The Peter Zeihan Podcast Series - Why I'm Okay with Some of the Secondary Tariffs || Peter Zeihan

Episode Date: April 7, 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/PeterZeihanOn March 25, President Trump announced a new 25% tariff on purchases of Venezuelan crude. There's a lot going on with this one, so let's cover the micro and macro.Full Newsletter: https://mailchi.mp/zeihan/secondary-tariffs-and-trump-gets-pissed-off

Hey, Al, Peter Zion here, come to you from Colorado. Just around the corner is question time. When our Patreon members get to grill me live, it'll happen on April 9. For those of you who are not members, this is kind of a hoot, especially considering it's happening just a few days after Donald Trump has announced Liberation Day slash Tariff Day, which is going to change the economic trajectory of the United States and of the world. So look at what's going on in the news, sign up for Patreon, get your questions ready,

and I'll see you soon. Peter Zine here coming to you from Colorado. We're going to do a quick one today about something that happened on the 25th of March. Specifically, Donald Trump announced a bit of a surprise to everyone on his team that there's yet another tariff coming. This one specifically is a 25% tariff on anyone who purchases Venezuelan crude oil. The idea is that Venezuela is a horrible place led by a horrible team that is doing horrible things to its people and the United States thinks horribly of it and therefore no one should deal with it. three things here working from least to most important first this is blatantly illegal the constitution is very clear that the authority for tariffs is uh lies with congress uh not with the presidency whenever the president wakes up with a hair up his ass that obviously does not matter to this administration at all as we have seen over and over and over again and especially since the american senate has basically abdicated all responsibility for policy making and just deferred to trump on everything um legally this is obviously an issue and moving forward. It could be an interesting series of topics in domestic

politics, but I really don't see anyone calling the president on it, so bygones. Second, most Venezuelan crude ends up in the United States. So this is technically a tariff on us. Venezuelan crude is super heavy and it's super contaminated with things like sulfur and mercury. And there are very, very, very few refineries in the world that can process it unaided. And almost all of them are in the United States. Actually, I would argue all of them are in the United States. However, Venezuela in the United States don't get along. So what happens is Venezuela produces the crude. They export it to a broker, and then that broker sells it to U.S. refineries. And so even though Venezuela and the United States have really not gotten along now since 1998, it's been that long, we're still

the end destination for most of their stuff. And everyone just agrees to participate in a little bit of paperwork in order to make the relationship still functional. Now, a little bit does go to China and even less and it more regularly does go to India, but really it's all here. Now, the brokers who do this, those are primarily Chinese. So there could be an interesting legal approach here to go after the brokers as to the United States, but ultimately the people who are paying the tariffs are the people who are importing this stuff, or at least how it's theoretically going to work.

Donald Trump is really not concerned with the detail, so it feels like it's just going to be a flat tariff on all things, China, of another 25%, which I believe brings us to almost 100% at this point. It's been a moving target, keeping track of that. That's a lot. Anyway, third, far more importantly, is Trump's right, globalization is gone. It's not coming back. And the series of tools that were developed to regulate the American economy and its interface with the rest of the system from 1945 until 2015, they, at a minimum, need an update, much less things like saying that tariffs are the purview of Congress, which is enshrined in the Constitution. That obviously needs an update, too. And so while I can make fun of the specifics of what is really a clownish attempt

at economic policy, I have to admit that if we're going to develop new tools, I would rather have them battle tested under an incompetent administration in a short period of time than done the right way, using legalisms and acts of Congress under a more capable president. So I'm actually okay with this. We're moving into a world where it's less based on rule of law and more based on whatever you define your national interest in the moment happens to be. So Venezuela clearly is a country that indirectly indirectly has worked against American national interests for a couple of decades. And basically hitting with a baseball bat in the shins is going to cause them a lot of problems. And the Chinese are not our friends. And so if you want to put an arbitrary tariff on them

and just see what happens, you know, this is as good of a time as any to try this out. It's all about experimentation. We need to develop a fundamentally new toolkit. And while Trump is obsessed with tariffs, tariffs will be at least one of the tools in that kit. So at least for the moment.