will all be living in somebody’s slice of our multipolar world.
Washington needs to fully commit to making that future world — or however much of it we can effectively integrate — American in its ethos and rules versus anything else. America remains the kernel code of today’s globalization: our internal rule set of free trade, democratic rule and collective security projected across the world these past eight decades but now encountering firm authoritarian pushback from the likes of China and Russia.
The best way to ensure that future is to re-open these United States to new member-states — the ultimate Trump card in a superpower brand war.
Such ambition and responsibility will define our patriotism this century: We get better by getting bigger, just as we have throughout the vast majority of our history.
However bombastically, Trump points us in the right direction. Ask yourself: Do you want a future in which Canada defects to the EU, Russia rules the Arctic and China runs Latin America? Because that will be the default outcome of our non-action.
This is where Trump’s seemingly absurd ambition punches through our current strategic fog: embracing today’s inconceivable to prevent tomorrow’s inevitable.
That is genuine grand strategy.
But let’s also get more real in our thinking and the terms we offer. Justin Trudeau is right when he says Canada will never become America’s 51st state, but what if it became America’s 51st-through-59th-states? Would that be enough political power and standing for Canadians to choose over admission into the EU? Say, 18 Senate seats and more congressional districts than California’s 52 seats?
That’s a respectful offer.
Greenland holds two seats in Denmark’s 179-member parliament. Does that strike you as more empowering than two seats in the U.S. Senate? How about a $57 billion buy-out package that makes every Greenlander an instant millionaire?
Does Trump have your undivided attention now?
We live in volatile and uncertain times. But it still holds that the best way to predict the future is to create it yourself versus letting others take the lead.
Trump is all about taking the lead in such deal-making. And Trump, perhaps more than any other U.S. political leader out there, recognizes that America’s strategic future will be marked by North-South or hemispheric integration. Trump may discount the ultimate cause of that shift — namely, climate change’s devastation of our planet’s lower latitudes, but he’s already zeroed in on its most disruptive outcome: mass migration from the Global South to the Global North.
America — and Canada, for that matter — can pretend that we can wall ourselves off from that turbulent future, but that is a cruel fantasy. Better to move America’s borders further north and south than to suffer that inescapable pathway — again, the inconceivable pre-empting the inevitable.
Donald Trump may seem as unlikely a messenger from this future as Nixon was during the height of the Cold War (A future global economy dominated by China and America? Are you insane?), but the logic will only grow more formidable over the years.
COMMENT – I think this is a fascinating take on grand strategy.
73. How to sustain scientific collaboration amid worsening US–China relations
Valerie J. Karplus, Lan Xue, M. Granger Morgan, Kebin He, David G. Victor,
and Shuang-Nan Zhang, Nature, January 14, 2025
Researchers need to define ‘safe zones’ for joint work in which the benefits outweigh the political risks. Here’s how.
As the political relationship between the United States and China has frayed, the scientific ties between them have become thinner and more fragile. This is a dangerous trend. Working together, scientific communities in the two nations have the potential to create technologies and ideas that will benefit the world — such as clean-energy innovations and improved drugs. But if these communities are driven further apart, the flow of discoveries will slow, and scientists will be less equipped to respond collectively to crises.
The incoming administration of President Donald Trump is likely to amplify the current bipartisan consensus in the United States to be tough on China. Over the past decade, both Republicans and Democrats have increased tariffs and restrictions on Chinese imports. Last month, after much wrangling, the two countries renewed the US–China Science and Technology Agreement (STA), a framework that supports collaboration between government departments. This is a helpful step, but one that has put a spotlight on the many points of contention between the countries’ political leaders.
To bridge the gaps, scientists must become more politically savvy and active in setting the terms of engagement. US and Chinese researchers must come together to choose and champion ‘safe zones’ for joint work: topics that offer high value from collaboration and minimal sensitivity to geopolitical issues.
Weakening scientific ties
Division need not be a foregone conclusion. For example, during the cold war, while political leaders were banging shoes on desks, science served as a conduit for ideas and understanding. Scientific establishments in the US and Soviet blocs forged many valuable safe zones, such as geology and polar science during the International Geophysical Year in 1957–58. They also founded the International Institute for Applied Systems Analysis, a research institute in Laxenburg, Austria, to foster scientific cooperation (see Nature 575, 257; 2019).
The United States and China also have a history of close collaboration. Since the late 1980s, millions of Chinese graduate and undergraduate students have travelled to the United States, and tens of thousands of US students have studied in China (see ‘US–China collaboration’). The numbers soared in the late 2000s, and the two economies and scientific establishments have become deeply intertwined.
COMMENT – Lesson for anyone analyzing charts… when the Y-axis changes massively, while the X-axis stays the same, something really interesting is happening.
My advice to the scientific community in the United States:
Spend far less time obsessing over cooperation with a hostile authoritarian state and spend far more time trying to build cooperative relationships with other partners in the world.
The decline in Chinese students in the United States has already been replaced by Indian students. Intelligence and curiosity are evenly distributed across the globe, go seek out Indonesian, Colombian, Nigerian, and Kazakh students and research partners, the world would be better if you did.
When scientists demand collaboration with their Chinese counterparts, they strengthen the hold of the Chinese Communist Party over their own scientific enterprise. If scientists were to shun them and seek partners elsewhere, it would put enormous pressure on the Party to loosen its grip.
74. China’s DeepSeek Shows Why Trump’s Trade War Will Be Hard to Win
Tyler Cowen, Bloomberg, January 9, 2025
A promising new model shows that innovations in artificial intelligence don’t necessarily depend on the latest chips.
Breakthroughs in AI are so common these days it is hard to separate the truly important from the merely incidental. But one recent development is worth paying particular attention to: the appearance of DeepSeek-V3, a new large-language model from China. Its significance has as much to do with trade as with technology.
I’ve played around with DeepSeek for several days, and it is one of the best LLMs of the dozens I have used over the last few years. It is fast, easy and has a free version. And while it is not the equal of the best US models for sophisticated or difficult questions, I would rate it in the top tier. That is consistent with the opinions of others, including testers.
There are several other notable things about DeepSeek. First, it comes from a hedge fund rather than a technology company (that said, these categories are probably in need of revision). Second, it was reportedly trained at very low cost, by some estimates only $5.5 million, excluding non-compute costs, as these measures usually do.
And, perhaps most notably, DeepSeek does not make use of the highest-quality semiconductor chips. President Joe Biden’s administration has worked hard to limit the export of those chips to China, for reasons of national security: The US wanted to slow Chinese progress in AI and related military technologies. Without access to the latest chips, DeepSeek had to look for different and cheaper ways to train its model.
I have in the past supported these trade restrictions, as AI technology is a vital matter of national security. But I now think the ban was too ambitious to work. It may have delayed Chinese progress in AI by a few years, but it also induced a major Chinese innovation — namely, DeepSeek.
Now the world knows that a very high-quality AI system can be trained for a relatively small sum of money. That could bring comparable AI systems into realistic purview for nations such as Russia, Iran, Pakistan and others. It is possible to imagine a foreign billionaire initiating a similar program, although personnel would be a constraint. Whatever the dangers of the Chinese system and its potential uses, DeepSeek-inspired offshoots in other nations could be more worrying yet.
Finding cheaper ways to build AI systems was almost certainly going to happen anyway. But consider the tradeoff here: US policy succeeded in hampering China’s ability to deploy high-quality chips in AI systems, with the accompanying national-security benefits, but it also accelerated the development of effective AI systems that do not rely on the highest-quality chips.
It remains to be seen whether that tradeoff will prove to be a favorable one. Not just in the narrow sense — although there are many questions about DeepSeek’s motives, pricing strategy, plans for the future and its relation to the Chinese government that remain unanswered or unanswerable. The tradeoff is uncertain in a larger sense, too.
To paraphrase the Austrian economist Ludwig Mises: Government interventions have important unintended secondary consequences. To see if a policy will work, it is necessary to consider not only its immediate impact but also its second- and third-order effects.
One secondary effect of the chips restriction is that it may encourage some Chinese sources to obtain high-quality chips through third parties in other countries, or to rent time on non-Chinese AI systems that use higher-quality chips. In that case Chinese firms don’t need to buy the chips at all, at least for some purposes. The US is responding with further controls on the sector — but can it really micromanage a global market? I am increasingly skeptical.
As it considers further trade restrictions against China, President-elect Donald Trump’s administration would do well to study the unintentional consequences of its predecessor’s policies. To be sure, there is a national security case for some (not all) of the non-AI trade restrictions. But the first-order effects of any policy are rarely the end of the story.
If the federal government decided to restrict or tax a Chinese good or service sold in the US, for example, China could try to sell the same item by rebranding it through a third party, as many Asian countries are willing to help out. Rule-evading entrepreneurs tend to move more swiftly than bureaucrats.
In the abstract, national-security arguments are compelling. In reality, however, it’s difficult to design policies to protect national security. It’s important to think through ways to help the practice better match the theory.
COMMENT – What Tyler Cowen fails to point out is that the chips that DeepSeek does use are the Nvidia chips that Jensen Huang purposefully designed and manufactured to be just under the technical threshold imposed by the Biden Administration. This is less a story of the failure of export controls and more a story of an American company that seeks to do everything possible to undermine U.S. interests in its blind pursuit of just a little more profit… or perhaps Nvidia’s leadership isn’t aligned with U.S. interests which is a much bigger problem.
The Biden Admin tightened these loopholes a year later, and its actions this week tighten it even more, suggesting that what we’ve seen from DeepSeek will be difficult to replicate.
I wish the Biden Admin had chosen to use its significant enforcement power to demonstrate to Nvidia and others that their behavior was intolerable.
But they didn’t… they gave a series of slaps on the wrist that sent the clear signal to U.S. semiconductor companies (and the rest of the world) that the U.S. Government was NOT serious.
For example, the $500,000 fine the Commerce Department imposed on Global Foundries (the world’s 3rd largest contract chipmaker) at the end of October 2024 for sending 74 shipments (worth $17 million) to an affiliate of SMIC without a license. That’s pocket change for a company that had nearly $7 billion in revenue last year.
Imagine if, in the wake of 9/11 when the U.S. Treasury Department imposed significant sanctions on doing business with terrorists and their financiers, JP Morgan had undertaken company policies to only comply with the letter of the law, all while lobbying on behalf of their terrorist clients to lift the sanctions.
I suspect that the Bush Treasury and Justice Department would have crushed them. We would have seen individuals in handcuffs and company bankrupting fines.
None of that has happened with semiconductor companies… even when they clearly violate the law.
I wish the Biden Administration would have practiced a bit of the old Chinese idiom: Sometimes you have to kill the chicken to scare the monkey.
Instead, they approached enforcement tentatively… and that weakness encouraged companies like Nvidia to aggressively push their products to the limit of the controls the Administration put in place and that is what got us the DeepSeek outcome.
If we want to succeed in our tech war with the PRC, then U.S. companies must be more concerned about the downside risk of undermining U.S. interests… right now, the reverse is true with Jensen Huang in the PRC this week trying to lift the restrictions Beijing has placed on his company (accusations that Nvidia violates the PRC’s anti-monopoly laws).
75. It’s September 2026, and the Pentagon Is Alarmed
David French, New York Times, January 9, 2025
76. Beijing’s Espionage Campaign Against the West
Mike Pompeo, Wall Street Journal, January 12, 2025
77. Trump's bullying diplomacy harks back to Yalta-era world order
Hiroyuki Akita, Nikkei Asia, January 15, 2025
Greenland, Panama proposals show incoming leader's focus on force over norms.
With days to go before his inauguration, U.S. President-elect Donald Trump is already causing alarm with proposals to seize control of Greenland and the Panama Canal, as well as his refusal to rule out the use of military or economic force to do so.
The response from international officials can roughly be divided into two.
The first group sees the remarks merely as a bluff and a way to draw out diplomatic concessions. Even Trump would not truly think he can acquire Greenland, which is a Danish territory, or the Panama Canal, they say.
The second group believes Trump may be serious to some extent -- that Trump considers international relations as a domain for major powers, where smaller countries should simply do what they are told.
It may be best to assume Trump's worldview fits the latter. He has previously signaled his willingness to go over the heads of U.S. allies in order to settle international issues between major global powers.
In terms of the Ukraine war, the Biden administration has coordinated closely on its response with European NATO members. In contrast, Trump is looking to negotiate directly with Russian President Vladimir Putin to end the fighting. He has shown no interest so far in coordinating his position beforehand with European allies.
The same applies to North Korea. Rather than working with Japan and South Korea to contain the situation, Trump seems interested in making a breakthrough through direct talks with North Korean leader Kim Jong Un.
Trump has said he received "beautiful" love letters from Kim while in office. The warm comments are less about any personal affinity Trump feels toward Kim, and more a sign that he sees North Korea's autocratic leader as an important negotiation partner.
Under the United Nations Charter created in the aftermath of World War II, every nation regardless of size is expected to abide by international rules. But Trump sees the world as a jungle governed by power, not ethics or rules. This view, which stems from his career in the cutthroat real estate sector, is not expected to change.
Trump has no interest in shaping the world order. However, he could unintentionally usher in the return of great-power diplomacy like the world saw from the Yalta Conference of 1945. From the creation of the U.N. to the occupation of Germany to determining spheres of influence, events after World War II unfolded largely the way U.S. President Franklin D. Roosevelt, British Prime Minister Winston Churchill and Soviet leader Joseph Stalin had agreed during the meeting.
Trump's aggressive attitude against Denmark and Panama and his disregard for alliances makes sense when considering his interest in Yalta-like great-power dealmaking.
But it is Russian President Vladimir Putin who is most interested in the return of great-power diplomacy. He wants to decide on the future of Ukraine and the power balance in Europe through direct negotiations with Trump, putting the interest of U.S. allies on the back burner.
Concern over Trump's diplomatic style loomed large over the World Policy Conference in the United Arab Emirates in December.
Trump's approach "is the worst-case scenario" for Europe because it could result in "a deal between Putin and Trump that would be at the cost of Europe and Ukrainian security interests," German lawmaker Norbert Roettgen said.
If there is a possibility that Trump will negotiate with the North Korean leader, "we hope that there will be very close consultation with South Korea," said Hur Kyung-wook, South Korea's former vice minister of strategy and finance.
In November, Alex Younger, former head of British intelligence service MI6, also expressed concerns over Trump in a podcast with the Financial Times.
"He's a Yalta man through and through," Younger said. "It's all fundamentally inimical to Britain's interests."
Trump's diplomacy could yield surprising results. But there is an even greater chance that he could create lasting problems.
While Putin and Kim essentially have no term limits, Trump has four years in office. If he rushes for a deal on the Ukraine war or North Korea, he would likely be put at a disadvantage.
U.S.-China ties are another thing to watch. Views on China within Trump's team differ between hawks like Marco Rubio, Trumps choice for secretary of state, wealthy entrepreneurs like Elon Musk, and "America first" devotees like Vice President-elect JD Vance.
It is hard to imagine Musk, who is making big profits in China, taking a hard line against Beijing. While the America First faction is concerned about China, it is reluctant to spend heavily on defense to increase American involvement in Asia.
Trump has chosen to incorporate these varying viewpoints into his incoming administration. By leaving the door open to both hardline and conciliatory policies, he may be trying to keep China on its toes.
While a real estate deal concludes once a contract is signed, diplomacy does not end after one big deal. An impatient Trump could risk failure if he treats the two the same.
COMMENT – I consider Hiro a good friend and always seek him out for a discussion to hear his opinions, but I think he missed THE key point with this OpEd.
These “norms” that he points to, they have evaporated already.
They are gone.
We no longer live in the so-called “rules-based international order” or the RBIO, for short.
The RBIO died of neglect by those who claim they valued it most.
The only countries that seem to cling to this ideal are allies of the United States who have spent the last few decades disarming themselves unilaterally, setting their economies up to depend on the RBIO’s enemies, and refusing to pick up the burden of maintaining a liberal RBIO.
For the past quarter century, Washington begged and pleaded with Ottawa, Tokyo, London, Paris, Berlin, Brussels, Seoul, Rome, and Canberra to step up to the plate and share the burden of maintaining a liberal international system. A system that these rich countries claimed was an absolute prerequisite for their own prosperity and security. This was a system built on rules and norms, which could hold in check (with force, if necessary) the proclivities of those who desire an illiberal international system.
That begging and pleading failed.
I wish it hadn’t failed.
I wish the political, foreign policy, and national security elites in the capitals I mentioned had been able to grasp the seriousness of the situation.
I wish they had been able to connect the dots between the PRC’s economic and industrial rise and Beijing’s desire to create an illiberal international system that would protect the CCP’s regime.
I wish they had been able to connect the dots between Russia’s offer of cheap energy with Moscow’s desire to undermine the coherence of Europe and the stability of its economy: in essence, reverse the outcome of the Cold War.
I wish they had been able to see the Iranian regime as one that was bent on using force and terror to remake the Middle East.
I wish they had been able to realize that illiberal regimes sought nuclear weapons as levers to protect and expand their illiberal regimes.
I wish they would have taken the abysmal human rights records of these illiberal regimes more seriously and refused to enter into economic dependency with states that rejected their values.
I wish they could have had the imagination to conceive of a future where these illiberal regimes teamed up to overturn the RBIO.
I wish they hadn’t deluded themselves into believing that the so-called “Yalta-era” could never return.
Had they done those things, I suspect we would have a very strong RBIO today.
We would be collaborating on reducing CO2 emissions. We would have a functioning and fair international trading system where the rule of law, along with high standards for labor and environmental protection, crossed borders just as easily as people and goods do. Regimes in Tehran, Beijing, Pyongyang, and Moscow would be isolated and divided, or they would have made transitions to more liberal regimes.
Ultimately, the RBIO is dead because folks assumed that someone else would make the investments to maintain it (or, more disturbingly, folks assumed it was self-sustaining and that if they disarmed, others would follow suit). For the leaders in the capitals I mentioned, they assumed for the most part, the United States would do all the heavy lifting, forever. They assumed American taxpayers would forgo their own economic opportunities, so that they could maintain a system that provided economic opportunities to others.
It is a perfect example of the tragedy of the commons.
78. The looming Eurasian menace
Hal Brands, Washington Post, January 9, 2025
79. A China-Taiwan War Would Start an Economic Crisis. America Isn’t Ready.
Eyck Freymann and Hugo Bromley, New York Times, December 31, 2024
80. How (not) to deal with China
Editorial Board, Washington Post, January 13, 2025
81. Trump and Xi Face Off
Walter Russell Mead, Wall Street Journal, January 13, 2025