How have Trump's tariffs affected American manufacturing?

While tariffs have helped with simple product manufacturing by encouraging relocation within the tariff wall, they have led to deindustrialization for more complex products, increasing costs and causing contraction in the manufacturing sector.

What is the economic outlook for the US economy in the next 12 months?

The outlook involves a difficult choice between high inflation with productivity or high inflation with goods shortages, due to ongoing deindustrialization and the end of globalization.

What are the challenges with onshoring semiconductor manufacturing?

Onshoring semiconductor manufacturing is complex due to the thousands of steps involved. While fabs are important, testing, packaging, design, and logistics are also critical and less developed in the US, making a full onshoring difficult and costly.

Why is the Trump administration's policy-making considered erratic?

The administration reportedly makes major policy changes based on the president's feelings rather than consistent strategy, and lacks cabinet members with deep technical experience, leading to uncertainty in the business community.

What are the issues with US actions concerning Venezuela?

Recent actions against alleged drug smugglers in Venezuela have raised concerns about war crimes and violations of international law, with policy discussions reportedly starting after military actions were taken and without clear congressional briefing.

How has the dynamic of Mexican cartels changed?

The crackdown on the Sinaloa Cartel has led to its fragmentation and the rise of the more violent Jalisco New Generation Cartel, increasing territorial conflict and murder rates in Mexico.

Why has fentanyl become such a significant drug problem?

Fentanyl is easier and faster to produce than cocaine, requiring fewer man-hours, making it a more attractive and dangerous product for illicit drug markets.

We're Witnessing Soviet-Scale Collapse of National Power

Sam Harris

Science & Technology3 min read23 min video

Dec 4, 2025|682,530 views|14,658|3,410

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Key Moments

TL;DR

US national power is collapsing comparably to the Soviet Union due to Trump's policies, deglobalization, and economic instability.

Key Insights

The US is experiencing a national power decline comparable to the Soviet Union's collapse.

Trump's second term policies, particularly tariffs, are de-industrializing the US and leading to higher costs for complex goods.

Deglobalization and supply chain vulnerabilities expose the US to goods shortages alongside inflation.

AI infrastructure development, while a bright spot, is contributing to an unsustainable bubble.

US foreign policy decisions in Venezuela and Mexico are being made chaotically and raise concerns about legality and effectiveness.

Mexico's cartel landscape has shifted from the Sinaloa Cartel to the more violent Jalisco New Generation Cartel, exacerbated by US demand for drugs.

China faces a severe demographic and economic collapse due to its aging and shrinking population.

DEINDUSTRIALIZATION AND THE TARIFF MENACE

Peter Zeihan argues that the current US administration's policies, especially its frequent tariff changes, are causing a form of deindustrialization. While simple manufacturing relocation might occur, complex industries with thousands of supply chain steps face significant cost increases. This leads to a shift away from high-skilled, value-added jobs towards lower-value or automated sectors, as evidenced by falling industrial construction spending.

INFLATION AND GOODS SHORTAGES LOOMING

The combination of deindustrialization and the necessary industrial buildout to counter globalization's end creates a dual threat of inflation and goods shortages. Without a return to building and a different federal policy approach, the US will face a scenario where imports decline while domestic production falters, forcing a choice between high inflation with productivity or high inflation paired with severe shortages.

THE AI BUBBLE AND ITS GLOBAL DEPENDENCE

The rapid buildout of data centers for AI is seen as a bubble, though the long-term AI trajectory remains uncertain. Critically, the advanced chips (GPUs) required for LLMs depend on a fully globalized system. While current buildouts provide necessary power infrastructure, the breakdown of globalization could prevent future GPU production, making existing installations all that will be available.

SEMICONDUCTOR DEPENDENCE AND MISPLACED FOCUS

Zeihan criticizes the focus on semiconductor fabrication plants (fabs) as lower value-added steps. He emphasizes that the more crucial, higher value-added aspects of the semiconductor process in the US are design and logistics. For national security, the focus should be on downstream processes closer to the end consumer rather than capital-intensive fabs, highlighting continued dependence on global supply chains like Taiwan.

CHAOS IN FOREIGN POLICY AND UNPROVEN CLAIMS

The Trump administration's foreign policy is characterized by a lack of a straight line, with major policy shifts driven by personal feelings rather than expert advice. This ambient chaos, illustrated by numerous tariff changes and unbriefed military actions in places like Venezuela, leaves businesses uncertain and investment stalled. The administration's approach to national security and international law, particularly regarding alleged war crimes, is raising significant concerns.

CRISIS IN VENEZUELA AND THE WAR POWERS ACT

While Venezuela has a weak state increasingly involved in drug trafficking, US actions there, including alleged extrajudicial killings, lack transparency and clear congressional authorization. The debate over the War Powers Act is relevant, as administrations often disregard it. However, this is the first time it's been directly challenged over the 30-day threshold, with Congress remaining inactive, leaving the legality of prolonged military actions uncertain.

MEXICO'S CARTEL SHIFT AND FENTANYL'S RISE

The crackdown on the Sinaloa Cartel under the Biden administration inadvertently empowered the more violent Jalisco New Generation Cartel. Their brutal tactics, including targeting local officials, increase violence. This shift, coupled with the demand for narcotics in the US, has facilitated the rise of fentanyl. Due to its ease of production and distribution compared to cocaine, fentanyl presents a persistent challenge that US interdiction efforts struggle to contain.

DEMOGRAPHIC COLLAPSE IN CHINA

China is facing a severe demographic crisis, with its population over 54 potentially exceeding those under 40. This trend is unsustainable for its economic model, leading to predictions of a significant collapse by 2035. The US population also saw its first decline, excluding the Spanish flu pandemic, indicating a worrying demographic trajectory for both global powers.

Mentioned in This Episode

●Supplements

●Products

●Organizations

●Concepts

●People Referenced

Economic and Foreign Policy: Do's and Don'ts

Practical takeaways from this episode

Do This

Focus on downstream manufacturing and high value-added processes for national security.

Invest in industrial plant expansion and power generation to prepare for deglobalization.

Understand that drug problems are demand-driven; focus on reducing demand.

Support congressional action to enforce the War Powers Act and provide clarity on military engagements.

Prepare for a future with potential goods shortages alongside inflation.

Avoid This

Rely on flat tariffs for complex manufacturing, as they increase costs and drive deindustrialization.

Expect policy continuity from an administration prone to frequent changes based on 'feelings'.

Assume onshoring of complex manufacturing like semiconductor fabs is easily achievable.

Engage in extrajudicial killings or actions that violate international law, even against drug smugglers.

Underestimate the long-term demographic and economic challenges facing nations.

Common Questions

Peter Zion's expertise lies in using demography and geopolitics to forecast future trends, particularly for clients in finance, manufacturing, and agriculture.

Topics

Demography National Power Goods Shortage Deindustrialization Cartels Drug Smuggling War Powers Act Mexico Demographic Trends

Mentioned in this video

organizationJalisco New Generation Cartel

The second largest drug trafficking organization in Mexico, characterized by extreme violence and territorial expansion.

organizationMaduro government

Mentioned for potential collaboration in facilitating drug flows through Venezuela.

organizationSeal Team Six

Mentioned as a force Trump has suggested sending to deal with cartels.

conceptWar Powers Act

A US federal law enacted in 1973 intended to check the U.S. president's power to commit the U.S. to an armed conflict without the consent of Congress. It's discussed in relation to recent military actions.

personPeter Zion

The guest on the podcast, who uses demography and geopolitics to forecast the future, especially for clients in finance, manufacturing, and agriculture.

organizationDEA

Mentioned as having an operation that led to the capture of the Sinaloa cartel's chief accountant.

productUSS Ford

A top US supercarrier mentioned in the context of military presence and policy discussions regarding Venezuela.

organizationSinaloa Cartel

Previously the most powerful drug trafficking organization, its leadership has been shattered, leading to fragmentation and increased power of other cartels.

organizationLos Chapitos

Sons of El Chapo who are reportedly running the Sinaloa Cartel organization in a less business-like and more destructive manner.

personEl Chapo

Former leader of the Sinaloa Cartel, whose arrest and prosecution significantly impacted the organization.

personPresident of Honduras

Mentioned in the context of a recent pardon of a former president convicted as a drug smuggler.

countrySoviet Union

organizationArgentina

toolGPUs

organizationMexico