War is physical and China has far superior physical capabilities
by Hua Bin via The Unz Review 

In part one of the essay, I have touched on the critical asymmetries in Chinese and US capabilities in a shooting war.
I discussed China’s asymmetric advantages in geography, will to fight, military preparedness, as well as the knowledge and intelligence of commanders and soldiers.
In this second part, I will focus on the most critical capability gap between the two – the physical capability for
war fighting.
This is the material aspect that determines winning and losing, regardless empty rhetorics and biased beliefs. The term physical capability means what each belligerent can bring to the fight in terms of weapons, their quality and quantity, the speed they can be produced and replenished, and how much they would cost.
In short, we are talking about who can sustain a high intensity conflict with superior weaponry as well as superior industrial scale, speed, and cost.
The winner is going to be the one with the superior physical capabilities in war fighting and war production –the most fundamental material aspect of wars.

Asymmetry in Physical Capabilities

China will prevail, in the final analysis, because it enjoys vastly superior physical capabilities over the US.
The confidence is built upon physical reality – China’s ability to make everything needed for such a war, make a lot of them, and make them cheaply and quickly.
I’ll let data and facts to make the case. To do that, I have inserted a large number of hyperlinks to specialist websites on the technical and military subjects covered.
For those interested in technical details, I encourage you to click on the links. Otherwise, you only need to read the headline summaries.
Everyone is aware the US and China are the two largest economies in the world. Many use the size of the economies as proxies for national power.
However, two critical differences exist between the two countries. They serve as the fundamental macro context to understand the physical capability gap between the two states.
First difference is the composition of the two economies. Simply put, China has an industrial economy while the US has a financialized economy. The implication of this difference on physical capabilities is enormous.
Second difference is state capacity in mobilization and execution of large physical projects, including war.
China is led by engineers while the US by lawyers and bankers.
On one side, the leaders are problem solvers; on the other side, the leaders are friction creators and profiteers.
The difference in leadership has implications on how war is prepared and prosecuted.

Industrial power vs. financial power

At market exchange rate, the US economy is $30 trillion vs. China’s $20 trillion. At purchasing power parity,
China’s economy is between 30% to 60% bigger than the US, according to most experts including CIA and the World Bank.
30% of Chinese economy is manufacturing vs. 10% in the US. China’s manufacturing value added is 35% of global total vs. US at 12%, even at nominal value.
China’s merchandise trade surplus reached $1.2 trillion in 2025 while the US ran a deficit of $1.1 trillion.
The US economy is service based and over 85% of GDP come from sectors such as FIRE (finance, insurance and real estate)
Healthcare (accounting for 18% GDP alone) Retail and distribution (i.e. selling stuff that others make) Software and technology
Business services (legal, accounting, advertising, etc.)
Hospitality Education Media & entertainment Imputed value (6% GDP such as hypothetical rental value of owner-occupied housing; China doesn’t count accounting entry such as imputation in GDP calculation).
The US runs a large service trade surplus with the rest of the world, mainly in technology exports and finance.
The service economy may provide good-paying white-collar jobs. But its value is often untradable and easily inflated.
Service sector size accounts for the difference between Chinese and US economies. This is the economic sector that is the most difficult to make apple to apple comparisons.
An American Uber driver provides exactly the same service as a Chinese Didi driver but makes 5 or 6 times the pay.
Healthcare in China accounts for 7% of GDP vs. 18% in the US but life expectancy is longer in China.
Education is mostly public and basically free in China, including university education. It accounts for a tiny percentage of GDP contribution but China graduates 12.5 million college students a year vs. 2.1 million in the US.
Apart from making comparisons difficult, such service-based economic activities are largely intangible and useless in national emergencies and wars.
On the other hand, China’s economy is much more physical and tangible with dominant positions in most of the world’s industrial sectors from steel making, chemical production, electricity generation, machinery, electronics, ship building, automotive, solar, battery, construction, pharmaceuticals, to mining and refining minerals.
In most industrial categories, China is the world’s leading producer, often producing more than the rest of the world combined (e.g. ship building, drones, mobile phone, computer, humanoids, electric vehicle, solar panels, as well as most categories of critical minerals – to name a few).
Look around your house and find out how many things are either made in China or made with intermediary goods from China.
Service sector accounts for just 55% of Chinese economy.
In essence, China has a fundamentally different and more substantive economy from the US.
A superficial nominal GDP comparison fails to highlight the gap in true national power.
China has mastery over atoms while the US has mastery over bits. China is far closer to the US in the mastery of bits than the US is to China over atoms. It is also closing any gap much faster.
Wars are physical. In any shooting wars that feature cost exchange and scale, China’s physical advantages over the US and its vassals are insurmountable.
An imperfect analogy – the US today is like a former champion boxer who has switched to painting and writing poetry in the last 40 years while China has been spending his day in the gym pumping iron.
A wise man once said Machiavellian and Warren Buffet will be knocked cold by Mike Tyson in a fist fight.
In a boxing match, it doesn’t matter how many tricks or how much money you have. What matters is the ability to deliver physical impact.

Physical capabilities gap

In nearly all physical sectors, China enjoys vast superiority in scale, speed, and cost. The differential is getting bigger over time.
These include – Infrastructure – building roads, bridges, ports, tunnels, etc.

One such example is the collapsed Francis Scott Key Bridge in Baltimore that was damaged by a container ship
in a 2024 accident.
The 2.6 kilometer basic steel truss bridge over the Patapsco River is expected to take 6 years and $5.2 billion to rebuild.
Compare that with the Hong Kong-Macau-Zhuhai Bridge in southern China, the world’s longest sea-crossing bridge-tunnel system.
The engineering marvel is 55 kilometers long, including 23 km bridge sections, 6.7 km underwater tunnel, 25 km connecting viaducts and artificial islands.
It is designed to withstand magnitude 8 earthquakes and super-typhoons with a lifespan of 120 years. It took Beijing 9 years and RMB127 billion ($19 billion) to construct. It opened in 2018 and this month welcomed its 1-billionth passenger (there are customs checkpoint to record the coming and goings).
Transportation – China owns 8,000 merchant ships vs. US’s 177. According to US Navy Secretary John Phelan, China had around 1,800 ships under construction in 2022. The US had 5. China’s share of global shipping order is 71%.
Since 2005, China built 50,000 kilometers high-speed rail. The global total, including China, is 60,000. The US has zero.
China produced 34.5 million automobiles in 2025, including 16.6 million EVs; the US produced 10 million cars including 1.5 million EVs Electricity – China’s total electricity generation reached 10.6 trillion kilowatt-hours (kWh) in 2025 vs. US generation of 4.2 trillion kWh, according to the US Energy Information Administration.
The agency reported that China added 445 gigawatts of power capacity in the first 11 months of 2025 while the US was projected to add 64 GW in 2025.
China’s annual electricity consumption growth is equal to the total annual production of Germany. And China is adding TWO Germany’s worth of generation capacity every year.
China has 36,000 kilometers Ultra High Voltage (UHV) transmission lines vs. 0 in the US.
State Grid, the world’s 3 largest corporation by revenue behind Walmart and Amazon, just announced a RMB4 trillion ($574 billion) investment plan over the next 5 years to upgrade its grids and boost renewables as AI demand accelerates energy usage.
China produces over 50% global electricity generation supply chain from prime movers, generators, transformers, capacitators, circuit breakers, switches, power compensators, to inverters and converters.
Nearly all of above items need to be imported in the US Energy – the US is the world’s largest producer of fossil fuel; while China dominates green energy production – 80% of global solar and battery supply, 65% of wind turbines, and 31% of hydro power
High tech hardware – China accounts for over 50% global electronics, smart phone, computer, smart home device, robot, drone, and humanoid production.
For example, Hangzhou-based startup Unitree delivered 5,500 humanoid robots in 2025, compared with the leading US makers Tesla, Figure AI, and Agility Robotics who each shipped roughly 150 units.
Machinery/equipment – China is the top producer of cranes, tunnel boring machines, mining and refining equipment, MRI machine, computer numerical control machine, fibre optic cable (including those used by Ukraine’s drones)
Mining and refining of critical minerals – China dominates rare earth and other critical minerals for high tech production, green transition, and defense such as polysilicon, gallium, tungsten, germanium, cobalt, graphite, lithium, nickel, copper, and artificial diamonds.
Pharmaceuticals – China dominates the global market for key starting materials (KSMs) and active pharmaceutical ingredients (APIs).
China controls 60-80% global API market, especially generic APIs such as antibiotics, pain killers, and cardiovascular drugs.
China accounts for 60-75% global supply of KSMs, particularly for complex, multi-step syntheses where cost efficiency and scale matter.
If a war breaks out between the US and China, US hospitals need to find new suppliers for 95% of their antibiotics.
Traditional heavy industry – in steel, cement, bulk chemicals, building materials, China’s production is often 10 times or more than the US.
Tech infrastructure – according to Gemini, China deployed 3.4 million 5G base stations by the end of 2024, or 60% global total vs. 200,000 in the US; China installed 10.3 million public EV charging stations by end of 2024, or 70% global total vs. 220,000 in the US
Urban development – there are 145 Chinese cities with population of 1 million and over vs. 11 in the US.
Even with their 4X population size difference, China has a well-publicized “housing overcapacity issue” known as “ghost towns” (too many empty houses); while the US has an equally well-known “homeless” problem or should I say, correctly, “unhoused” problem.
Military hardware – the US delivers 1.6 to 2 destroyer a year (Arleigh Burke class) while 4 11,000-ton Type 055 hulls are built side-by-side simultaneously in one shipyard in Shanghai.
China is building 16 Type 093B nuclear attack submarines at the same time while the US produces 1.2 a year when Navy budget requires 2.3 per year.
China is test flying 3 separate 6 generation fighters since December 2024. The J-36 has flown 3 variants already. The US NGAD F-47 6 gen fighter is forecast to fly its first prototype by 2028 at the earliest.
As the US air force is still conceptualizing collaborative combat aircraft (CCA), China has fielded numerous autonomous unmanned “loyal wingman” drones already, including GJ-11, GJ-21, Anjia, FH-97A, CH-7, etc.

Anecdotal cases show the same pattern

The data comparison I listed may be a bit drab. A couple of anecdotal cases could be more illustrative.
In June 2024, 2 US astronauts were stranded on the International Space Station when NASA’s Starliner suffered thruster failures and helium leaks.
Instead of the original one week mission, they were forced to stay for 9 months before a SpaceX capsule came to their rescue in March 2025.
In November 2025, 3 Chinese Taikonauts on Shenzhou-20 mission were similarly stranded on the Tiangong Space Station when their return capsule was hit by space debris. What happened next couldn’t be more different.
China’s Manned Space Agency (CMSA) sent a replacement spacecraft to return them home. Their stay was extended by a mere 9 days.
After undergoing on-orbit internal repairs, the empty Shenzhou-20 capsule was undocked and successfully returned to earth on January 19, 2026.

Another example is more personal.

I just bought my first EV made by Shanghai Automotive (SAIC) – a MG IM L6 model. It is a mid-market 5-seater SUV and cost about RMB135,000 after promotions ($19,300).
My last ICE car – a 2012 Maserati Quattroporte (4.7L, Ferrari F136 V8 engine) – cost RMB2,450,000 ($338,000).
The Quattroporte is a beauty and a beast. It has 430 horsepower and can reach top speed of 285 km/h. The car can accelerate from 0 to 100 km/h in 5.1 seconds.
I didn’t buy the IM L6 for speed or thrill. It’s a family car. However, I am pleasantly surprised to find out the IM L6 has maximum power output of 570 kW, equal to 775 horsepower.
Its 0 to 100 acceleration is 2.7 seconds and top speed 300 km/h.
Weirdly, my mid-market sports utility electric vehicle has a higher power and speed than the Maserati Quattroporte.
These anecdotal examples may not be relevant to a discussion about wars but should give people a sense of China’s physical capabilities.
The West’s industrial dependency on China China’s chokehold on rare earth elements (REEs) is a well-established fact by now. Beijing enjoys virtual monopoly in rare earth refining and magnet production, particularly the most valuable heavy rare earth.
But the REEs chokehold is merely the tip of the iceberg. China is the dominant global producer in a wide range of critical minerals and commodity products such as antibiotics.
It also has a significant position in the global semiconductor supply chain, especially in the mature nodes such as those found in automotive, electronics, and smart home devices.
The recent case of Chinese-owned Netherlands-based Nexperia is a case in point.
When the Dongguan chip packaging facility embargoed Europe auto makers for the illegal Dutch government capture of Nexperia’s European operations, most European automakers such as VW were on the verge of stopping their assembly lines.
The West depends on Chinese intermediate goods and capital equipment for a wide range of its own industrial production and green transition.
Even if there are supply sources the West can switch to, it will likely incur massive capital expenditure and uffer a significant cost increase – at a time when the collective west is still struggling with inflation.

Examples of China’s physical superiority

In this part, I’ll simply list a random batch of tech and military news headlines that are in my inbox from the past week to illustrate China’s physical superiority and military rise.
You can click into the hyperlinks for further details.
The links to military tech reporting are to give a flavor of the pace and scale of Chinese mil-tech innovations.
Xiaomi beat Ferrari supercar in straight-line drag race test (by Interesting Engineering)
https://interestingengineering.com/transportation/xiaomi-ev-beats-ferrari-sf90-xx
China deploys the world’s first megawatt-level airborne windmill (by Interesting Engineering)
https://interestingengineering.com/energy/worlds-first-megawatt-airship-rises-6560-ft
China builds the world’s most powerful “hyper-gravity machine” that compresses space and time (by Futurism)
https://futurism.com/robots-and-machines/china-builds-hypergravity-centrifuge
China just launched the world’s most complex railway project for $50 billion – 1,800 km Sichuan-Tibet high
speed rail line to be built at 4,000 meter altitude (by Click Petrol & Gas)
https://en.clickpetroleoegas.com.br/China-mobilizes-thousands-of-engineers-to-altitudes-above-4-000-
meters–cutting-through-entire-mountains-to-open-1-600-km-of-tunnels-and-viaducts.-vml97/
China files plan to send 200,000 satellites into orbit (by ZME Science)
https://www.zmescience.com/future/china-just-filed-plans-for-200000-satellites/
Researchers at National University of Defense Technology accelerates a 1-ton train to 700 km/h in 2 seconds
using electric maglev technology (by Click Petrol & Gas)
https://en.clickpetroleoegas.com.br/asaf04-asaf04-5/
Alibaba’s Qwen leads global open-source AI with 700 million downloads (by China News Agency)
https://english.news.cn/20260113/004b0522f987475cbf83ffc3a8d009aa/c.html
China’s secret lithography project challenges ASML’s monopoly (by IDN Financials)
https://www.idnfinancials.com/news/59732/chinas-secret-lithography-project-challenges-asmls-monopoly
World turning to China for efficient, low cost, and customizable AI (by ZD Net)
https://www.zdnet.com/article/china-open-ai-models-versus-us-llms-power-performance-compared/
China dominates global humanoid market with over 80% of installations (by South China Morning Post)
https://www.scmp.com/tech/big-tech/article/3340142/china-dominates-global-humanoid-robot-market-over-
80-installations?
share=raDAZCPx7WHUx%2BK906GVUYj7syx4%2FMctgZDlNT5O08bKeOhWZAYqKe9dpmSKCawLYXswmYRbCD
China’s nuclear submarine fleet overtakes Russia as production surges (by Military Watch)
https://militarywatchmagazine.com/article/china-nuclear-submarine-production-surge
China develops Type 096 ballistic missile subs to challenge US Ohio-class and future Columbia-class subs (by
Army Recognition)
https://www.armyrecognition.com/news/navy-news/2026/china-develops-type-096-ballistic-missilesubmarine-
to-challenge-us-undersea-nuclear-deterrence
China’s 3 J-36 sixth generation fighter completes test flight (by Defense rd Security Asia)
https://defencesecurityasia.com/en/china-j36-sixth-generation-fighter-third-prototype-milestone-flight-test/
J-10 fighter seen equipped with YJ-21 hypersonic anti-ship missile (by Army Recognition)
https://www.armyrecognition.com/news/aerospace-news/2025/chinas-j-10-fighter-seen-with-possible-yj-21ehypersonic-
anti-ship-missile-in-new-images
China’s supercooled radar chips boost stealth jet detection range by 40% (by Interesting Engineering)
https://interestingengineering.com/military/chinas-supercooling-tech-boosts-radar-chips-performance
Chinese cargo ship packed with modular missile launchers (by The War Zone)
https://www.twz.com/sea/chinese-cargo-ship-packed-full-of-modular-missile-launchers-emerges
Chinese cargo ship (same one as above) with electromagnetic drone launcher and vertical missile cells (by US
Navy Institute)
https://news.usni.org/2026/01/07/chinese-merchant-ship-sports-electromagnetic-drone-launcher-verticallaunching-
systems
Chinese Navy fields intercontinental anti-ship hypersonic missile capable of reaching US west coast (by US Navy
Institute)
https://news.usni.org/2025/12/26/chinese-forces-fielding-intercontinental-anti-ship-ballistic-missilescapable-
of-reaching-u-s-west-coast-pentagon-says
China’s DF-27A hypersonic missile with strike range between 8,000 to 9,000 kilometers at average speed of Mach
8.6 (by Defense Security Asia)
https://defencesecurityasia.com/en/china-df-27a-hypersonic-missile-test-mach-8-indo-pacific/
China’s ultra long range sixth-gen fighter marks milestone with third prototype model (by Military Watch
Magazine)
https://militarywatchmagazine.com/article/china-ultra-long-range-sixth-gen-milestone-flight\
China deploys high-power microwave weapon against drone swarms (by Army Recognition)
https://www.armyrecognition.com/news/army-news/2026/china-deploys-hurricane-3000-microwave-weaponfor-
operational-counter-drone-warfare
Chinese scientists develop supercooling to boost the performance of gallium nitride (GaN) radar systems by 40%
(by South China Morning Post)
(GaN-based AESA radar is the world’s most advanced radar system and widely used in China’s stealth planes and
navy ships as well as ground stations)
https://www.scmp.com/news/china/science/article/3340053/chinas-supercooling-tech-packs-40-more-punchchips-
used-military-radar?
share=yNY9w3aw1QXLsZrGkrWhP60POB7SWXw62KlWFTUNAeimtWvG%2FLKtPgXFUhhY5jk%2FdfEWkQcsIO%
China will field 1,000 J-20 heavy stealth fighters by 2030 (by Military Watch)
https://militarywatchmagazine.com/article/china-1000-j20-stealth-2030-rusi
Scientists invent 6G surface to turn enemy radar beams into energy for stealth jets (by Interesting Engineering)
https://interestingengineering.com/military/china-6g-surface-turn-radar-beam-power
Military air logistics revolution with unmanned cargo planes (by Military Watch)
https://militarywatchmagazine.com/article/china-leads-air-logistics-revolution-tianma1000
China’s vision for future air war – space aircraft carrier (by Biship Strow)
https://www.bishopstrow.com/18-166299-china-unveils-its-vision-of-future-war-with-space-aircraft-carriersome-
pieces-are-already-in-place-trending/

Examples of US military capability gaps

In contrast with the accelerating Chinese military and technological innovations, the US military is encountering numerous challenges in its physical capabilities.
An example of the widening gap with China is the US Navy’s surface combatant failures.
A basic Google Gemini search on “failed US surface combatant programs in the past 2 decades” turns out the below results –
In the past two decades, the U.S. Navy has faced significant challenges with its surface combatant acquisition, resulting in several programs being truncated, restructured, or canceled due to cost overruns and design instabilities.

Major Failed or Truncated Programs

Constellation-class Frigate (FFG-62): Canceled in November 2025 after only the first two ships were under construction. Although intended to be a low-risk design based on the European FREMM, extensive modifications led to design instability and cost ballooning. The Navy plans to replace it with a simpler “Small Surface Combatant” (FF(X)) based on the Coast Guard’s Legend-class National Security Cutter.
Littoral Combat Ship (LCS): Characterized by the GAO as a major failure due to mechanical unreliability, hull cracking, and the failure of planned “mission modules” to become operational. Originally intended for over 50 ships, the program was curtailed, and several ships have been decommissioned decades before their intended
service life ended.
Zumwalt-class Destroyer (DDG-1000): Truncated from 32 ships to just 3 due to spiraling costs. The centerpiece Advanced Gun System (AGS) was effectively neutralized when the Navy canceled its specialized, hyper-expensive ammunition.
CG(X) Next-Generation Cruiser: Canceled in 2010 during the early design phase as part of broader defense cuts. It was intended to replace the Ticonderoga-class cruisers but was deemed too expensive for then-current budgets.

Service Life Management Failures

Cruiser Modernization Program: An audit found the Navy “wasted” nearly $2 billion attempting to keep 11 aging Ticonderoga-class cruisers in service. Despite these investments, the ships faced persistent maintenance issues, leading to early retirement for many and a shift in resources toward newer platforms.

Recent Strategic Shifts (2025–2026)

By early 2026, the Navy’s surface strategy has pivoted toward:
Large Surface Combatant (DDG(X)): Replacing the Cruiser/Destroyer fleet, though its procurement was delayed into the late 2020s to refine requirements.
Uncrewed Vessels: Increased focus on smaller, cheaper autonomous platforms to augment the fleet and offset the loss of traditional large programs.
For a deeper dive into the pathetic and wasteful failure of the highly expected Constellation Class frigate program, you can read this November 2025 War Zone report. https://www.twz.com/sea/navy-sinks-theconstellation-class-frigate-program.
Another example is hypersonic missile program, where the US gap with China and Russia is already at generational level.
China has at least a 10-year head start on hypersonic development and deployment vs. the US. According to Pentagon’s China Military Power Report, China has conducted more hypersonic missile tests in the past 5 years than the rest of the world combined.
Despite the well-known gap, Pentagon has repeatedly failed to make progress and meet its own deadlines after billions of dollars of investments.
The US Conventional Prompt Strike (CPS) weapon system, its core hypersonic missile program, is not in operational status.
The plan is to start fielding in USS Zumalt and Virginia-class submarine sometime in 2026 or 2027. The technology is shared with the US Army’s Long Range Hypersonic Weapon (LRHW), a.k.a. Dark Eagle.
After years of failure, the program reported first successful tests in June 2024. However, recent news shows the program’s deployment faces repeated delays. https://www.scmp.com/news/world/united-statescanada/article/3340291/us-blows-past-another-deadline-field-its-first-hypersonic-missile?
share=lsmcEGlVOPfUdPOQSZlCBQQvTO6xyLf5s8Af4k2QVpoih7WmmE4RHmf1XC6b6IT93FHTkim%2B1BqRPJa2
According to public sources, the Pentagon has invested more than US$12 billion since 2018 in an attempt to develop, test and deploy a hypersonic system.
The first battery will cost about US$2.7 billion, including missiles, according to the Government Accountability Office.
Besides the high costs, the field deployment of the weapon system has suffered repeated delays.
The army missed a previous deadline of September 2023 to field the technology, and blew past another deadline in the past September.
In December 2025, the US Army announced “a significant advancement of military capabilities” when it
activated a battery that operates the Dark Eagle hypersonic missile.
The Army did not mention at the time that the missiles were not ready until it is recently disclosed the operational deployment will be some time in 2026 or 2027.
The US Navy currently estimates the CPS system has a “flyaway” unit of cost of $51 million per missile. For fiscal 2026, the Navy request $663 million specifically for the production of 11 missiles.
In stark contrast, China has fielded numerous hypersonic missiles with various types of technologies (dualconical, wave-rider, scramjet, HGV), range (1,000 km to 9,000 km, just below ICBM range), speed (Mach 5 to Mach 16).
Pentagon estimates China has over 600 such missiles fielded. The actual number is likely to be much higher.
Chinese hypersonic weapons cost from $15-25 million per missile (US estimates) for the high-end (such as DF-17, DF-26 and DF-27A) to $99,000 per unit for the low-end/export models (such as YKJ-1000).
According to the January 2026 China Military Power Report by the US Department of War, China is commissioning hundreds of hypersonic missiles every year while the US will only reach serial production in 2026, with plan for 48 to 72 missiles produced per year by 2030.
Due to its scale and cost advantages, China can conduct saturation attack with hypersonic missiles against US carrier groups.
A saturation attack is designed to overwhelm defender’s systems by firing more munitions than their sensors and interceptors can handle simultaneously.
US war simulations show China can saturate a US carrier group’s defenses for less than $30 million using a swarm of missiles with “high-low mix”, while the US would spend over $200 million in interceptors just trying to survive the first wave.
In extreme scenario, China could launch dozens of YKJ-1000 at a target in saturation swarms that is mathematically impossible to fully intercept, ensuring 100% probability of a mission kill.
Even under the most optimistic scenario where the US carrier groups survive the swarm attack, the cost exchange will be so lopsided that the US cannot sustain a high intensity conflict.
Why the US cannot close the physical capability gap with China
The asymmetry in physical capabilities between China and the US is the result of decades long neoliberal economics that prioritize short-term financial returns over long-term industrial competitiveness.
The neoliberal economic dogma advocates outsourcing and “asset light” corporate strategy that moves production overseas and deemphasizes capital investment.
As a result, US businesses have focused on where return on investment is highest – product design, marketing, and distribution.
And they have delegated the “dirty work” of physical supply chain and production to poor third-world country workshops.
The best case studies of this business model are Apple and Nvidia, two of America’s most valuable companies.
Apple’s flagship product, the iPhone, is designed in California and made in Dongguan. Apple moved the dirty and low margin work of making the phone to China while retaining the high value-added design, branding, marketing, and distribution at home.
The result is Apple can design a great phone but cannot make a single one in the US.
Nvidia similarly is focused solely on GPU chip design and its CUDA software ecosystem while outsourcing the physical work of making the chips to TMSC in Taiwan with machines made by ASML in the Netherlands.
This hyper asset-light business model rewards Nvidia a gross margin over 80% and a market cap of $4 to 5 trillion.
However, if China starts a military operation against Taiwan, Nvidia will have no physical chips to supply its AI data center clients.
While the capitalists in the US have created massive paper wealth, the country has lost its ability to deliver physical results.
This neoliberal economic model has led the US to become a financialized shell economy with an inflated service sector and a large but shallow GDP.
(Republished from Substack by permission of author or representative)
The governing system, in parallel, has degenerated into a “vetocracy” where fragmented interest groups regularly bloc collective endeavors.
State capacity is manifested in its propensity to regulate, debate, and stall rather than to produce and execute.
Societal ethos favor usury, lawfare, software, and media make-believe while viewing physical labor with distaste and aversion. Talents are directed to speculation and get-rich-quick schemes.
China has taken the opposite path and focused its resources squarely on the “real economy”.
President Xi’s campaign in the last decade to burst the real estate bubble, rein in monopolistic predatory internet platforms, pour resources to Belt and Road Initiative (BRI), and invest in Made in China 2025 has saved China from the western death spiral of deindustrialization and financialization.
This is the root cause of China’s physical superiority and there is no reversing.

Authored by Matthew Piepenburg via VonGreyerz.gold

Fifty-four years ago (August 15, 1971), Nixon took the USD off its gold standard, thereby officially putting the final nail in the Constitutionally mandated concept of US money.

But hey, at least the Constitution can still serve as a nice museum piece for kids to walk past.

First, the decoupling from gold has lasted more than half a century, so it hardly feels “temporary.”

As for the USD holding its purchasing power, well, when measured against a milligram of gold, that paper dollar has lost > 99% of its value since 1971.

Meanwhile, and contrary to the expert hearing testimony of a 1971 Fed Chairman and Treasury Secretary, gold has not got down in price, but has risen, by well… 8000%.

EIGHT THOUSAND PERCENT.

Huh?

Looking Ahead? It Looks Bad…

All of the foregoing facts confirm just how debt-distorted the US economy and narrative are, as of 2025.

They also confirm just how debt-trapped US policies have become. More importantly, they confirm just how doomed the US economy is going forward.

This is because the US growth narrative has zero good options left to it. Once debt/GDP ratios cross the 100% Rubicon (we are now at 120%+), growth mathematically slows by 1/3.

And the only way to bring this debt ratio down is via massive spending cuts well beyond the DOGE or USAID cuts. The real debts come from entitlements and military spending, which no politician can or will touch.

The US Already in Default?
Again, this leaves the US with only bad options to address unsustainable debt. It can either default or inflate away its debt.

Guess which option DC will (and has) take(n)?

But here’s the rub.

By inflating away its debt via currency debasement, inflation levels are soaring past UST yields, resulting in negative real rates – i.e. a NEGATIVE returning UST, which by definition, IS a defaulting bond.

The ironies abound…

But the US avoids publicly displaying this irony and default by simply lying about (i.e., misreporting) the US inflation rate, measured by a CPI scale that has been “modified” over 20 times since the Volcker era to mask actual inflation data.

Again: Just more desperation hiding in plain sight.

And do you really think begging foreign companies to set up shop in America, hiring Americans to work the assembly lines of foreign companies is a solution? Sounds more like China in reverse. You, your kids will be or already are working for Chinese, Taiwanese, Japanese, or European companies manufacturing inside the U.S.! It’s rather embarrassing to think that the profits of these foreign companies will go right back home, that your kid’s bosses are foreigners! It’s rather embarrassing to realize China, India, even Russia, are turning out far more science, technology, engineering, and math graduates than the U.S. and are incentivizing those individuals to innovate, build, design, and produce inside their own countries. According to several reports, nationwide, foreigners make up 1/3 of our technology jobs, and in Silicone Valley that number is 2/3!

My point … these are not real solutions only window dressing to beef up employment, political theater, which are temporary at best! Reinventing America starts with education and ours is abysmal … it will take several generations to restore a workforce that can jump into the global economy, or even threaten to replace our reliance on foreign immigrants!

via MoA

President Trump likely thought that he could press China into making a deal with him. The tariffs he imposed were supposed to create leverage for that.

Instead he found that China is willing and able to fight back:

China said it will raise its tariff on US goods to 84%, retaliating to the hefty new tariffs on its imports that kicked in on Wednesday.

The move came after the Trump administration followed through on a threat to add a 50% tariff on Chinese goods, in addition to 34% reciprocal tariffs, raising the overall tariff rate on Chinese goods to 104%. The steep new duties on China and 184 other US trading partners took effect at 12:01 a.m. ET on Wednesday.
Beijing’s move marks further deterioration in US-China trade relations after China vowed on Tuesday to “fight to the end” in the renewed trade war.

When the U.S. launched its proxy war in Ukraine against Russia it thought that it could defeat Russia by economic means. A wall of sanctions and other restrictions were to destroy the Russian economy. But Russia was prepared and much stronger than the U.S. had anticipated. Its economy did better than those of the countries which opposed it.

A similar miscalculation seems to have happened with regards to China.

Trump is not knowledgeable about China’s mighty economy. Vice-President Vance recently called China’s highly qualified work force ‘peasants‘. Treasury Secretary Scott Bessent is likewise ignorant:

I advised Scott Bessent, now Trump’s Secretary of the Treasury who is leading the tariff war, in 2013 when he was still with Soros. An investment bank engaged me to advise Bessent on China’s economy and consumer trends and go over my book The End of Cheap China.

I took an instant disliking – Bessent was one of the most arrogant and ignorant on China people I had ever met. He was uber bearish on China and was largely ideologically driven in his analysis. Communist countries couldn’t succeed was basically the jist of his views.
Data and rational analysis did not reign supreme.
…
He thinks America has the upper hand with China right now. I worry for America. We have one of the most ignorant on China yet arrogant people I’ve ever met running a trade war against China.

Along with trouble in the stock and treasury markets we now can see trade between the U.S. and not only China but large parts of South Asia comes to a screeching halt:

Amid escalating trade tensions between China and the United States, some Chinese exporters are taking the drastic step of ditching shipments mid-voyage and surrendering containers to shipping companies to avoid crushing tariff costs.

Industry insiders have dubbed the move “preparing for the Long March”, a grim metaphor for what many see as a prolonged and punishing downturn in cross-Pacific trade.
A staff member at a China-listed export company, who requested anonymity, said its US-bound container volume had plummeted from 40 to 50 containers a day to just three to six as a result of the new tariffs on Chinese imports imposed by the second Trump administration.
…
“We’ve halted all shipping plans from the Philippines, Vietnam, Indonesia and Malaysia,” the employee said. “Every factory order is halted. Anything that hasn’t been loaded will be scrapped, and the cargo already at sea is being re-costed.”

Those are goods that U.S. importers expected to see but which will not be delivered. Not even to higher prices. It may take a few weeks until the effects will be seen in U.S. stores but empty shelves, especially for low value everyday stuff, are now sure to appear.

There are no other producers to take up the space.

This will hit the U.S. much more than China:

The Chinese trade surplus with the US is about 3% of its GDP. China would not lose off of that; it would wind up redirecting a lot of those goods to other countries that would only welcome the extra stuff up to a point, or even sell more domestically. But China could weather the hit. Economic suffering that clearly results from US malevolence would also be unifying, while a sluggish economy due to the deflating of a monster property bubble is much less so.

Trump is proposing to make this dire situation worse by sanctioning pharmaceuticals.
…
The only way inflicting this level of punishment on Americans (a huge spike in untreated illnesses, on top of the economic distress from sudden rises in costs and resulting spending cutbacks that will result in business failures, high inflation (conceivably hyperinflation if the destruction of productive capacity is large enough, and readers know I hate the casual use of the “h” word), and a big uptick in unemployment, is if the plan is to produce so much upheaval as to justify the imposition of martial law. But who wants to be the emperor of a hellhole?

On Monday I had quoted Adam Tooze who provided a scenario of rising Treasury interest:

Rather than investors piling into Treasuries driving the price up, instead, we could see investors selling Treasuries en masse.
…
At this point we would expect to see the Fed step in, not just to lower interest rates, as is now commonly expected, but do more drastic interventions.
…
But [..] what if investors, both American and foreign decide, that they no longer wish to hitch their wagon to the empire of the mad king? What if they decide that the US is indeed exceptional, but that it is exceptional in rather nasty ways? […] Well in that case, holding billions in dollars newly created by the Fed does not give you the security you want.

So you sell the dollars. You just want out of the mad house.
This, Ladies and Gentleman, would be the truly big disaster.

The unthinkable move in Treasury happened last night:

Treasury yields spiked on Wednesday as investors bailed out of what has been perceived as the world’s safest instrument on expectations of crumbling foreign demand as tariffs take effect.

The yield on the 10-year Treasury spiked to as high as 4.516%. Yields move in the opposite direction to prices.
Yields settled down after China called for dialogue with the U.S. on trade, and then moved right back near the highs of the day after China said it was increasing its tariffs on the U.S. to 84%.
The yield on the 30-year Treasury was 4.91%, having earlier peaked above 5%.
“Something has broken tonight in the bond market. We are seeing a disorderly liquidation,” said Jim Bianco, president and macro strategist at Bianco Research.
…
[T]ariffs are devastating to bonds — not only do they have an inflationary impact, but they result in fewer dollars being sent to foreign countries that have traditionally recycled them into financial assets and U.S. Treasury securities in particular.

Peter Schiff @PeterSchiff – 10:51 UTC · Apr 9, 2025
U.S. stocks, bonds, and the dollar are all down. This is a broad-based liquidation of U.S. assets. Trump claims his tariffs will cause foreigners to invest in the U.S. to avoid the tariffs. Instead, tariffs have already resulted in foreigners pulling their money out of the U.S.

Rising interests is the last thing the Trump administration wanted to see. It wants to borrow more to be able to cut taxes. But with interest rates on the rise it will become more difficult to cover the U.S. deficit.

The real damage though will probably happen in smaller Asian countries who have borrowed in U.S. dollar and, due to tariff and trade troubles and rising interest rates, will have difficulties to pay back their loans. If they default the western banks who have lend them the money will go down with them. The trade trouble could thus develop into a serious banking crisis.

These are interesting times to live in …

by Claudiu Secara

I see no solution for the US in its foregone predicament – Trump or no Trump.

If the US continues on the path of trade imbalance as of now, it can continue enjoying its lifestyle for another generation as it goes on selling its assets one by one, land, real estate, art collections, gold, etc. It would face the same historical transition as happened in nineteenth-century Europe when the emerging bourgeoisie capitalized on its hard work and savings and replaced the la dolce vita landed aristocracy.

This is well illustrated by at least two classic pieces of literature, The Cherry Orchard by Chekhov and The Leopard, by Lampedusa. Nothing new to see here.

The other option that the US has is to raise tariffs and other trade barriers against the countries that are overtaking its domestic production, and retreat as a standalone economy. A form of twenty-first century autarchic economy. The result? Stagnation, third-worldization, backwardization, etc. Not good.

So, the historical trend is clear. There is not much for the US to do. World War III? Not a chance to win. Trigger a world pandemic? Use bioweapons? Not much hope to get out unharmed. In fact, the brief experiment with Covid showed that the US had a much higher level of destruction and death than its adversaries. New forms of exotic weapons like geo-weapons, climate weapons, direct energy weapons? The US is no longer facing an army of bows and arrows, but even better and more sophisticated technological powerhouses in China and Russia.

It would be wise then to call for a truce, ask for help in order to wind down its excesses of the last 30 or 40 years. Not yet unmanageable. Engage in a constructive dialogue, give up its claims to hegemony and look ahead for another day, when it can re-tool itself and recast itself into a different national identity. But that ain’t going to happen because the national hubris and arrogance is so deeply engrained in the populace that such a sudden loss of status is unpalatable.

If the competition is shaping up to be between team China and team US, there is every reason to believe based on known qualifications that team China is already projected to be the winner. Hard work, excellent education, focus, discipline, unity of the goal, good morals and far less corruption as the institutionalized policy of the US system, all of these and more are all meant to predetermine the outcome.

But, we’ll have to wait and see.

by Gerry Nolan

Trump’s trade war just went nuclear again, this time slamming the global auto industry with a 25% tariff hammer that sent shockwaves through European and Asian markets. The move, touted by Trump as a bold step toward reviving American manufacturing, has already vaporized over $14 billion in market value from Europe’s largest carmakers, according to The Telegraph. From Frankfurt to Tokyo, the message was clear: the United States is no longer playing by the old rules.

Japan took a heavy blow. Toyota’s shares dropped 2%, Nissan lost 1.7%, and Honda tumbled 2.5% in response to the announcement. This isn’t just investor jitters, it’s economic reality. Automobiles make up nearly 28.3% of Japan’s total exports to the U.S., pumping out roughly $63 billion annually. According to estimates from Nomura Research Institute, Trump’s tariffs could slice 0.2% off Japan’s GDP, about $8 billion gone, evaporated by the stroke of a presidential pen. The timing couldn’t be worse for Tokyo. With consumer inflation already above target, the Bank of Japan had been eyeing a long-awaited rate hike in May. That window may have just slammed shut.

Japan’s Prime Minister Shigeru Ishiba kept his response measured, stating Tokyo is evaluating “what’s best for Japan’s national interest,” and that all options are on the table. But the subtext was clear: Japan’s political class is scrambling to recalibrate its approach in the face of Washington’s increasingly erratic protectionism.

For Trump, this isn’t just economic policy, it’s domestic theater. He claims the tariffs will generate $100 billion annually in tax revenue and revive an American auto industry hollowed out by decades of neoliberal outsourcing. The tariffs are scheduled to kick in on April 2, with a second wave targeting car parts one month later. Meanwhile, S&P Global Mobility reports that nearly half of all new passenger vehicles sold in the U.S. last year were manufactured abroad, underscoring how deeply integrated America’s auto market has become with the very nations now under fire.

But here’s where it gets deeper and darker.

This isn’t just about trade. It’s about empire in retreat, turning in on its own vassals. Trump is torching what remains of transatlantic and transpacific economic cooperation, turning Germany and Japan from loyal vassals into collateral damage. This is the late-stage imperial reflex: when you can’t win against China or Russia, you cannibalize your own “allies” to buy time and votes at home.

Europe, already battered by energy shocks and NATO overreach, now watches as its industrial core is gutted by the very hegemon it once pledged allegiance to. Japan, caught between hosting U.S. bases and courting Chinese trade, is learning the hard way what multipolarity means: adapt or perish.

This is the “America First” doctrine in its final form, not strategy, but economic Darwinism. Allies be damned. Supply chains be damned. Stability be damned. Trump doesn’t care if Tokyo burns or Frankfurt bleeds, as long as Michigan gets a few more factory jobs and the illusion of sovereignty returns to dying Rust Belt towns. Funny thing is many of these don’t have recripocrical tarrifs at least until now, but the US simply couldn’t complete.

The irony? While Washington imposes tariffs to build cars at home, Russia and China are building a new world economy, outside the dollar, outside dinosaur SWIFT, and increasingly outside the gravitational pull of American policy altogether. Eurasia is rising. BRICS is expanding. And the West, led by a tariff-throwing real estate mogul turned messiah, is punching its allies in the face, again. I love it.

What began as a trade war is ending as a self-inflicted collapse.

https://t.me/TheIslanderNews

Grayzone report on the International Republican Institute’s sponsorship of trans events in Bangladesh, IRI’s funding coming from the National Endowment for Democracy.

So why did transgender people make up a quarter of the IRI program’s participants, in a country of 173 million where a 2022 census found they comprise just 0.007% of the population? The IRI documents suggest it’s because the Institute views gay and transgender people as uniquely disruptive actors who can be deployed to manipulate political realities overseas: “Facing discrimination and prejudice, LGBTI people tend to participate in social change activities to eventually bring changes to politics.”

    Also:

All told, between March 1, 2019 and December 31, 2020, the Republican group sponsored 160 photographs, 30 paintings, 21 theatrical shows, five short films, three “transgender dance performances,” three documentaries, two rap songs and accompanying music videos, and one book. Meanwhile, IRI staff had “identified over 170 democratic activists who would cooperate with IRI to destabilize Bangladesh’s politics,” they wrote. 

Using wokeness in service of a political agenda to overthrow a country’s government and install a US aligned regime. Yeh, that sounds about right.

https://thegrayzone.com/2025/02/07/republicans-transgender-dance-bangladesh/

In explaining the Trump phenomenon, intelligence might hinder one’s understanding of “the don”. Highly intelligent people tend to attempt to want to make order out of chaos and sense out of nonsense. They have a hard time understanding an intellect that is subpar, in a person who has achieved such heights of political power; they’re inclined to think that there must be something there they are not seeing.

The more they scrutinize the situation, the more they connect dots that should be but aren’t there. Kevin Barret had an interesting article comparing Trump to Ubu Roi and I think he may be on to something there, perhaps, that could help us understand from a less educated perspective.

The don appears to be working from more of a mob boss mentality and it’s hard for intellectuals to understand this more instinctual, “might makes right” position, as opposed to a more traditional and diplomatic, civilized perspective.

Trump has been sent by the Masters to paint a total strategic loss as a victory, and from what I’m seeing, his strategy is this: if there’s no way to stop the Russians in Ukraine, then we’ll just grab whatever we want to show how big and strong we are, by beating up a bunch of smaller countries and economically canabalizing the E.U. vassal states, like Saturn devouring his children.

We’ll see if he is really stupid enough to follow through on his claim to seize Gaza. Perhaps there’s something more to Trump’s maneuvers, as the world is unifying against this outrageous crime. Will he actually force the Israelis into the two-state solution they fear most, or a one-state solution of the Israelis and Palestinians, as the Iranians have long advocated? It seems to be kind of leaning more towards the Ubu Roi perspective, right now.