The Peter Zeihan Podcast Series - Navigating Reindustrialization in a Deglobalized World || Peter Zeihan

Episode Date: November 30, 2025

Ready to level up your geopolitical insight? Join Peter Zeihan's Patreon and get 50% off your first month with code PZ50.Black Friday Sale: https://bit.ly/PZBFSaleThe world we've known and loved is going away, which means the US will have to pull itself up by its bootstraps and get to work...because there is a massive defense buildout and reindustrialization looming on the horizon.Full Newsletter: https://bit.ly/4ikb6MX

Hey all, Peter Zion here, coming to you from the foothills above Denver. Today, we are taking a trio of questions from the Patreon page. We're kind of mushed together into a Franken video. The questions have to do with what sort of economic activity should we expect as a result of the defense buildout? What can localities do to get a piece of the re-industrialization process? And third, is there a concern that we're going to supersaturate the market with certain types of labor as part of this process? All good questions. Let's turn this into a bit of a story.

Black Friday and Cyber Monday are upon us. And so we are offering discounts on new signups for whatever level of our Patreon system that you're interested in. If you use code PZ50, you get 50% off of your first month, regardless of what the signup happens to be. And that will last throughout the weekend. If you're going to engage in significant industrialization or re-industrialization, the single most important thing, The first thing that you have to have before anything else matters is electricity, because if you can't keep the lights on, none of the rest of it works. So, for example, part of the impact of the Trump tariffs right now is it's driving

industrial processes out of the United States because when you have a complicated supply chain and things are going back and forth over borders multiple times, a flat tariff like what the Trump administration has instituted taxes things every time they come in. So it's cheaper just to take the manufacturing. out of the country and put it somewhere else. A lot of that is going to Mexico. They'll finish the product there. They'll ship it in. You'll only have to pay the tariff once.

Much cheaper, much more economically viable. It's really hurting American communities right now. And it's nothing compared to what's coming over the next year. But Mexico can't power itself. Mexico's energy company, Pemmec, state company, is arguably the least competent major company in the world right now, at least competent of size. They can't produce crude.

Mexico is very close to becoming a net crude importer. They import huge amounts of natural gas and even finished electricity from Texas. And so in Juarez, which is the border town across in El Paso, there are these vast industrial parks that have been built to take advantage of the ongoing NAFTA integration and now the Trump policy decisions. But Juarez doesn't have enough electricity to turn the lights on. So these warehouse are just sitting empty. You have to go all the way down to Chihuahua City, which is a better run city. has its own power generation system in order to get electricity, but Chihuahua City only has so many people. And so it's really put a crimp on building out supply chains of any type in North

America. So if you're in the United States and you want to get into this industrial pulse, keep in mind that the Chinese are going away one way or the other. They're literally dying out. We're going to have to make our own product. I agree with the Trump administration on at least that point. You have to start with power. And I know, I know, for those of you in community development, you're like, oh, fuck. I get it. Because number one, when it comes to community development, this is usually not your thing. You usually have a local power company or a regional power company or a private power company or a co-op and you might be unfriendly turns with them, but you're not the decision maker. You've got to find a way to get into

their heads. Number two, I know, I know, I know, I know. The federal government is making this as impossible as it possibly can. The three biggest inputs that go into a new power plant are copper and steel and aluminum and the Trump administration has put a 50% tariff on all of them. And that sucks. And that means even if your community had a plan in place, the numbers don't make sense anymore. You have to go back to the drawing board. And the Trump administration has taken away everything that the previous governments have done in terms of funding for electricity buildout or even financing. So you do have to do it all on your own at a higher cost. And that sucks. It's still the first step and it still has to be done. And we're really at a point now where we are running out of time.

so you need to do it anyway. Okay. Next piece, labor. We have obsessed to a degree in this country with white-collar education. The baby boomers were of the belief that a white-collar job was better than a blue-collar job. It's not something unique to the United States. The Chinese feel that way, too. And so they really encourage their kids to go to university rather than to become a plumber.

Also, the Trump administration has really cool. cramped down on migration from other countries, legal and illegal, something the Biden administration did too, for those of you who forget. And in addition, Mexico has been industrialized and urbanizing now for 40 years, which means they've been moving from the farms and into the cities, and when you live in the cities, it's harder and more expensive to raise kids. And it's reached the point now that there are actually fewer five-year-olds than 10-year-olds in Mexico, and the bottomless supply of semi-skilled labor that we're used to getting has already stopped, even before you think about immigration enforcement.

You put those three things together and the United States has a massive shortage in the trades and blue-collar workers and electricians and plumbers and welders. If you're going to build a power system, you might want to have an electrician or two on board. Now, the way you train these people up are two things. You can follow kind of the German approach

where you do an apprenticeship, where companies go into not just community colleges or tech schools, but high schools and even grade schools to assure kids to make them aware that this sort of career exists. And the fastest way to six figures in the United States right now is to learn how to weld or wire. So if you want to tell your kids the fastest way to get rich,

get them some overalls and some heavy gloves and a pair of pliers and maybe a blow torch and show them how to use them. And if you don't know, find someone. The other path, of course, is direct education. And that is a technical school program. Now, there are lots of places in the United States. States that are great at technical schools and there are lots of places that suck at it. Cincinnati's pretty good.

San Antonio is pretty good. Charleston, South Carolina, Milwaukee. These are all world class when it comes to teaching people how to do things with their hands. But you're more traditional urban centers, your New York's, your San Francisco's, your Santa Monica's. Yeah, not so much. And so we get this little stickiness in the industry where the places that are good at it will also find it easier to ramp up and might actually get local over. oversupply. And the new generation of young people, the millennials, and especially Gen Z,

they're not as interested in moving to get a job as the Xers and especially the boomers were. So we're going to get pockets where we do have some super saturation in labor. And that is a good problem because it means it's easier for industry to move into those sectors and absorb the labor anyway. But as with everything, as with housing, as with labor, nothing's a straight line. and you will have these periods when things will go up and things will go down. But if you don't build out that educational system in the first place, you are not going to participate in the industrial buildout in the first place. Okay, so electricity and then labor.

This is kind of a zoning thing. Most restrictions on most construction are not at the federal level or even at the state level. They're at the local level. This is one of the reasons why I really like working with community development groups. because all the people who are going to be decision makers on what to allow to happen, what to not allow to happen, or in the room. This is really important when it comes to zoning, not just industrial parks, when you're thinking about that electricity question. Because if you want to import electricity from another state, then the federal government is automatically involved. And FERC, which is one of the institutions that basically regulates that, has always been just so damn slow under every administration since at least 1994.

The difference under Trump, too, is Trump has fired a lot of the people. So we've gone from a federal approval process that was slow and sclerc to one that just doesn't function at all because there's no one to actually evaluate, which means that for at least the remainder of this administration, if you're going to get electricity, it has to come from within your state so that state regulatory authorities are the ones who can allow it to cross across jurid jurisdictional lines. In this sort of situation, the states that general have the best options in front of them are going to be larger because there's a greater diversity of options. And of course the ones that are able to produce natural gas on their own

because they can take that stuff, put it in a pipeline. The pipeline doesn't have to cross interstate borders. The federal government is not involved. It can go straight to a power plant whatever it's needed. And Texas is very clearly at the top of that list. I've talked in the past about some of the problems in the Texas power sector. Those all remain. Maybe we'll post what that is so you can remind yourselves. But Texas still has a leg up on a lot of this. Texas's problem is the tariffs. And most of the economic growth we've seen in the industrial space in Texas since roughly 1995 has been because of the integration with Mexico. About 40% of all Mexican-American trade is just Mexico and Texas. And that is being slammed shut by the tariffs. And Texas,

if we can't get some of these federal policies change is arguably one of the states that is going to suffer the most. Other states that are just kind of caught in this vice where they can't get the power and they can't get the labor and federal government is undoing all of the hard work that they've done in the last 30 years, it really comes down to auto alley. That's Michigan, Ohio, Indiana, Kentucky, and Alabama. These are states that are used to working with foreign entities to help build cars and jets. and the tariffs are basically making that almost impossible on top of making it more difficult for them to just simply keep up with electricity demand.

So those are the three things you need to worry about and those are unfortunately the three things you need to worry about with the federal government acting as a sandbag rather than a springboard. And the last question, what about the defense built up? The United States is in the process of Dublin and perhaps as much as quadrupling its production of expendable munitions, missiles,

bullets, artillery shells, everything like that. As preparation for the coming conflicts with both the Chinese and the Russians, or at least that's how the logic goes. For those of you who have been following other conflicts that are going on in the world, the only other conflict the United States is really involved in from an arm supply point of view is Ukraine, and 80% of that aid is stuff that is coming out of mouthballs that the U.S. military doesn't use anymore. So for the most part, what's going on with Ukraine has no impact on American stock. So I put that out of your mind. This is all stuff for the United States for the future. I have no problem with this.

When you have an expeditionary military that it launches things from a distance, it's all about reach, lethality, and accuracy, and that requires a certain amount of munitions. And gearing up for a long fight is not something that I think I have a problem with because that's exactly what the military is supposed to do. Now, of those fights, one will require a lot more weapons than the other one. The China one will be brief. I am really not worried about a conflict with China. China is a commercial maritime power that doesn't have a global navy. They have a large navy in terms of a number of ships, though those ships are small, they don't have much reach, and they certainly don't have legs.

So in the event of a war, the United States would basically sink the entire Chinese Navy in a matter of a couple weeks and then enact a embargo. And even if the United States got sucker punch really early and lost, even a couple of carrier groups, the embargo would still happen because it doesn't have to happen within sight of Chinese shores. That can be 3,000 miles away. and the Chinese economy would collapse in a matter of weeks. So this is the country that is the world's largest energy importer and food importer,

and they import almost all of the raw materials that they need for their state to exist. So you would be looking at civilizational collapse in a matter of weeks to months. I don't worry about a war with China, but I have no problem getting ready for it. Russia's different. Russia's a land war, and the Russians see the current conflict as the opening innings of what they think will be the last great war of the Russian people, and they are planning on it and involving, us at some point. They are not going to stop at least until they get to an external buffer zone

that they think is defensible. And that means reaching the Baltic Sea. That reads meeting the Polis Gap at roughly Warsaw. That means reaching the Carpathian Mountains, which is on the far side of Ukraine, and eventually the caucuses, which involves taking out Armenia, Azerbaijan, and Georgia, and probably going into Central Asia as well. They're committed to this because this has been the doctrine of the Russians for at least the last three centuries. It's just, you know, It's now a bald guy carrying out. Land wars are different. Land wars are fought on multiple fronts.

Land wars involve taking territory and holding territory. So we will need at least an order of magnitude more weapons for a conflict with the Russians. We had an opportunity a couple of years ago to really help out the Ukrainians to break the back of the Russian military. The Biden administration was to be perfectly blunt too slow. And the Trump administration for the last year has basically backed out in a way that has really allowed the Russians to build out their industrial plant with help of the Chinese. They now have a lot of production capacity on the other side of the urals. For those of you who study World War II, there's a lesson there. And so the Russians can fight until the end, and we are now kind of in for a penny and for a pound at this point.

It could have been easier. We have to do it the hard way now. What that means for you. We're probably not going to see a big economic boom in the United States because of the defense buildout. Back in the 80s, before Silicon Valley, Valley was really a thing. The military was known, the space program were known for developing new technologies that would eventually percolate into the civilian sector, things like Teflon and rockets and aerospace and radios and radar and LiDar and eventually cell phones and computers. Now all of those got their origin in defense and space work. That's not the world that we're in anymore. The space sector into SpaceX is partially privatized already and Silicon Valley

is now a thing, so all the computer work is being done by private hands. It's not that there's not roles for the military. It's not that there can't be spin-off technologies that become promising. But the civilian sector really has expanded to absorb almost all of the leading technical sectors. So if you happen to live in an area where the military has a plant that builds shells, they're going to need to double the size of that, and that's obviously going to matter to you. but we're probably not looking at any grand technological leaps because of the military about the only technology at the moment that looks really interesting of course is artificial intelligence and the AI supply chain spans the world dozens of countries tens of thousands of parts

thousands of companies and there is no way it will survive de-globalization so that is a technology that we're going to have another 20 30 40 years to figure out doesn't mean it won't happen, but it also doesn't mean you're going to be alive when it does.