Tariffs and the Corruption State

at the beginning of his time in office. On July thirty first, we finally actually found out what those tarrists are going to look like, and what those troists are going to look like is prisciannen Effectively, what happened is that roughly, if the US runs a trade deficit with you, you get a fifteen percent tariff, and you get a ten percent tariff if we run a trade surplus with you. Now there's a bunch of other individual rates. We'll get to some of them in a second, but it's worth

emphasizing that this doesn't make any sense. So okay, before we get into the structural effects of this, I want to sort of look at what the nominal stated justification for imposing these tariffs are and how they're at odds with each other. And this is the point where we're turn to later. Part of the justification for the tariffs is that, okay, they're trying to use tariffts to replace

the income tax. That's nonsense, it's gibberish. You literally cannot raise enough money through tariffs to replace the income tax. But okay, that's the thing that they want to do. The other nominal justification, and this is what's being used in negotiations and is the thing that is causing individual tariff rates to randomly sort of be jacked up, is that Trump is pissed off that the US runs trade deficits with countries. And again, like this is basically nonsense.

The US pays for things in its own currency. We don't actually need other places currency. It doesn't matter if we run trade deficits. I really hate that Rand Paul is right when he said I run a trade deficit with my grocery store. But like, that's how the American Empire is supposed to work. These people do not care that this is how the American Empire is supposed to work. They have been handed the most sophisticated imperial machinery that

has ever existed in the entirety of human history. And they see numbers on a chart which says we pay them more money than we're getting and they're pissed about it. But again, okay, if that's the state of justification, right, then why are you imposing a terra fund countries? We have a trade serplus two that doesn't make any sense, and the difference between them is only five percent, So

what are we doing here? It's nonsense, like our trade policy is being run by people who don't understand how any of this works and are operating off of, you know, effectively just pure anger and rage. So I'm going to talk about a few of the really really high rates. We're not going to focus on much on the thirty percent South Africa, for example, but oh boy, so Syria is at forty one percent, which is absolutely fucking hideous.

Syria is a country that I don't know anyone who listens to this show is aware of the extent to which Syria has been devastated by the civil war, and this is an incredible blow to their economy. Laus and Me and mar are also being terriffed at forty percent, and we promised in the executive disorder to explain how Trump recognizing the junta. So Joe Biden had refused to

recognize me and Mar's like military coup government. As long time listeners of this show are aware, there is a military coup in in memr There is a large gale revolutionary process attempting to overthrow this government. My co host James Stout and Robert Evans have done a lot of very good reporting on this that you can go find. You should find it. It's some of the best journalism

that I've ever encountered. But the US's official position has been that we don't recognize the coup government because it is, and this is true, a coup government. But Trump just sent the junta a letter of it says you're tariff to forty percent. And the thing about this is the Junta was like, oh shit, hell yeah, Like that means you recognize us, right, because you're sending us official fucking

notices of shit. So you're recognizing US as the legitimate government of mean Mar. And so the Juta is like thrilled by this. There's some evidence of like the US lifting sanctions on them after. It's kind of messy, but yeah, great, somehow in the attempts to sort of just like squeeze every last drop out of all of these countries, we have recognized an incredibly brutal military dictatorship. Hate that back

to the more direct tariff stuff. The tariffs on Laos is also going to be devastating for Laosian economy, which is a lot of the economies in Southeast Asia are pretty heavily export driven, and it's one of the places where a lot of textiles manufacturing takes place. After the sort of increase in labor prices and increase in resistance from the labor movement in China kind of pushed all of that capital down the make Cong River delta. This is going to absolutely fucking suck for everyone in Laos.

And you know, this is something I want to keep emphasizing over and over again that these turf teriffs, people they hurt the most are workers in places like Laos, in places like Syria, right, who are going to just

be absolutely fucking devastated by it. Now, let's also talk Switzerland, which was the other country that had a terriff at like forty percent This one is genuinely really funny, which is that it seems to largely be driven by Trump being pissed off of the trade deficit, which is like compared to like the scale of the US economy, that deficit is like zero dollars. But the funniest part of this is that the trade deficit is largely driven by

gold imports. Now, this is extremely funny because if you know anything about the American Right, you know that a lot of the ways that they did their funding, especially when they were sort of building their operations, a huge source of their funding is getting their followers to buy gold. This was the original Alex Jones grift right. I think he still does it a little bit now. Before he sort of pivoted into supplements, he would partner with like

gold salesmen and like silvia salesman. This and this has always been a huge source of these people's money. Now there's there's been a little bit of decrease in the

prominence of gold as a thing. There's a very good Folding Ideas video about this incredibly bizarre Indrius Elba Weird gold promotion documentary which talks about the ways in which gold has been sort of threatened by bitcoin, and well mostly bitcoin, but it's like cryptocurrency in general is like the scam you're trying to sell all of these sort of weird prepper and like hard lia line quote unquote

sound money libertariany types. But it is very funny that this is in effect a self reinforcing cycle, because the thing about the price of gold is that it is largely determined by how fuck the rest of the economy is. The old people who are trying to sell gold are trying to sell you on the fact that the economy is about to fucking explode. But this is a cyclical effect, right where these terff rates go up and the economy explodes, and so people buy more gold from Switzerland, at which

point are trade balanced with Switzerland gets worse. It works, it worse, so and any other like Swiss watches or another sort of major source of export currency so off, which are again all worn by all these fucking maga grifters with their like fucking ten thousand dollars watches or whatever.

So that one's just funny. Trump has also announced and this has not gone into effect yet, who fucking knows when if it goes into effect, But I think it's worth talking about, which is that Trump has been talking about putting a one hundred percent tariff on semiconductors unless you invest in the US. So Apple sort of in response to this, pledged one hundred million dollars in investment

in the US to build chips. And I think it's also worth looking at the ideological underpinnings of this, because a huge part of this thing is something that you've been seeing increasingly on the right, is this dream of

making domestic iPhones. And if you look at the people in the tech sector, right, the sort of tech billionaires who run all this stuff, they're openly fantasizing about like, oh, these like soft weak liberals are going to be forced to like work in the factories and put iPhones together or whatever. And it's worth emphasizing that this is just not possible, right, And this is true of a significant number of the things that they want these tariffs to do.

They're just not possible results of the policy levers they're pulling. A couple of months ago, I described a sort of similar policy thing to this as like they're they are attempting to scream at the moon in order to control the tides and it's like it doesn't work, it's not the right lever. It literally can't do what you think it's going to you. And it's worth going into why, which is that we can't make iPhones here because we

don't have the migrant labor force to do it. And a lot of you may be thinking, oh, well, the US has a lot of migrant workers. No, you don't understand China, which is where most of these things are built. Even with the terriffs, like a lot of you know, there were some downcycling of plants, that stuff has mostly been upcycled. Again, China has three hundred million migrant workers.

That is almost the entire population of the United States. Right, we are talking about individual plants with two hundred thousand workers. That is the low end estimate. By the way of those numbers, we don't actually have very good numbers on how big some of these fox Con facilities are. The low end estimate is two hundred thousand. Right, and again this is just in time production. So okay, what does that actually mean? Right? This means that the production cycles

work a lot of For example, the way that ups works. Right, We're like, you have a bunch of people who are effectively seasonal or part time workers who only come in when demand increases, so for ups, right, and it's actually a relatively similar schedule to the way it works in China. But it's like there's these massive surges around the holidays

with apples. It's more like September November roughly. But it's in order to like massively be able to ramp up production in time for you know, the sort of like massive holiday increase of orders. Right. But in order to do this, you need to have a production apparatus where you have two hundred thousand workers there, but you can also get rid of most of them and they can support themselves doing other stuff for the rest of the year, and then you have to be able to bring them

back in during peak season. We just do not have the populations to replicate this, right, even if you're trying to replace it with prison labor. The thing about the American prison system is that it's decentralized, right. This is actually a key element of how the US economy is structured. Prisons are one of the sort of three major sources

of jobs in rural areas. The other two are like va March style service jobs, which replaced anything else that was in the economy and the military basis, which is part of why you know, like like this is part of why rural politics of console reactionary because like, okay, so if your options in the economy are soldier, prison guard, service, labor,

you're gonna generate a bunch of unhinged reactionary bullshit. But again, even even though the American prison system has a really high population, these people are really spread out, and iPhone production requires sort of like mass centralization, right, that's the only way to get these things to work. Plus, the workers that you're bringing in have to be skilled enough

to be able to do this shit. And this is a capacity that's built up in China over the course of like of like decades, right, And we don't really have this now that people have tried moving this production into other places like Vietnam, for example, the teriff rates there are also making this extremely difficult. But it's been really really hard to replace. And the other issue, and this is a technological issue, not just a sort of issue of the systemic elements of the population of China.

The infrastructure to build microchips in the US doesn't exist, and it's not just that the infrastructure to build the chips doesn't exist. It's actually way worse than that, and this is why all of the attempts, and the Biden administration has put an enormous amount of money into this. The Chinese government also has put an enormous amount of money spifically into the microchip angle, and none of them

may have been able to do it. And part of it's technological problem, but part of it is that the machines that you need to make the chips don't exist, right, But the machines you need to make the machines that make the chips also don't exist. And the machines you need to make the machines that make the machines that

make the chips also don't exist. We are so far up the supply chain, right, and this is one of the you know, one of the things, the thing that they're trying to do through sort of like pure politics, right through like just like the pure exertion of state power, is to reshape the fundamental structural way that the supply chain work, and the way the supply chain is worked

is by intense specialization in very very very small areas. Right, So Taiwan for example, becomes the only place basically that can manufacture these chips. And that intense specification means that like the machines that make the machines that they that are used to build this thing are only made by like one company in social land, and like machines to make those machines like who the fuck knows where they're built.

And this is a thing where the technology involves become so complicated and the laborers become so specialized that you're dealing with machines that like just straight up not many people in the world know how to use, and not on people in the world know how to create, and so we're so far up the supply chain, right, And this is also if you want to look at like what the impact of these terrists are going to be, right,

because your supply chains are so specialized. You know, you can think of these supply chains as like incredibly complicated machines, right, and any sort of like little rock that you throw into the machine, or do you know, you throw sand into the machine and suddenly the ball bearing doesn't work at quite the right efficiency, and so things just start breaking down across the entire supply chain, and they think that they can just replicate all of this with just

like pure tariffs and like throwing money at it, and no, you can't. These are these are actual structural things of how the economy works. Now, do you know what else is a structural element of how the economy works? Idiot? Is these products and services and the fact that they fund this podcast. Woo, we are so back now. One of the other kind of terriffs I think I've been

calling I guess like defiance tariffs. One of the things that Shop administration has been doing is threatening to impose a fifty percent teriff on anyone who buys oil from Russia. India has been threatened with this. India's current terrif rate is twenty five percent. They're right now threatening with another twenty five percent against in the fifty percent. It's sort of unclear exactly who's going to back down here. More interestingly,

and we've talked a little bit about this, Brazil. There was a fifty percent turf of tariff on Brazil again for refusing to release Bolsonaro, which is very funny because this has managed to piss off the entire sort of political sphere in Brazil to the extent that like Bolsonaro, has had to come out and announce this because Bolsonaro was getting fucking torn to shreds by the Brazilian right for being basically a trader sort of lapdog of the US,

as they're sort of, you know, imposing this direct attack on Brazil through this fifty percent tariff. Right. It's backfire so spectacularly that like Lula, who was floundering, is now writing this incredible wave of sort of anti American Brazilian nationalism from both the left and the right. So Lula, who is who is again in a pretty strong political position because of this, has refused that you direct talk to the US because he was like, absolutely not fuck this.

Here's a quote from Routers. We had already pardoned the US intervention in the nineteen sixty four coup, said Lula, who got his political start as a union leader protesting against the military government that followed a US backed ouster of a democratically elected presidents. Quote. But this is now not a small intervention. It's the president of the United States thinking he can dictate rules for a sovereign country

like Brazil. It's unacceptable. Now. Again, as I said in the ed, there's a lot of things now that are worth looking at here. Right, we have, on the one hand, this direct connection from Lula from you know, the sort of subtle CIA backing of military coup stuff which happens under the table to you know this just like the president of the United States is telling you how to run your country. And that is a subjective shift, even if like the CIA overthrowing your government like has more

of a direct political impact on it. Right. The thing about the thing about the way American power worked was that it was mostly supposed to be under the table, and it's not now. It's just it's just out there in the open. Right. The premise that the US governments, like the president of the United States, should just be able to tell another country what to do is the

fucking premise of American imperialism. And now they're just saying it out loud and noting that it's not like Lula is some kind of like anti American radical, right, Like Lula worked really well in his first term in office, which was w Bush, but again because of the way that the political winds have shifted here, right to the extent that like Bolsonaro has had to condemn an attempt to get him released from prison, which is so funny because he's doing this. He is, he is, he is

pushing very hard. Now there hasn't really been a response yet for Lula's call for organized terror resistance from China and India and bricks. I don't know if there's going to be. It's worth talking a little bit about what bricks actually is here. So bricks stands for Brazil, Russia, India, China, South Africa. It was originally like an asset class designed by some guys at Goldman Sachs who were, you know, trying to like classify the assets of this kind of

like developing economy thing. It was like, you know, you can buy bonds and these things and maybe you can you can classify their asset rates together and has kind of become a political alliance. But you know, there's a lot of people who will attempt to sell you on bricks being this sort of like leftist anti imperial alliance, you know, and as a sort of socialist thing. And like I will simply ask, right, who is doing the socialism here? Right? Is it a butcher of Gujarat? Is

it she quote? We must oppose Welfarerism jimping. Is it, Vladimir, we will show Ukraine true decommunization Putin? Is it the African National Congress of selling your country to Bank of America? Is it the butcher of Haiti?

of countries that absolutely fucking hate each other. It's never been a coherent political project. Lula is trying to turn it into one, but like, I fucking I don't think that's gonna work. So, you know, that's sort of what's been going on on the front to sort of national resistance. But Lula does have you know, a kind of very very large and powerful political force behind him domestically to

resist this. We'll see what happens going forward. It's also worth noting that China has been negotiating with the US and their tariff increases, which are supposed to go into effect, have been delayed for another ninety days. So we're stuck in this holding pattern again. But let's talk about what this means for the economy, right, And I think the very short term answer is that I don't think anyone really knows, right, Like, the actual macro effects of this

are things that we've only just started to see. No one's ever really tried to model this out because there's no reason why it whatever happened, you know, And you're starting to see things behind the scenes, like medical supplies being incredibly difficult to require. You're starting to see a bunch of very very weird items and supply chains become increasingly difficult to find. But again, the supply chains are going to break down in ways that we just don't

really understand. What is going to happen, And what has started to happen is inflation is increasing. I want to sort of again review our kind of inflation theory, right, which is largely derived from our friends as strange matter, sort of supply chain theory of inflation. Their usis of inflation is that, like, it's not set by just supply and demand. It's set by cost plus markup. Because you know, price is not set by like an autonomous thing called the market. Price is set by like a guy with

like a price gun. Right, It's directly set by people. And the way that those people set the price is you know, the cost of acquiring the item, plus and

markup for their profit. Now out, One of the sort of fundamental like insights here is that price is sort of sticky until it isn't, right, which is that like, okay, So the actual thing that controls price is sort of like how pissed off consumers get at price increases, but also comma that is also very very much tied to brand, right, And if you raise your prices and consumers get pissed, you even if you drop them again, that doesn't necessarily mean those people will come back, right, So you know

a lot of times when they when they when there's price increases, companies try to eat it. And that's and that's been what's happening with a lot of these things, right where at each point in the supply chain, people are you know, people are having to sort of pay for the tariff parts, right, and and when someone has to pay for the tariff, they increase their prices that they sell it to the next person in the supply chain. The next person's supply chin increases their prices right now.

So the way that these terraffs play out, right, is that each person in the supply chain is doing costless mark up, but their costs are going up. So your options are either you sell it at the same price and you reduce the amount of markup you're getting, which is reducing the raw profit you're taking in, or you raise your prices. And these things are trying to not raise their prices, and part of this is from direct political pressure, right like Trump has been threatening companies to

not raise their prices from the tariffs. But prices are starting to increase. And as this goes on, and as more and more teriffs come into effect, that this becomes more and more difficult to evade the tariffs. The prices are going to keep increasing because they're driven by these supply chain price increases. So you know cost is going to go up. It is going to have absolutely devastating impacts on workers across the world, primarily not in the US.

But the workers who are in these export oriented economies are going to have to deal with just the absolute horror of large scale economic collapse. You know what, who else hopefully doesn't have to deal with the absolute horror of larger scale economic collapse. It is the products and services to support this podcast. We are back now. The thing I want to close this episode on is not actually a look at the economy, because I think, you know, we kind of don't know exactly what's going to happen

with the economy other than bad. But there is something that I think we can look at that's been broadly ignored or miscovered, which is what these tariffs say about the nature of the state. And I think what's happening is that we're seeing a fundamental change in the way that the state functions from the previous sort of neoliberal regime to this like just really openly fascist one. And I think the most clear example of this isn't necessarily

the terroriffs, so they are a pretty clear example. It's this extremely weird like extortion agreement reached between Trump, AMD and Nvidia. And to read this from CBS quote, US chip makers in Nvidia and AMD will pay the US government fifteen percent of revenue generated by sales of their AI chips in China. A White House official confirmed to CPS News this is just a shakedown, right. You know, this is part of a negotiating process by which originally AMD and and Video are going to be banned for

selling the AI chips to China. And in order to be allowed to sell these ships to China, Trump was like, okay, if you want to do that, give us like thirty percent of your revenue, when they were like, okay, what if we did fifteen percent? Right, this is just a shakedown. And you know it's been described as such all over the press, but they're missing something fundamental here, which is that the state fundamentally is just a shakedown.

embedded into them. Right, it's it's hideous, open corruption. But analysis that looks at the Trumpe administration as corruption of an ideal type, right, that looks at it as the transformation of the state into something that it fundamentally isn't That kind of analysis is just wrong. The state has always and has always only been the localized monopoly on the legitimate use of force. Right, That's all it is.

That's all it's ever been. Everything we know about the state today, right from the legal system to education, to roads, to environmental regulation to the welfare state, are all just functions that were tacked onto the core monopoly on violence, either as part of a carrot and stick gambit to maintain control of population or simply as a concession to popular force. You can just have a state that is a bunch of guys with guns who rule purely by fiat and have control over an area. That is a state.

Everything else that we think of as being part of a state is tacked on, and trump Ism as a political force has simply reverted the state back to a pure mode of extraction. Right, the state is men with guns who take shit from you to pay for those guns. And it becomes breathtakingly clear that this is, you know,

how the state is functioning. Try and Trump administration, because the Trump administration has been slashing benefits while handing tax breaks and giant government contracts worth billions of dollars to the tech elite, and they've been spending tens of billions of dollars, you know, to hand to the men's with guns and to recruit new men with guns for the

mass deportation regime. Right, this is just a pure version of the state as an extraction regime, as a regime that fucking takes money for you a gunpoint to buy more men with guns so it can take more money from you. Trump Ism imagines that you can collect this money to pay for the apparatus of violence and terror from just pure extortion of foreigners in the working class,

you know. And we talked about this a bit at the beginning, right, this is part of why they want to do tariffs, as they think can replace the income tax. You know. The income tax is just like absolutely despised by the extra state elements of the ruling class because rich people hate paying taxes. But there just isn't enough capital to run a state like that with unemploying some kind of like mmts money printing, which is alienated a huge part of from Sosterity coalition because his quote unquote

deficit reduction stuff hasn't actually reduced the deficit. So the people who like really really care about that shit ideologically are pissed. But also on a fundamental level, this is already how most city governments operate, right. They are enormous police budgets extracted at gunpoint, either from the city council directly or directly from the working class, from fees and fines and tickets, like just leveled at working class people directly.

And this is something that is a little different from how previous regimes of neoliberalism has functions, because those previous regimes of neoliberalism did a lot of these same things, but they were run through regimes of debt extraction, right.

It was you know, it was the imf right coming into your country and being like, okay, if you want to pay back these loans that this dictator took out, right, you're going to have to like sell your entire fucking working class into pe andage so that your entire economy is going to be reoriented towards paying this debt back. But again, that was debt extraction, base and finance based. Trumpism wants to take out the middleman and just straight up set give me all your money if you want

to live. But this is not a particularly smart strategy. There's a reason that the state takes on other guises than just a man with a gun asking for your wallet.

by stone. Trumpism too will be torn to the ground by the hands of the people who had thought it could exploit forever this husband It could happen Here.