The Peter Zeihan Podcast Series - The Tariffs Stalk at Midnight + LIVE Q&A Starts Soon!

Episode Date: April 9, 2025

Our next Live Q&A on Patreon is here! On April 9, Peter will join the Analyst members on Patreon for question time! In order to get in on the fun, join the 'Analyst tier' on Patreon before April 9.Join the Patreon here: https://www.patreon.com/PeterZeihanWell, the fat lady ain't singing yet. Late yesterday, more updates on Trump's tariffs were released.Full Newsletter: https://mailchi.mp/zeihan/the-tariffs-stalk-at-midnight

Hey all, it's early in the morning, April 3rd. I set my phone to ping me when the tariff policy chain, and that was an error. With changes overnight, we're now on our 86th tariff policy of the last month. Oh, my God. Today, I just wanted to talk very briefly about what's going on with the Canadians and the Mexicans, which are at the heart of the U.S. trading system, and basically there isn't a manufacturing supply chain that we have that isn't reliant on steps in both countries. According to the newest changes, effective immediately, we have a 25% tariff on all automobiles,

on top of a 25% tariff on all trade coming from Canada and Mexico, on top of a 25% tariff on imported aluminum and steel, on top of a 10% tariff on imported energy. So the baseline rate for Canada and Mexico is technically only 25%. for our number one and our number two largest trading partners, but then we have these additional tariffs that really hit integration issues. So just running through the battery real quick. Energy, most of the crude that comes from Alberta is refined and used in the United States. Basically, we're the only refineries in the world that can process the stuff in most cases.

If the Canadians were to build an alternative piece of infrastructure, which would cost $30 billion minimum and take at least five years. years, all that would get them to do is tide water and then they have to build a refinery, help them build a refinery somewhere else. So this is an energy that basically just became more expensive and is really going to push U.S. refineries to change the way they refine, especially with the distillation column so they can use light or sweet or crude. I'd argue that was probably a good idea anyway, but now there's a very strong financial impetus to do it. And in the meantime, we're going to have significantly more expensive gasoline and diesel, particularly in the Midwest,

and particularly in agricultural regions. That's one. Number two, automotive. At the moment, the automotive tariff only applies to finished vehicles with a partial discount if there are parts in that vehicle that are made in the United States. So if you have a car that's assembled in Mexico, but three quarters of parts come from the United States,

you get a 75% exemption from the tariff. Of course, most vehicles made in North America are very heavily integrated, whether it's the Detroit area, with Ontario or Texas with Mexico. So this has an immediate impact to the tune of about, it's an average based on type, somewhere between $2,000 and $12,000 a vehicle,

with the $12,000 being more appropriate for cars that are imported from Europe. But within 30 days, this tariff will expand to cover not just finished vehicles, but all car parts. And when that happens, it will absolutely shatter the manufacturing supply chains of the United States.

Mexico and Canada, which we've spent the last 30 years building to make it the most efficient car industry in the world, because most of these parts cross the border four and five times. And so doing this will basically break the entire system because this is on top of the 25% tariff that now exists for Mexico and Canada. So 50% charge every time something crosses, even for a cheap car that will add at least $10,000 per vehicle and will absolutely make the United States completely dependent on imported vehicles from places with lower tariffs, assuming nothing else changes. Something else is certainly going to change.

Like I said, this is the 86th tariff policy. And then finally steal an aluminum. The Chinese are collapsing right on schedule. Their demographic disaster is well past the point of no return. It has been for years. They probably have no more than eight years left. And we need to double the size of the industrial plant, assuming we do that in league with Mexico and Canada.

If we're not going to do it in league with them, we're probably talking more about a tripling. and that is a lot of steel and a lot of aluminum that we're going to need, and now that is more expensive. Keep in mind that Canada was our number one supplier of aluminum, and now that costs 50% more, and none other than the president of Alcoa, not a Canadian company, has said that this is one of the most economically devastating things

that could ever happen to his industry, as well as construction in general as well as construction in general, as well as manufacturing in a broader sense. So, yeah, um, The last video I gave to you guys last night suggested a recession of about a year and inflation about 6%. This new stuff that happened overnight suggests it's going to be significantly worse, and I would be shocked if this was the end of it, because Trump hasn't even started announcing things like sectoral tariffs on things like semiconductors,

our medications. We know that there's a million-dollar tariff minimum that's going to come on all port visits by Chinese vessels. It's just around the corner. We've got the car tariffs. car part tariffs that kick in in a month. We are just getting started on this dislocation. If you're seeing this video, you just saw a free video. Since then, we've done a whole series of videos on the impacts of Donald Trump's tariff war and the global slowdown that's going to happen because of it as well as implications for the United States economy as well. In fact, in just a few hours,

we're going to be launching question time for the quarter, which is basically when all the Patreon folks get together and get to grill me personally. So if you subscribe to Patreon now, you not only get the updates and get the newest information as soon as it is available, but you get to find out everything that I know about what's going on for the tariff structure right now and into the future.