Trump’s Reagan Moment

During the Soviet era, Western leaders generally accepted the premise that the Soviet Union was going to be an ever-present threat that the West simply had to live with. This threat manifested in the Soviet Union’s efforts to spread its communist ideology in developing countries and its ongoing challenge to the political and economic systems of Europe and the United States.

However, this prevailing mindset shifted when President Ronald Reagan took office. He rejected the idea of accepting the Soviet Union as a permanent fixture on the world stage. Instead, he declared his intention to actively challenge Soviet power and ultimately win the Cold War.

Until President Reagan’s escalation of the Cold War, the US was not fully engaged in an arms race with the Soviet Union or pushing back. The Soviets were dedicating an estimated 25% to 40% of their GDP to defense spending, essentially a one-sided arms race. To challenge the Soviet regime, President Reagan deliberately increased US defense expenditures from 5% to about 7% of GDP. This placed immense strain on the Soviet Unions as their military spending was already stretched to its limit. By 1991, unable to match the increased US spending and facing internal pressures like demographic shifts, the Soviet Union collapsed.

However, while Reagan, Thatcher, and Pope John Paul II were focused on countering the Soviet Union and its communist expansion, another challenge was emerging for the United States: the rise of Japan. At the time, many believed that Japan, with its mercantilist economic policies focused on maximizing exports and minimizing imports, was on track to become the world’s largest economy. This prospect caused considerable concern in the US.

Under President Reagan, the United States faced an unsustainable trade deficit. To address this, a crucial decision was made regarding Japan at the Plaza Accord in September 1985, followed by the Louvre Accord in 1987. These agreements involved the United States, Japan, the United Kingdom, France, and Germany. Essentially, they agreed to devalue the US dollar against their currencies. This aimed to make US exports more competitive and reduce the trade imbalance with Japan.

The need for intervention arose because the US dollar had appreciated by 50% between 1980 and 1985. Initially, President Reagan resisted intervention, believing the strong dollar reflected a healthy economy of his own making. However, Congress pushed for intervention and threatened protectionist legislation, which Reagan opposed. Faced with the prospect of Congress taking matters into their own hands, Reagan agreed to a controlled devaluation of the dollar.

This devaluation, achieved through the Plaza Accord, unfolded over two years, with the dollar depreciating by 25%. The Louvre Accord in 1987 finally stabilized the dollar. While the Plaza Accord successfully reduced the overall US trade deficit and stimulated exports, it failed to significantly shrink the trade deficit with Japan, however many experts believed it caused a financial bubble in Japan, which ultimately saw the demise of Japan’s ambitions to be the largest economy in the world. This outcome highlighted an important lesson: tariffs may be a more effective tool when targeting a specific country to correct trade imbalances, versus currency devaluation.

To be clear, Japan was only stopped by intervention, and they were stopped. China must have an intervention or it will be the top economy soon.

Trump faces two existential threats posed by China:

China’s goal to supplant the United States as the global superpower, similar to Soviet Union: Despite recent overblown economic challenges causing a housing recession and a domestic demand recession, China remains determined to achieve this objective and despite the media commentary, is still on track, purely based on their imports and export growth.
China’s mercantilist trade practices similar to Japan’s: China strategically maximizes exports and minimizes imports to accumulate wealth and gain global influence. This mirrors challenges faced by the Reagan administration with Japan, but with a crucial difference: Japan is a key US ally, while China is a strategic competitor. It is odd the United States tip-toes around real solutions when they are not an ally. China’s exports and trade surplus is still growing by over 100 billion dollars per year, showing that despite the headlines of real estate recession and China’s demographic demise, China is still on track forever be a challenger to the United States as a superpower.

The Summary of Obvious Goals to resolve China:

1 – Military Deterrence:

To counter China’s growing military power, the US must prioritize military deterrence adapted to 21st-century warfare. This involves focusing on quantity as well as quality. The example of Ukraine’s planned production of 4 million drones highlights the potential threat of drone swarms in a conflict with China. It underscores the need for the US to develop effective countermeasures against such tactics.

2 – Countering Chinese Mercantilism:

Learning from the Plaza and Louvre Accords of the 1980s is crucial. While these agreements successfully boosted US exports by devaluing the dollar, they failed to curb Japan’s export dominance. Furthermore, devaluing the dollar now would be problematic due to its status as the petrodollar as well as other key aspects in sovereign wealth funds and foreign treasury holdings, potentially destabilizing economies reliant on dollar-denominated assets. A dollar devaluation is out of the question.

To effectively counter China’s mercantilist practices, it’s vital to understand their strategy:

China’s trade is not free: It is controlled by internal quotas that are not transparent, making it difficult to predict and counter.
China uses trade strategically: It leverages trade to gain favor and influence with some countries while repressing others seen as competitors – see below:
China manipulates data: If China’s wants countries to lower tariffs or not install barriers it claims it is in crisis and on decline, when it clearly is not. China controls the narrative and the narrative they are pushing is that they are in decline and will never be the number 1 superpower.

3- Maintaining the dollar as Reserve Currency

The last key is to maintain the dollar as the reserve currency and the only way to do that is to trade more with more countries and less with China. This will be explained below.

Though this document is quite long at 26 pages, the policy is as simple as possible with all the reasoning below, a summary here:

Understanding China’s Unpublished Strategy and showing obvious reasoning that the USA is not engaged in this Battle

China’s Grooming of Key Strategic Partners

By understanding the multifaceted challenges posed by China and adopting a comprehensive approach, the United States can effectively protect its interests and maintain its global leadership.

It is key to understand China is Cultivating, Conditioning Top Strategic Trading Partners to be future Allies and strategic partners of China.

China employs a strategic approach to trade with different countries, using trade balances to foster specific relationships and achieve geopolitical goals. Here’s an analysis of China’s key trading partners:

Japan: China imported $185 billion from Japan and ran near perfectly balanced trade with China. In other years, Japan has had the surplus. China is signaling to Japan: We want a balanced relationship; we will not abuse you, and you won’t abuse us. We are better friends to you than the United States, as we buy more from you. Let’s be partners and future allies.
South Korea: China imported $200 billion from South Korea and ran a $39.2 billion deficit. China wants a strong relationship with South Korea and is signaling: Don’t side with the United States and we are not a threat to you, please remove US soldiers from your country. Look how great our trade partnership is.
Taiwan: China imported $237.8 billion from Taiwan and had a trade deficit of $156 billion. China is stating: We want reunification. We are giving you billions in surplus per year. Let’s reunify. The best way to get rich in Taiwan is to be a pro-reunification business owner.
Australia: China imported $143.8 billion from Australia and had a deficit of $66.7 billion. To this major US ally, China is stating: Let’s be friends. We are indispensable to you and your economy. In times of conflict, stand down and let the United States go it alone.
Malaysia: China imported $106.6 billion from Malaysia and had a deficit of $10.9 billion. China wants strong relations with Malaysia.
Russia: China imported $114.2 billion from Russia and ran a deficit of $44.1 billion. This relationship is about energy security. China wants Russia as a partner to ensure energy supply by pipeline from Russia, rather than relying on ocean transport, in case of war.
Indonesia: China imported $77.2 billion from Indonesia and ran a deficit of $5.5 billion. This is very fair trade, and with Indonesia being the 4th most populous country in the world, it is clear China wants to state: Don’t choose a side; don’t align in this multipolar world. We aren’t asking you to be our ally; we only ask that you are not anyone’s (the United States’) ally.
Germany: China imported $129 billion from Germany and had a miniscule $9.5 billion surplus. Germany is China’s strategic outpost and partner in Europe, with a very strong relationship and near-balanced trade. This is intentional, to ensure the relationship stays strong and the USA cannot count on Germany in a trade war. Germany will stay on the sidelines.
New Zealand: China imported $13.5 billion, while New Zealand imported $10 billion.
Saudi Arabia: China imported $64 billion worth of goods, while Saudi Arabia imported only $43 billion. While Iran is often considered China’s primary ally in the Middle East, China is strategically expanding its influence throughout the region. This was demonstrated by the Chinese-brokered peace deal between Saudi Arabia and Iran in August 2023 and Saudi Arabia’s invitation to join BRICS. China recognizes Saudi Arabia’s crucial role in the global oil market and its potential to challenge the petrodollar’s dominance. As the United States reduces its reliance on oil imports, its allies must increase their purchases from Saudi Arabia to counter China’s growing influence. China aims to position itself as the leading superpower, and it sees weakening the US-Saudi relationship as a key step towards achieving that goal.
United Arab Emirates (UAE): similar to Saudi Arabia, has a large trade surplus with China. Its authoritarian government aligns with China’s political system, and it recently joined BRICS, further strengthening ties with China.
Qatar, with its massive trade surplus, has positioned itself as an international power broker. China is actively cultivating a strong relationship with Qatar, aiming to leverage its influence to potentially challenge the petrodollar’s dominance in the future.
Canada: China imported about $44 billion worth of goods from Canada, while exporting $45 billion to the country. This balanced trade relationship is not surprising, given Canada’s abundance of natural resources and its stable economy. However, Canada’s presence on this list of China’s close trading partners might seem unexpected. The reason for this close relationship is likely strategic: China needs Canada to act as a moderating influence on the United States, advocating against sanctions and tariffs, even as China engages in aggressive actions like the potential invasion of Taiwan.
France: France: In 2022, China imported $37 billion worth of goods from France, while France imported $45 billion from China. This trade relationship is notable because, in recent years, French President Macron has expressed hesitancy about supporting Taiwan against potential Chinese aggression. China likely sees France as a key partner in Europe and aims to cultivate stronger ties. It’s anticipated that China will run a trade deficit with France in the coming years, especially given Macron’s stance on Taiwan.
Brazil: China imported $122 billion from Brazil and ran a deficit of $44.1 billion. Brazil is China’s base and strategic geopolitical ally in South America. The USA can no longer count on Brazil, Brazil won’t admit it if asked, as the PT ruling regime has been indoctrinated to see China as the solution, replacing the United States. China runs a massive deficit with Brazil to say: “We are with you; you don’t need the United States anymore; we are your real partner in the world.” China is going all out to make Brazil a major strategic trade partner and geopolitical ally. They are doing this by significantly increasing focused trade and purchases, as we can see in the past few years:

2024: $130 billion

2023: $122 billion

2022: $105.9 billion

2021: $53.46 billion

2020: $67.79 billion

2019: $63.36 billion

2018: $36.7 billion

2017: $29 billion

This is no coincidence with Brazil. China realized in 2021 they could unhook Brazil from its alliances with the United States, and they went all in. It is not too late or hard for the United States to counter this; they need to accept the problem and deal with it and enhance the relationship with trade. We analyzed every other trading partner, and only Russia saw a large multi-fold uptick. However, Brazil’s increase was much larger, by 400%.

China employs an incredible strategic geopolitical trading practice by partnering with the largest economies in each region or the largest populated countries of the future in each region. Two prime examples are Indonesia and Brazil, both large and populous countries strategically located in key areas of the world. With Brazil as an ally in South America and Indonesia as a strong partner in Southeast Asia, China gains significant long-term strategic advantages, enhancing its ability to project power globally.

Voting with Ones Wallet

It’s naive to believe that China doesn’t exert significant influence over US allies like Japan, South Korea, and Australia. China is a crucial trading partner for these countries, accounting for over 26% of Japan’s total exports, for example.

No one in Japan wants to jeopardize their economic relationship with China over a dispute with Taiwan. To put this into perspective, consider that in 2021, the entire European Union exported only 88 billion euros worth of goods to Russia. While this is a substantial amount, it pales in comparison to the scale of trade between China and countries like Japan and South Korea.

This highlights China’s strategic use of economic leverage to influence the political decisions of its trading partners.

China’s Trade Relationships with Strategic Manufacturing Competitors

China’s trade relationships with key manufacturing competitors and potential regional powers, reveal a clear strategy of suppression:

United States: In 2022, China imported $164.2 billion from the US and ran a surplus of $362.2 billion. This accounts for 36% of the entire US trade deficit. As a mercantilist power, China minimizes imports from its primary competitor. The United States is both a manufacturing powerhouse and the dominant superpower, making it essential for China to maximize its trade surplus.
India: Despite current challenges, India is an emerging superpower and a potential future rival to China. China actively suppresses India’s manufacturing growth by minimizing imports. In 2022, China imported only $17.7 billion from India while India imported $118 billion from China, resulting in a $100 billion surplus for China. A strategic approach for the United States would be to encourage India to raise trade barriers against China to counter this imbalance.
Mexico: China views Mexico as both a back door into the US market and a strategic manufacturing competitor. This creates a complex relationship. In 2022, Mexico exported approximately $14 billion to China while importing $114 billion, highlighting another unbalanced trade relationship of epic proportions.
Turkey: Similar to Mexico’s position relative to the US, Turkey represents a potential “Mexico of Europe” and a major counter weight to Iran. Turkey imported $43 billion from China, while China imported only $3.58 billion from Turkey, one of the most abusive trade relations in the world. With existing geopolitical influence in the region through Russia and Iran, China aims to prevent Turkey from emerging as a major manufacturing competitor or as an economic superpower counterweight to Iran and Russia. Iran and Turkey both are vying for influence in the middle east, and China is cultivating Iran in one corner. The concept is clear: The more China trades with Turkey, the more China undermines its strategic partner Iran, and the more Turkey is built up as a manufacturing power to provide more products to Europe that compete directly with China. China has chosen to not buy almost anything from Turkey.

These examples demonstrate China’s strategic use of trade to suppress potential rivals and maintain its manufacturing dominance.

A key characteristic of China’s trade relationships with strategic competitors is the stark imbalance between imports and exports. China deliberately minimizes imports from countries like the United States that could challenge its manufacturing dominance.

China’s Eggs in many Basket’s trade Strategy

China strategically diversifies its import sources to cultivate influence and secure resources. While its top 10 import partners account for 50% of its total imports, the US relies heavily on its top three import partners for 56% of its imports. This contrast highlights China’s deliberate focus on building strong ties with several countries, specifically large, developing nations such as Brazil and Indonesia. This approach positions China for greater economic and geopolitical influence in the future.

The United States should focus on spreading trade out to many different countries instead of focusing in Canada, China, and Mexico. The United States can’t simply come up with new demand for $350 billion, and it is not so easy to not trade with Mexico, however the United States has only one solution to counter China’s trading alliances, and that is to not trade with China and focus that $350 billion on countries we can count on.

Challenges to US Dollar Dominance

The US dollar’s global dominance faces three critical challenges:

1. Dollar Scarcity:

Many countries, particularly those with trade deficits, struggle to acquire sufficient dollars to finance imports. This scarcity forces them to print domestic currency, leading to inflation and economic instability. Examples include Argentina, Sri Lanka, Egypt, Tunisia, Zambia, and Pakistan. These countries often have lower wages than China, but because China directly competes with their manufacturing sectors they can’t compete, they are compelled to accept the Yuan for trade due to dollar scarcity. This represents a subtle strategy by China to displace the dollar’s dominance by undermining manufacturing in otherwise competitive countries.

2. BRICS Currency:

The BRICS nations (Brazil, Russia, India, China, and South Africa) are developing an alternative international banking system to counter Western institutions like SWIFT. This initiative aims to reduce the impact of US sanctions and provide countries with an alternative to the dollar-dominated system. This system needs to be fully operational before China can invade Taiwan without fear of crippling financial repercussions.

3. Taiwan as it relates to dollar’s decline:

A potential Chinese invasion of Taiwan poses a significant threat to the US dollar. Unlike Russia, China has a massive $2.6 trillion annual import market. If the US imposes sanctions on China:

a. Impact on Allies and Sanctions: Countries exporting to China, including key allies like Germany, Japan, South Korea, and Australia, may switch to the BRICS banking system to avoid disruptions if the United States sanctions China’s use of SWIFT . This would neuter the use of financial sanctions against China, potentially backfiring on the United States and crippling both SWIFT and the US dollar as a reserve currency as if everyone switches to BRICS banking system, then the dollar system is only used when countries buy and sell from the USA.

b. Military Intervention Risks: Direct US military intervention carries high risks. China’s vast arsenal of millions inexpensive drones and missiles could create a no-fly/no-navigate zone, potentially overwhelming US forces and undermining US credibility. This scenario could solidify China’s position as the leading superpower. A negotiated solution with China may be preferable to avoid a costly and potentially disastrous conflict.

c. Limited Allied Support: Limited support from allies like Japan, who have indicated they will only intervene if their own territory is attacked, further complicates the situation. The US cannot count on widespread support for intervention in China’s invasion of Taiwan.

China’s Preparedness and USA’s Military Deterrence:

China has been actively preparing for a potential Taiwan invasion since 2015, while the US response has been less focused. I was shocked to recently learn Ukraine plans to produce 4 million drones in 2025. If Ukraine a country not known for manufacturing is producing millions. China may aim for 50 to 100 million inexpensive drones to overwhelm Taiwan’s defenses. Taiwan’s limited missile defense systems are vulnerable to saturation attacks by drone swarms. The US likely lacks sufficient drone defenses to counter such a strategy.

Iran’s recent attacks on Isreal shows that when Iran sent 180 missiles toward Isreal, they could not breach most of the defensive system. The fact is China sees this, they are not blind and realize that any invasion will requires millions of drones flying all at once to Taiwan to destroy every gas station, government building, military base, and defensive position.

Conclusion to the problems:

These challenges highlight the potential vulnerabilities of the US dollar and the need for proactive measures to maintain its global standing. The US must address dollar scarcity, counter the emergence of alternative financial systems, and carefully consider its options regarding Taiwan to avoid jeopardizing its economic and geopolitical leadership. (I.e. work toward peaceful unification and a Grand Bargain).

The Solution for Strategic Deterrence:

Addressing China’s Trade Imbalance and Mercantilism

Goal: Counteract China’s rapidly growing trade surplus, which was $415 billion in 2019 and is projected to hit $1.06 trillion in 2024. This trend poses a serious threat to US economic and geopolitical leadership. Trade is how China’s achieves world domination, not their domestic malaise. As long as Trade is booming, China is becoming wealthier and countering the USA on the world stage.

The USA does not want to be purchasing 450 billion dollars from China per year in 2027 if China launches an invasion of Taiwan, the United States must prepare over the next two years to rectify new supply chains away from China.

Proposed Solution: A Multi-Year Tariff Strategy is the Only Way to Counter China.

This strategy aims to incentivize China to adopt fairer trade practices and reduce its trade surplus with the US.

Phase One: Initial Tariffs

Impose a non-flexible 15% tariff on all imports from China to the United States. This tariff should be implemented within three months. This is a zero exemption Tarriff.
Impose a non-flexible 60% tariff on all imports from China that have immediate alternative country supply chains.
Impose a 7.5% tariff on all products imported from any country containing Chinese-manufactured components, sub-assemblies, supply chain elements, or software. This is to rid China using 3^rd party countries as a back door into the US market.

Tariffs for a Strategic Re-alignment

To prevent China from offsetting the tariffs by devaluing its currency, tariffs will be adjusted quarterly to compensate for any currency fluctuations (devaluation).
On January 1st of each subsequent year, tariffs will double:

Year 1: 15% on direct imports from China, 7.5% on all goods with Chinese components.
Year 2: 30% on direct imports from China, 15% on all goods with Chinese components.
Year 3: 60% on direct imports from China, 30% on all goods with Chinese components.
Year 4: 120% on direct imports from China, 60% on all goods with Chinese components.

Tariff Termination:

These tariffs will continue to increase until the trade balance between the United States and China reaches a 1-to-1 ratio. This is the negotiation.
Once a 1-to-1 trade relationship is achieved the tariffs freeze and are assessed and set to a value that maintains the 1 to 1 ration.
There will be no negotiations with China regarding these tariffs. They will remain in effect until success is reached. The negotiation is markets adjusting to Tariffs.
If components continue to enter the United States from China, the tariffs on those components from other countries may increase, even if the tariffs on finished goods remain unchanged. No components will sneak through back doors to the United States.
Future presidents retain the authority to further increase tariffs until the desired trade balance is achieved.
If China raises its tariffs against the United States, it will hinder this program’s ability to achieve a 1-to-1 trade balance. Therefore, it is prudent for China to increase its purchases from the United States each year to avoid the Year 3 and Year 4 tariffs, which would make business very difficult.

Additional Tariffs:

100% tariff immediately on goods/products made in China, that can be found in other countries – mostly commodities, steel, aluminum.
Implement a 7.5% tariff on all vehicles imported to the USA from the following Countries: on Germany, Japan, South Korea, United Kingdom, Slovakia, Italy, Sweden, Belgium, Austria, Hungary, South Africa, Argentina and Netherlands
Impose a 100% tariff on vehicles imported from all other countries not listed above, countries the United States has never imported vehicles from.
Increase the existing truck tariff from 25% to 50%.

Prevention of China’s Counter Attacks of US Tariffs – the Deterrent:

To discourage China from manipulating its currency, and countering the tariffs, tariffs increase quarterly if the yuan weakens or China responds with Tariff’s aginst the United States.

Here’s how it works:

Initial Tariff: A starting tariff rate (e.g., 15%) is applied to Chinese imports.
Tariff Increases: If China devalues its currency (e.g., by 10%), this tariff rate increases (e.g., to 25%).
Penalty for Manipulation: the tariff rate will double the following January (e.g., from 25% to 50%). If China had not devalued its currency, the tariff would have increased at a lower rate (e.g., from 15% to 30%). This compounding effect will result in zero Yuan devaluation.
Technology: If China Reduces Purchases of US Products to Zero, then China is restricted against having any and all US technology. If China tries to crash the dollar by dumping treasuries, then a full technology Ban goes into affect.

China may use this opportunity to buy nothing from the United States, in a race to the bottom. However, the United States should seek balanced, 1-to-1 trade. Cutting China off from all technology would incentivize China to accept 1-to-1 trade, preventing retaliation.

One example of what would end is the Comac C919, China’s homegrown single-aisle domestic airplane. It relies on US companies, and without that technology, it will not be feasible.

Why this is effective and China’s Dollar Reserves:

This system incentivizes China to maintain a stable yuan. To avoid higher tariffs, China would need to:

Sell a massive amount of its dollar reserves to buy Yuan to prop it up in the event of natural weakening.
Buy its own currency, the yuan using dollars. Each Yuan it buys it puts dollars into the open market.

Reports estimate these dollar reserves to be between $6 and $12 trillion. Selling a significant portion would help stabilize the yuan and avoid triggering higher tariffs.

Currently, China is selling yuan and buying dollars, weakening the yuan and accumulating even larger dollar reserves. This strategy prepares them for potential future tariffs but could backfire if those tariffs are tied to currency devaluation.

Conclusion:

Is it not too much to ask for balanced trade?

This reasonable tariff strategy aims to compel China to adopt fairer trade practices, reduce its trade surplus, and level the playing field for US businesses. By taking decisive action now, the United States can protect its economic interests and prevent a rise of China with the sole purpose of undermining the United States.

If China is placed in check, using this strategy, it is absolutely certain of two things; The CCP finds an early demise, or the CCP starts following the rules based world order.

Wavering US Allies in time of conflict

It’s crucial to understand that key US allies and trading partners (Germany, Indonesia, Japan, South Korea, Malaysia, Brazil, Australia, Vietnam, and Taiwan) are unlikely to join the US in imposing tariffs on China, right now, they will not join any Trump plan. They prioritize their balanced and beneficial trade relationships with China. China is actively reinforcing these relationships through diplomatic efforts, emphasizing shared interests and the pursuit of world peace.

The only way to break countries free is to alter the dynamics of international trade.

The US Stands Alone

This means the US cannot rely on a collaborative approach, like the Plaza Accord or the Louvre Accord, to address the trade imbalance with China. The US is essentially acting alone in this endeavor.

Targeting Chinese Components is the Only Way to Indirectly Force US Allies, Friends and Partner to be on Board

The most effective solution is to impose tariffs on any product containing Chinese components, regardless of the country of origin. This strategy directly targets China’s mercantilist practices, creates an unofficial private market tariff against China and has several implications:

Deterring Retaliatory Tariffs: By focusing on Chinese components rather than entire products, the US minimizes the incentive for other countries to impose counter-tariffs. The message is clear: the US is not targeting their products, only the Chinese components within them. Thus remove the components from China and have no Tariff.
Since Chinese components are prevalent in global manufacturing (estimated at 28%), this strategy can trigger a significant shift in production. Manufacturing segments currently in China would likely relocate to other countries rapidly, including the US. For example, cars made in Germany with Chinese components will likely eliminate those components and avoid the 15% year 2 tariff. This strategy could also encourage manufacturers to shift more production to their US factories.

Example: Automotive Industry

Consider the European automotive industry, which produces 16.4 million cars annually. Most of the radios in these cars are currently made in China. This represents over $3.5 billion worth of Chinese radio exports. With tariffs on finished products containing Chinese components, these radios would likely be sourced from Mexico or Malaysia. Even if only a small percentage of a car model (e.g., a BMW) is exported to the US, the presence of a Chinese-made radio would make the entire vehicle subject to tariffs. This incentivizes manufacturers to shift their supply chains away from China.

Because the United States will require higher domestic content for cars imported from Mexico each year (when the USMCA is renegotiated in 2026), it makes sense to manufacture all car radios in Mexico.

Addressing Concerns

If European countries express concerns or want to retaliate, how could they? the US response is straightforward: there are no tariffs on their products, and they have unrestricted access to the US market for Chinese products (besides automobiles 5% tariff increase). The tariffs only target Chinese components.

Impact on Global Supply Chains

The focus on Chinese components will compel companies worldwide to reconfigure their supply chains, reducing their reliance on China.

Vietnam: A Case in Point

Vietnam, heavily reliant on Chinese components in its manufacturing sector, will be particularly affected. This approach eliminates the need for targeted tariffs against specific countries like Vietnam.

As Vietnamese products transition to new supply chains, many will initially face tariffs of up to 15% during the first two years, leading to a significant decline in Vietnam’s trade with the United States.

There is simply no reason for the United States to target many countries, when only one country wants to knock the United States off its thrown.

United States needs to Expand the Coalition

To effectively counter China’s economic dominance, the United States needs to build a coalition of partners. India, Turkey, and Mexico are prime candidates. These countries share a common interest in promoting fair trade practices and reducing their reliance on Chinese imports.

Why these partners?

Limited Chinese leverage: China has minimal trade with India, Mexico and Turkey due to strategic trade repression, limiting its ability to retaliate against them with tariffs or other economic measures.
Potential for strategic partnership: The US could offer these countries a strategic trade partnership, potentially forming an alliance called MITU (Turkey, India, Mexico, United States), to incentivize their cooperation.

Increased market influence: These countries represent a combined $1.5 trillion in annual imports (excluding US imports). Reducing Chinese components in these markets would significantly disrupt China’s export dominance.
Weakening China’s position: If these three countries remove China from their supply Chain, this greatly re-writes the trade for the world. Mexico will certainly already do this when the USMCA is renegotiated.

The strategy: This removes China supply chain from future and current manufacturing powerhouses of MITU countries is key to countering China in the world.

By removing China from the MITU country supply chain, provides all countries in the world alternative supply chains to China.

Reserve Currency Solution

Plan to Solidify the Dollar’s Dominance

This plan aims to solidify the US dollar’s position as the leading international reserve currency for the next century.

Diversifying US Trade

The US needs to expand trade relationships with Southeast Asia, Latin America, and Africa to increase the circulation of the dollar. This strategy offers two main advantages:

Increased Dollar Usage: By trading with a wider range of countries, the US dollar will be used more broadly in international transactions, leading to greater demand and accumulation of dollar reserves by those nations. The more sovereign wealth funds the more the dollar becomes a permanent fixture reserve currency.
Reciprocal Trade: These countries, in turn, are likely to increase their imports of US goods and services, fostering mutually beneficial trade relationships.

To achieve this, the US must prioritize trade agreements and economic partnerships with strategically important countries in these regions.

Prioritizing Trade Partners to expand dollar circulation: A Tiered Approach

To solidify its position as a leading global trading power, the United States will implement a tiered system to prioritize trade relationships with key economies. This initiative will focus on significantly increasing imports from specific countries, particularly as the US reduces its reliance on Chinese imports. The Department of Commerce and the Export-Import Bank will play a crucial role in facilitating this shift.

Tier 1 Priority Countries for USA to Increase Manufactured Imports

The US aims to increase imports from the following countries over the next four years (compared to 2023 levels):

Malaysia: $50 billion
Brazil: $50 billion – subject to quiting BRICS
Indonesia: $40 billion
Argentina: $40 billion
Peru: $15 billion
Philippines: $10 billion
India: $10 billion – subject to quiting BRICS
Australia: $10 billion
Egypt: $5 billion
Turkey: $10 billion
Colombia: $5 billion
Pakistan: $3 billion
Panama: $2 billion
Laos: $4 billion
Thailand: $4 billion
Sri Lanka: $1 billion
Bolivia: $1 billion
Uruguay: $1 billion
Cambodia: $1 billion
Central America: $8 billion

These are the allies the United States wants to Out-Trade China.

This represents a total increase of $270 billion in imports over four years, a reasonable and achievable target, especially when mos tof these countries have competative wages or lower wages than China.

Tier 2: Expanding Trade with Africa

The United States will increase trade with the following African countries by a total of $10 billion annually:

Libya
Equatorial Guinea
Mozambique
Sierra Leone
Cameroon
Namibia
Tanzania
Eritrea
Niger
Benin
South Sudan
Togo
Burkina Faso
Djibouti
Mali
Rwanda
Gambia
Central African Republic
Burundi
Somalia
Sao Tome and Principe

In these countries, China currently holds a slight edge as the primary trading partner, exceeding US trade by approximately $7 billion. However, there is significant potential for the US to expand its trade relationships in this region.

Even a minor increase in trade volume would position the US as a leading trading partner. Therefore, a targeted increase of $10 billion per year across these countries presents a strategic opportunity to strengthen economic ties and increase US influence in Africa.

Right now when the United Nations Votes, the USA doesn’t have enough reliable allies and partners. It is time to shore up countries the United States may need in the future.

Tier 3: Maintaining Existing Trade Relationships – Laissez-faire relationship

For the remaining 100+ countries not included in Tier 1 and Tier 2, the US will focus on maintaining existing trade levels. The goal is to preserve stable trade relationships without significant increases or decreases in trade volume.

While the US reduces imports from China, some Tier 3 countries may experience increased trade with the US organically. However, the strategy for Tier 3 focuses on stability rather than expansion. The Department of Commerce and the Export-Import Bank will not prioritize these countries for additional support or incentives.

Tier 3 Countries already have strong trade relationships and in many cases the United States is a larger importer from these countries than China.

Most of these countries the United States is already a larger importer than China is.

Tier 4: Strategically Restricting Trade Growth with Mexico

While Mexico is a close economic ally and important trade partner, the US needs to diversify its import sources to maintain the dollar’s strength as a global reserve currency. Over-reliance on any single country, even a friendly one, could undermine the dollar’s dominance. Therefore, the US will implement a strategy to strategically manage trade growth with Mexico by creating wage growth.

Addressing the “Mexico as the Next China” Concern

In 2023, the US imported approximately $480 billion worth of goods from Mexico. This level of trade concentration poses a potential risk to the dollar’s global standing. To mitigate this, the US will focus on expanding Mexico’s manufacturing sector and increasing domestic production.

Leveraging the USMCA Review in 2026

The upcoming review of the United States-Mexico-Canada Agreement (USMCA) in 2026 presents an opportunity to rebalance the trade relationship with Mexico. The following measures will be prioritized:

Increasing North American Content Requirements for vehicles: The USMCA currently requires 75% North American content for duty-free automotive imports. This will be revised to 90% to 100% North American, 0% to 5% CAFTA-DR content, 0% to 5% from other countries (excluding China).
All other non-automotive Products made in Mexico that are imported to the USA: will be revised to 90% to 100% North American, 0% to 5% CAFTA-DR content, 0% to 5% from other countries (excluding China).
Strengthening Tariff Enforcement: The current 2.5% tariff on non-compliant vehicles will be increased to 7.5% for Germany, Japan, South Korea, United Kingdom, Slovakia, Italy, Sweden, Belgium, Austria, Hungary, South Africa, Argentina and Netherlands to encourage greater North American production.
Promoting North American Auto Manufacturing: A 100% tariff will be imposed on finished vehicles imported from countries other than Germany, Japan, South Korea, United Kingdom, Slovakia, Italy, Sweden, Belgium, Austria, Hungary, South Africa, Argentina and Netherlands. This will incentivize the establishment of new auto factories in North America to access the US market.
Increasing Truck Tariffs: The existing 25% tariff on imported trucks will be raised to 50%.
Aligning with Canada on Electric Vehicle Tariffs: Mexico will be required to adopt Canada’s 100% tariff on Chinese electric vehicles as part of the USMCA. These vehicles directly compete with Mexican made vehicles.

By increasing the required percentage of North American-made components in goods imported from Mexico, the US aims to achieve the following:

Reduce the Trade Deficit: Shifting production of components from other countries to be made exclusively in Mexico.
Increase Wages in Mexico: Increased demand for Mexican-made components will create more jobs and drive-up wages. This will improve living standards and potentially reduce illegal immigration motivated by economic disparity.
Enhance Mexico’s Economic Stability: Higher wages will lead to increased domestic consumption and a stronger Mexican economy. This could empower citizens to demand better security and governance, potentially mitigating the influence of the narco-state.
Promote Regional Economic Growth: Increased manufacturing in the US, Canada, and Mexico will strengthen the overall North American economy and reduce reliance on external sources.

This strategy may seem counterintuitive: building more factories in Mexico to ultimately restrict imports to the United States. However, it is a rational approach. The goal is to shift the production of components currently sourced from other countries to North America. This means the same finished products entering the US from Mexico will simply have a higher percentage of North American-made components.

By increasing North American content requirements and encouraging manufacturing growth in Mexico, which will drive wage growth as they don’t have enough people, the US aims to:

Reduce reliance on imports from countries outside North America, particularly China.
Boost domestic manufacturing in the US and Canada.
Increase wages and improve living standards in Mexico, potentially reducing economic pressures that drive illegal immigration.
Strengthen the overall North American economy and promote regional stability.

Tier 5: Significantly Reducing Trade with China

Over the past 15 years, the US has imported an average of $500 billion annually from China, while exporting only $150 billion, resulting in a significant trade imbalance. To counter China’s mercantilist practices and promote fair trade, the US will implement a strategy to reduce imports from China by approximately $350 billion.

This reduction will be achieved through the strategic tariff plan outlined in previous sections. While this approach may appear forceful, it’s a necessary response to China’s persistent trade imbalances and unwillingness to fulfill previously negotiated deals, as evidenced by their failure to meet commitments in the Phase One trade deal.

Expected Outcomes

This strategy is expected to yield several key benefits:

Diversified Imports: The $350 billion reduction in Chinese imports will be reallocated to countries with whom the US seeks to foster stronger strategic relationships, Tier 1 and Tier 2 listed above.
Strengthened Dollar: Increased trade with a wider range of countries will expand the use and circulation of the US dollar, reinforcing its position as the dominant global reserve currency.
Countering China’s Influence: By reducing economic dependence on China, the US can counter its ambitions for global dominance and promote a more balanced international order.

Facilitating Increased Trade with Target Countries

While the US operates under a free-trade system where buyers naturally seek the lowest-cost suppliers, the government can actively encourage trade with specific countries to achieve strategic objectives.

Reducing imports from China by $350 billion will naturally create opportunities for other countries. Some countries will have a natural gravitational pull, and won’t need massive incentives to attract US business:

1. Southeast Asia: A Prime Destination for Diversification

Countries like Indonesia, Malaysia, the Philippines, and Thailand are well-positioned to absorb a significant portion of the reduced imports from China.

Malaysia is expected to grow its hub for electronics manufacturing as companies relocate from China.
Indonesia is poised to attract manufacturers of low-cost household appliances.

The US can further facilitate this shift by:

Strengthening existing trade agreements.
Providing targeted investment incentives.
Streamlining regulatory processes for businesses relocating to these countries.

2. India: A Rising Manufacturing Powerhouse

India is already attracting significant investment in manufacturing, with companies like Apple expanding their production capacity there.

3. Turkey: A Competitive Alternative

Turkey’s existing manufacturing capabilities, which already compete with China in various sectors, make it a natural beneficiary of reduced Chinese imports. The US can further support Turkey by:

Expanding market access for Turkish goods.
Promoting collaboration in research and development.
Facilitating investment in Turkish industries.

4. Colombia: A Nearshoring Opportunity

Colombia’s proximity to the US, combined with an existing free trade agreement, makes it an attractive option for “nearshoring” production. The US can capitalize on this by:

Deepening economic ties and promoting investment in Colombian industries.
Supporting infrastructure development to enhance connectivity and trade efficiency.
Providing technical assistance to enhance Colombia’s manufacturing capabilities.

By actively supporting these countries, the US can ensure that the reduction in Chinese imports leads to a strategic realignment of trade relationships and strengthens its economic ties with key partners.

Challenges and Opportunities for Increasing Trade

While some countries are well-positioned to benefit from reduced imports from China, others face challenges in attracting US companies.

1. Australia

Increasing imports from Australia beyond minerals may be difficult due to its limited manufacturing capacity.

2. Egypt, Pakistan, and Sri Lanka

These countries have potential for increased textile, clothing, and footwear manufacturing due to low labor costs. However, government support and collaboration with the US Commerce Department are crucial to attract US investment.

3. Latin America (Brazil, Argentina, Bolivia, Panama)

Latin America presents both challenges and opportunities:

Challenges:

Labor Issues: Complex labor laws, strong unions, and high severance pay in countries like Brazil can deter investment.
Political and Economic Climate: Leftist ideologies, corruption, toxic envy (punish success mentality) and bureaucratic hurdles can create an unfavorable business environment.
Taxes and Duties: High taxes and import duties can reduce competitiveness.

Opportunities:

Existing Manufacturing Base: Existing white-goods manufacturing provides a foundation for expanded production.
Location and Time Zone: Proximity and aligned time zones facilitate easier communication and business operations.
Available Workforce: Despite challenges, a workforce is available.

Recommendations for Latin America:

Free Trade Zones: Establish zones with streamlined regulations and special trade zone flexible labor practices to attract investment.
Government Support: The US Commerce Department should actively assist in developing competitive manufacturing zones and engage with the governments in these regions to create the manufacturing zones and tax and labor system in those manufacturing zones which will maximize exports.
Financial Incentives: The Export-Import Bank should prioritize financing projects in Latin America.

Impact on China

While China holds significant wealth with over $6 trillion in reserve currency, reducing trade will have consequences.

Indirect Impact

If China’s economy takes a actual large slow down, then they will buy less from other countries, make it easier for the United States to out-purchase China with strategic countries.

Direct and Indirect Reductions

The US will directly reduce imports from China by $350 billion. Combined with reductions from other countries, the total impact on Chinese exports is estimated to be around 20% after four years:

$350 billion by the USA
$100 billion by Europe
$150 billion by Mexico, Turkey, and India
$100 billion from Tier 1 target countries

This $500 to $700 billion reduction, while not crippling, could trigger a 10-year manufacturing recession in China and it would reduce the trade surplus to 400 billion per year.

Impact on Global Trade

China’s reduced purchases from the world will result in approximately $262 billion less in imports. However, countries increasing their domestic production will see increased demand for raw materials, potentially offsetting this impact.

China Re-action

With pre-announced responses in the event China retaliates to the US desire to have a 1 to 1 trade relationship. China will think twice about a spiral to zero. China will have no choice but to live with it.

Taiwan Strategy of the Tariffs are implemented.

Responding to a Chinese Decoupling

If China fully decouples from the United States, a move they have been pursuing for years, the US will further diversify its imports. This decoupling could embolden China to invade Taiwan. However, the US and its allies are prepared to respond with a unified strategy:

Coordinated Tariff Increase: If China invades Taiwan, all countries with strong relationships with the US will immediately raise tariffs on Chinese goods by 25%. This coordinated action will impose significant economic costs on China and deter further aggression. If the United States could quickly become the top trading parnter of each country, then they may have a chance to sway some countries.
No sanctions: Sanctions on banking on China will result in the grand launch of the BRICS banking system – they are planning on this, they have created this system for the Taiwan invasion sanctions. Sanctions on a country that buy 2.6 trillion in goods from the rest of the world, is going to only push numerous countries away from the SWIFT system.

Conclusion:

China has in ten years basically become the top trading country in Southeast Asia and South America. The data has moved so quick, most decision makers may not even be aware of this.

China will invade Taiwan by 2027, and recent war games show China winning 9 out of 10 times. The best way for the USA to win is not to use bombs or missiles, but to build a strong trade relationship now with partners and allies. The United States is facing the a Suez Canal crisis moment that the United Kingdom faced in 1956, the United Kingdom went in, did not have international support and left with it tail between its leg, its currency in shambles and a growing number of commonwealth countries seeking independence and separation. If the USA loses it will be an absolutely disaster, with dollar greatly weaker, few allies remaining and a broken idea that the US military is invicible.

The United States has a choice now, prepare for this moment by doing a strategic decoupling now, preparing for the event of a Taiwan invasion. Decoupling now will allow the USA to already shift supply chains. Or if the USA is caught flat footed, it will do a 1 month shift out of China, resulting in massive inflation, and supply chains wreaked with no ability to re-establish themselves. It results in incompetence by the leaders of the United States.

Though this document is quit long at 26 pages, the policy is as simple as possible:

On January 1st of each subsequent year, tariffs will double:
- Year 1: 15% on Chinese imports, 7.5% on goods with Chinese components.
- Year 2: 30% on Chinese imports, 15% on goods with Chinese components.
- Year 3: 60% on Chinese imports, 30% on goods with Chinese components.
- Year 4: 120% on Chinese imports, 60% on goods with Chinese components.
7.5% tariffs on foreign automobiles imported to the United States.
60% tariff on all chinese products that can be made in any other country.
USMCA renegotiation: Imports from Mexico to the USA will be revised to 90% to 100% North American content, 0% to 5% CAFTA-DR content, 0% to 5% from other countries (excluding China).