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The true size of Japan vs the US east coast.

I’m playing everyone’s favorite party game: guess the Trump administration’s strategy. Like most of you, I have no inside information. But that’s what makes it fun. Here’s my best theory. Some assumptions first: 1) They’re not crazy. There is a strategy. It doesn’t align with conventional economic principles. But there’s something they’re playing toward. 2) They’re not stupid. I know enough of the players involved to know they’re not idiots. They may be making what will turn out to be accurately predicted to be horrible decisions, but they do have a plan and it’s coherent. As part of this, while I think they think they can increase U.S. manufacturing, they don’t really believe they can bring everything on-shore. 3) They’re intentionally being opaque as to what the real plan is. Trump fashions himself a negotiator. Holding his cards close to his vest, even lying about what cards he has, is part of the game. 4) They’re not just in it for themselves. I get that this has become non-conventional wisdom, but I am going to assume for this that the goal isn’t merely grift. Even if you believe it is, suggest that’s an easy out to thinking through what may be more complex motivations. 5) China is the real enemy. China has done some things in the last two years that have made even the China doves in the last administration into hawks. Again, I know there’s lots of media saying Trump wants to kiss up to Xi. But, having spent enough time with enough folks in this and the last administration, they really worry about China morning, afternoon, and all night. So with that context, I posit the strategy is entirely: destabilize and ultimately decapitate China. If that’s right, you could just impose tariffs on China. But China has lots of export markets, so goods will just flow out through those. What if instead you impose tariffs on everyone? While China and the U.S. have similar GDPs, China is much more dependent on exports. That means while the countries of the world like cheap Chinese exports, they don’t depend on the Chinese market for their exports (yet). China has actually been on a nationalistic spree recently so foreign brands are more out of favor, meaning they’re an even less interesting market to sell to. The U.S., on the other hand, is the world largest buying market. We are the consumers to the world. If we stop buying, everyone suffers. That means nearly everyone needs to come to the table with the U.S. if there are universal tariffs. The U.S. is also unique in that it is among the only countries that doesn’t need to import anything. Don’t get me wrong, we want to import iPhones and PlayStations and French wine and German cars. But we don’t need oil or food or water or most the other raw materials to make sure people stay alive. So the U.S. will hurt under a high tariff regime but won’t collapse. Some manufacturing will move back on shore. But the biggest thing is every country needs to negotiate with the U.S. What does the U.S. ask for? I’m sure a bunch of nits with every country. But what if the big ask is: it’s us or them. You either trade with the United States, or you trade with China, but trading with both isn’t acceptable anymore. For some countries — Vietnam, Indonesia, Philippines — the promise is to be the next China, but this time under more careful rules dictated by the U.S. For most the rest of the world, they’re already massive net importers from China. Forced to make a choice between selling to China or selling to the U.S. I’d guess most will pick the U.S. German automakers are terrified of BYD. And the Italians and French haven’t proven they can sell wine or cheese to China at any real volume. What’s China’s response? It’s tricky because they’ve preached self-sufficiency and internal focus. But if the whole world order suddenly aligns against them, what do they do? I have no idea if this is the Trump administration’s plan. But it’s the only thing I’ve come up with that passes the sniff test.