FROM MAGA TO CHINA Here are four things MAGA is getting wrong, and...
Balaji@balajis
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Mar 11, 2025
~6 min read
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1
FROM MAGA TO CHINA
Here are four things MAGA is getting wrong, and why it's handing over the world to China.
(1) First, MAGA correctly understands that America’s economic position is in decline but thinks this is due to economic competition itself, rather than lack of competitiveness.
(2) Second, MAGA also understands that the US has wasted trillions abroad in foreign wars, but thinks the problem is global leadership itself rather than poor leadership.
(3) Third, MAGA knows that their Blue American enemies have allies abroad, but has incorrectly overreacted to this by treating every non-Red-American as an enemy.
(4) Fourth, MAGA sees the billions of dollars flowing from the US to foreign recipients, but isn't grasping that the US can only print those dollars in the first place so long as it's the hub of a global empire.
When you put these together you can both understand MAGA's actions and understand why they will not lead to the intended result.
Basically: MAGA is hyperfocused on cutting off any apparent flow of funds from Red Americans to Blue Americans and non-Americans. And they only have ~500 days in power. So they're trying to quickly shut off imports, close down institutions, and exit all wars.
OK.
Except the reason the imports exist in the first place is because US products aren't competitive relative to Chinese products (or Fed printing). The reason those institutions exist is because the US set them up to run the world. And the reason those wars are happening is not because of American leadership per se, but because of the absence of good leadership.
If you shut all of that down at once — if you abandon global competition and global leadership — you shut down American Empire, and with it the ability to print money. And then everyone in that empire has a very bad time.
Here are four things MAGA is getting wrong, and why it's handing over the world to China.
(1) First, MAGA correctly understands that America’s economic position is in decline but thinks this is due to economic competition itself, rather than lack of competitiveness.
(2) Second, MAGA also understands that the US has wasted trillions abroad in foreign wars, but thinks the problem is global leadership itself rather than poor leadership.
(3) Third, MAGA knows that their Blue American enemies have allies abroad, but has incorrectly overreacted to this by treating every non-Red-American as an enemy.
(4) Fourth, MAGA sees the billions of dollars flowing from the US to foreign recipients, but isn't grasping that the US can only print those dollars in the first place so long as it's the hub of a global empire.
When you put these together you can both understand MAGA's actions and understand why they will not lead to the intended result.
Basically: MAGA is hyperfocused on cutting off any apparent flow of funds from Red Americans to Blue Americans and non-Americans. And they only have ~500 days in power. So they're trying to quickly shut off imports, close down institutions, and exit all wars.
OK.
Except the reason the imports exist in the first place is because US products aren't competitive relative to Chinese products (or Fed printing). The reason those institutions exist is because the US set them up to run the world. And the reason those wars are happening is not because of American leadership per se, but because of the absence of good leadership.
If you shut all of that down at once — if you abandon global competition and global leadership — you shut down American Empire, and with it the ability to print money. And then everyone in that empire has a very bad time.
2
With all that said, we should have a lot of sympathy for the turnaround attempt, because this is the Flight 93 Administration. They've bravely rushed the cockpit and taken control from the terrorists, but the ship of state might just be irreversibly vectored into the ground.
We are after all talking about decades of accumulated problems, from Social Security to lack of competitive industry. These problems may well be unsolvable. To mix metaphors, it's easy to Monday morning quarterback and extremely hard to quarterback.
Nevertheless, sometimes an outside perspective is helpful. So, let's go through the points above:
(1) The issue is lack of competitiveness, not competition itself. You'd know the US was successful if American cars were outcompeting Chinese cars in neutral third party markets. Tariffs won't do that, but maybe deregulation could. Otherwise you get this map, with China moving into Canada/Mexico/Western Europe now that they've been cut off by US tariffs:
(2) The issue is lack of leadership, not leadership itself. Yes, Biden blew up Nord Stream 2. But think about what that means — the US is in such control of Germany that it can blow up a key pipeline within the country with no consequence! So, obviously, you can't blame Germans for their domestic situation. Red America should simply assume control of the country and reform it rather than cutting it loose and having it fend for itself, with Blue-selected politicians in charge and China waiting in the wings. They should reprogram the Terminator. Basically, success doesn't look like cutting Germany loose. That will just result in a neutral or even hostile Germany down the line.
(3) The issue is the far left, not non-Red. It's extremely dumb for Red America to turn even Canadian conservatives like Pierre Poilievre into reluctant enemies. They just revived the left in Canada for no reason and now there is a hostile blue power on their border.
(4) The issue is mismanaged empire, not empire itself. Perhaps the deepest point is that MAGA really thinks American power comes from the 77M Red Americans and their muscle, as opposed to the 1B+ in the global American Empire. Even if you grant that they have a higher percentage of soldiers — the economic heft of Red America is far less than the 1B+, their political control over the other 200M+ Americans is fragile, and they're facing the 1.4B Chinese. It's just foolish to attack all allies and trade partners — that is how you lose trade wars, and wars.
CITATIONS
A few links you might find interesting, from previous posts, supporting various subparts of the thesis above.
[0]: Seymour Hersh on how the US blew up Nord Stream in Germany without consequence: seymourhersh.substack.com/p/how-america-…
[1]: Rather than cutting the EU lose, reprogram the Terminator: x.com/balajis/status…
[2]: Ten Points on why tariffs are bad: x.com/balajis/status…
[3]: Ukraine may actually be the climactic battle of the Thucydides Trap. Even if it shouldn't have been started in the first place, a precipitous surrender there changes the world order: x.com/balajis/status…
[4]: There are only 77M MAGA, but 1B+ in the Golden Billion / American Empire: x.com/balajis/status…
[5]: The fundamental strategic constraint is the decline in G7 share of world GDP relative to BRICS: x.com/balajis/status…
[6]: Rise in Chinese free trade agreements: x.com/balajis/status…
[7]: Why deregulation is better than tariffs: x.com/balajis/status…
[8]: How the West lost Suez to the Houthis: x.com/balajis/status…
[9]: Why exiting institutions means losing them to China:
We are after all talking about decades of accumulated problems, from Social Security to lack of competitive industry. These problems may well be unsolvable. To mix metaphors, it's easy to Monday morning quarterback and extremely hard to quarterback.
Nevertheless, sometimes an outside perspective is helpful. So, let's go through the points above:
(1) The issue is lack of competitiveness, not competition itself. You'd know the US was successful if American cars were outcompeting Chinese cars in neutral third party markets. Tariffs won't do that, but maybe deregulation could. Otherwise you get this map, with China moving into Canada/Mexico/Western Europe now that they've been cut off by US tariffs:
(2) The issue is lack of leadership, not leadership itself. Yes, Biden blew up Nord Stream 2. But think about what that means — the US is in such control of Germany that it can blow up a key pipeline within the country with no consequence! So, obviously, you can't blame Germans for their domestic situation. Red America should simply assume control of the country and reform it rather than cutting it loose and having it fend for itself, with Blue-selected politicians in charge and China waiting in the wings. They should reprogram the Terminator. Basically, success doesn't look like cutting Germany loose. That will just result in a neutral or even hostile Germany down the line.
(3) The issue is the far left, not non-Red. It's extremely dumb for Red America to turn even Canadian conservatives like Pierre Poilievre into reluctant enemies. They just revived the left in Canada for no reason and now there is a hostile blue power on their border.
(4) The issue is mismanaged empire, not empire itself. Perhaps the deepest point is that MAGA really thinks American power comes from the 77M Red Americans and their muscle, as opposed to the 1B+ in the global American Empire. Even if you grant that they have a higher percentage of soldiers — the economic heft of Red America is far less than the 1B+, their political control over the other 200M+ Americans is fragile, and they're facing the 1.4B Chinese. It's just foolish to attack all allies and trade partners — that is how you lose trade wars, and wars.
CITATIONS
A few links you might find interesting, from previous posts, supporting various subparts of the thesis above.
[0]: Seymour Hersh on how the US blew up Nord Stream in Germany without consequence: seymourhersh.substack.com/p/how-america-…
[1]: Rather than cutting the EU lose, reprogram the Terminator: x.com/balajis/status…
[2]: Ten Points on why tariffs are bad: x.com/balajis/status…
[3]: Ukraine may actually be the climactic battle of the Thucydides Trap. Even if it shouldn't have been started in the first place, a precipitous surrender there changes the world order: x.com/balajis/status…
[4]: There are only 77M MAGA, but 1B+ in the Golden Billion / American Empire: x.com/balajis/status…
[5]: The fundamental strategic constraint is the decline in G7 share of world GDP relative to BRICS: x.com/balajis/status…
[6]: Rise in Chinese free trade agreements: x.com/balajis/status…
[7]: Why deregulation is better than tariffs: x.com/balajis/status…
[8]: How the West lost Suez to the Houthis: x.com/balajis/status…
[9]: Why exiting institutions means losing them to China:
Balaji@balajis
The US founded the UN and NATO at its post-1945 peak.
But if it leaves, the orgs don't just disappear. Either China takes over (like WHO) or China sets up an alternative (like BRICs).
In both cases, the US may end up negotiating with the China-run orgs from a weaker position.
But if it leaves, the orgs don't just disappear. Either China takes over (like WHO) or China sets up an alternative (like BRICs).
In both cases, the US may end up negotiating with the China-run orgs from a weaker position.
3
No. China is competitive because they make good products at good prices, as proven by their traction over Western alternatives in neutral markets.
Eg: how are they wrecking even Germany & Japan in cars? Is everyone brainwashed? Or has China gotten good?
Eg: how are they wrecking even Germany & Japan in cars? Is everyone brainwashed? Or has China gotten good?
𝐃𝐦𝐢𝐭𝐫𝐲 - biofoundationalism.com@BackTheBunny
China and "Competitiveness": The Insect Method
The purpose of exports should be more imports; exports are real costs, imports are real benefits. When economic behaviors do not reflect this, an insidious strategy is taking shape.
If global trade were driven by comparative advantage, what free-trade types will tell you is the case, persistent major trade imbalances would not exist, because your exporting success necessarily sows the seeds of your future exporting disadvantage.
There would be a natural equilibrating force that manifests between currency strength and exports that results in something approximating mid-to-long-term trade parity between nations. This is not occurring.
There is one materially flawed point in QT that Balaji and others completely overlook: what the word "competitive" means, how it's achieved, and on what terms.
How did China become so darn "competitive"?
It’s often the case that chronic surpluses are accomplished via varying tactics of domestic wage suppression. A tactic that subverts the natural equilibrating forces of balanced trade.
Germany and China are particular culprits, who coincidentally just so happen to have the two biggest trade surpluses.
China is not “more competitive” due to some Ricardian “free trade” advantage. It has taken the perverse approach of depriving its middle class of its share of GDP, which is a fancy way to say structurally diminishing wages.
The popular human-readable narrative is that China's trade success comes from superior efficiency and work ethic. They're extra busy bees over there!
The reality is something different: through its industrial policies (which manifest as de facto trade policies) it's systematically underpaid workers.
When you pay workers less than their productivity warrants, you're not being "more competitive", you're just shifting money from workers' pockets to exporters' profits. This isn't free trade; it's wage suppression dressed up as economic efficiency.
If your labor input is cheaper because you subvert the wages of labor, it’s not all that surprising where your “advantage” comes from.
This is the Strategy of the Bug. The Method of the Insect.
China didn't magically grow more competitive than the US because its workers one day decided to “save more” or “work harder". People love these story-telling narratives rather than looking at the raw mechanics of what's going on.
China's exporting "competitiveness" is in large part achieved because its workers have intentionally received a smaller share of their productivity gains.
This isn’t "efficiency" but rather a transfer of wealth from workers to businesses.
In China, it's the Hukou system that exploits labor rights and wages. Think of it like the US H1B program, but on steroids. It creates a servant-like, low-wage underclass that China uses to its exporting advantage.
The system classifies Chinese citizens into two categories:
Agricultural (rural) hukou
Non-agricultural (urban) hukou
This classification determines not just where you live, but access to jobs, education, healthcare, housing, and other social benefits.
To compete with this... *shudders*
"Competitiveness"... who wants this?
This is not the only way China facilitates its mercantilist surpluses. It also manipulates its currency, keeping it artificially depressed.
This is of substantial benefit to manufacturing (exporters) at the expense of households (all households are effectively importers, because they only buy goods and do not produce them). A weaker currency aids exporters and is a hinderance to importers.
Important: What matters is whether workers' compensation reflects their productivity. It's the productivity share of GDP where this dislocation has its impact. That's where the Hukou system takes its toll.
To illustrate: on a GDP/worker basis, Chinese workers are around 20% as productive as US ones. If they earned ~20% of the wage that'd be fine and not a competitive advantage.
But they don't, they earn around 10-15% of the US worker. This is a major difference for manufacturing labor inputs.
China has a substantial productivity-income gap relative to the US, and it allows their sustained surpluses to perniciously persist.
The average Chinese worker produces about a fifth of his American counterpart, but consumes an even smaller fraction of that output.
"COMPETITIVENESS"
A global race to the bottom ensues on account of a cancerous globalism wage assault, and the middle class bears the brunt of it. As the only way to compete in this shitty worldwide competition is to continually undermine wages.
To "compete" with this on its own terms is to overtly vitiate labor and hold your middle class in disregard, seeing them as little GDP variables and nothing more. Americans have no desire to "compete" with this, nor should they. Nor should anyone.
I hope this elucidates why certain types love the US H1B program so much, as well as the obsession politicians have with allowing in infinity immigrants.
They present it as “inclusion” “refugees” “diversity” and all walks of warm-and-fuzzy platitudes. This is a lie. It’s a wage-suppression technique.
What else keeps wages down? Labor supply. What increases supply? More warm bodies. Your wages can’t rise if we’re importing a bunch of guys that will work for half the price.
No more.
Don’t worry “free traders”, what you have here is not free trade anyways. You have mercantilist subversions that you have allowed to happen at your expense, because you prefer simple soundbites like “tariffs are tax” rather than root-level, distal-cause analysis.
Industrial policies are de facto trade policies. China can say it has "free trade", but that's a lie. Because it manipulates both its currency and domestic labor, which is every bit a functional trade policy as tariffs are, just with optics that deceive people.
The best time to address this was when it first started, the second-best time is now.
Reject the Insect Method.
Blog in profile.
The purpose of exports should be more imports; exports are real costs, imports are real benefits. When economic behaviors do not reflect this, an insidious strategy is taking shape.
If global trade were driven by comparative advantage, what free-trade types will tell you is the case, persistent major trade imbalances would not exist, because your exporting success necessarily sows the seeds of your future exporting disadvantage.
There would be a natural equilibrating force that manifests between currency strength and exports that results in something approximating mid-to-long-term trade parity between nations. This is not occurring.
There is one materially flawed point in QT that Balaji and others completely overlook: what the word "competitive" means, how it's achieved, and on what terms.
How did China become so darn "competitive"?
It’s often the case that chronic surpluses are accomplished via varying tactics of domestic wage suppression. A tactic that subverts the natural equilibrating forces of balanced trade.
Germany and China are particular culprits, who coincidentally just so happen to have the two biggest trade surpluses.
China is not “more competitive” due to some Ricardian “free trade” advantage. It has taken the perverse approach of depriving its middle class of its share of GDP, which is a fancy way to say structurally diminishing wages.
The popular human-readable narrative is that China's trade success comes from superior efficiency and work ethic. They're extra busy bees over there!
The reality is something different: through its industrial policies (which manifest as de facto trade policies) it's systematically underpaid workers.
When you pay workers less than their productivity warrants, you're not being "more competitive", you're just shifting money from workers' pockets to exporters' profits. This isn't free trade; it's wage suppression dressed up as economic efficiency.
If your labor input is cheaper because you subvert the wages of labor, it’s not all that surprising where your “advantage” comes from.
This is the Strategy of the Bug. The Method of the Insect.
China didn't magically grow more competitive than the US because its workers one day decided to “save more” or “work harder". People love these story-telling narratives rather than looking at the raw mechanics of what's going on.
China's exporting "competitiveness" is in large part achieved because its workers have intentionally received a smaller share of their productivity gains.
This isn’t "efficiency" but rather a transfer of wealth from workers to businesses.
In China, it's the Hukou system that exploits labor rights and wages. Think of it like the US H1B program, but on steroids. It creates a servant-like, low-wage underclass that China uses to its exporting advantage.
The system classifies Chinese citizens into two categories:
Agricultural (rural) hukou
Non-agricultural (urban) hukou
This classification determines not just where you live, but access to jobs, education, healthcare, housing, and other social benefits.
To compete with this... *shudders*
"Competitiveness"... who wants this?
This is not the only way China facilitates its mercantilist surpluses. It also manipulates its currency, keeping it artificially depressed.
This is of substantial benefit to manufacturing (exporters) at the expense of households (all households are effectively importers, because they only buy goods and do not produce them). A weaker currency aids exporters and is a hinderance to importers.
Important: What matters is whether workers' compensation reflects their productivity. It's the productivity share of GDP where this dislocation has its impact. That's where the Hukou system takes its toll.
To illustrate: on a GDP/worker basis, Chinese workers are around 20% as productive as US ones. If they earned ~20% of the wage that'd be fine and not a competitive advantage.
But they don't, they earn around 10-15% of the US worker. This is a major difference for manufacturing labor inputs.
China has a substantial productivity-income gap relative to the US, and it allows their sustained surpluses to perniciously persist.
The average Chinese worker produces about a fifth of his American counterpart, but consumes an even smaller fraction of that output.
"COMPETITIVENESS"
A global race to the bottom ensues on account of a cancerous globalism wage assault, and the middle class bears the brunt of it. As the only way to compete in this shitty worldwide competition is to continually undermine wages.
To "compete" with this on its own terms is to overtly vitiate labor and hold your middle class in disregard, seeing them as little GDP variables and nothing more. Americans have no desire to "compete" with this, nor should they. Nor should anyone.
I hope this elucidates why certain types love the US H1B program so much, as well as the obsession politicians have with allowing in infinity immigrants.
They present it as “inclusion” “refugees” “diversity” and all walks of warm-and-fuzzy platitudes. This is a lie. It’s a wage-suppression technique.
What else keeps wages down? Labor supply. What increases supply? More warm bodies. Your wages can’t rise if we’re importing a bunch of guys that will work for half the price.
No more.
Don’t worry “free traders”, what you have here is not free trade anyways. You have mercantilist subversions that you have allowed to happen at your expense, because you prefer simple soundbites like “tariffs are tax” rather than root-level, distal-cause analysis.
Industrial policies are de facto trade policies. China can say it has "free trade", but that's a lie. Because it manipulates both its currency and domestic labor, which is every bit a functional trade policy as tariffs are, just with optics that deceive people.
The best time to address this was when it first started, the second-best time is now.
Reject the Insect Method.
Blog in profile.
4
At one level, it doesn't really matter if China has 200X US shipbuilding capacity due to "unfair" competition or not.
Their "overproduction" means military strength, which means winning against anyone who isn't willing or able to build like that.
However, at another level, you really do need to get rid of the cope that says China is still just "cheap labor." Because it just misunderstands the world. China is more about robots than Maoists these days. And 1B+ people are now capitalist rather than socialist. Of course they're going to be competitive!
Anyway, here's Tim Cook on the topic. China has real skill, they're not slaves, and you are just not going to compete if you don't want to admit they're genuinely competitive.
Their "overproduction" means military strength, which means winning against anyone who isn't willing or able to build like that.
However, at another level, you really do need to get rid of the cope that says China is still just "cheap labor." Because it just misunderstands the world. China is more about robots than Maoists these days. And 1B+ people are now capitalist rather than socialist. Of course they're going to be competitive!
Anyway, here's Tim Cook on the topic. China has real skill, they're not slaves, and you are just not going to compete if you don't want to admit they're genuinely competitive.
0:56
5
China is sandbagging their strength. The cost of living there is low. Their society is undergoing technolocial hyperdeflation. If they actually freely floated their currency it'd rise, but they'd lose control. But maybe they do it with HKD. @GlennLuk
Vinny Lingham@VinnyLingham
@balajis Why don’t they just float their currency then?
6
👆 typo: should say "technological"
@VinnyLingham But China is very competitive with their current strategy. And their apparent goal is to finish crushing global competition in every market via "overproduction" and only then float the currency.
@VinnyLingham But China is very competitive with their current strategy. And their apparent goal is to finish crushing global competition in every market via "overproduction" and only then float the currency.
Vinny Lingham@VinnyLingham
@balajis @GlennLuk Therein lies the conundrum. China can't be competitive without capital controls.