Decoding the New Economic Order: Democracy’s Test, Europe’s Dilemma, and China’s Leverage #250
⭐️ Sestercentennial edition 🌟
Grüezi!
Trump’s tariff offensive reveals America’s waning economic leverage as China buys from America’s farms. America buys from China’s robot factories.
Policy by pendulum replaces predictability—“the moron risk premium,”
Europe finds itself trapped between two giants—economically tied to China while dependent on America for security, forcing a painful strategic reckoning.
This is my 250th edition. Thanks for coming along on the journey. Drop me a note or comment if I can do anything to improve, or if you have something to say!
1️⃣ Democracy Unmoored
The spectacle makes spectators of us all
For decades, commentators like Martin Wolf and Thomas Friedman have functioned as cartographers of power, geolocating elites across the Western world.
Their role was more than mere reporting, it was reassurance: to demonstrate that behind the apparent disorder of politics and markets lay discernible patterns, rational actors and comprehensible motives.
The cartographers’ conundrum
Now these trusted interpreters find themselves struck dumb. Friedman concludes his latest column:
“I have never been more afraid for my country’s future in my life.”
This isn’t commentary; it’s confession. In the FT, Martin Wolf compares the US president to Alice in Wonderland’s Queen of Hearts—a children’s book reference that captures the inadequacy of charts and theories to capture governance by caprice.
Policy by pendulum
Consider the 25 significant trade policy announcements from Washington in less than three months—how does anyone analyse policies that might be reversed before pen has left paper?
Democratic systems depend not just on institutions but on shared frameworks of understanding. Citizens struggle to respond collectively to what they cannot comprehend collectively. Markets dislike what they cannot predict. Allies find it difficult to align with what they cannot anticipate.
The unusual tone of these Friedman and Wolf’s commentaries—the literary allusions, historical references and confessional candour—feels like nervous birdsong before an earthquake.
For Europeans, particularly those who came of age during the solidarity of the cold war, this is particularly uncomfortable. The European project was built upon principles of rationality, predictability and rules-based governance—precisely the values now vanishing.
When values collapses, power alone remains, and Europe finds itself uncomfortably short of that particular currency.
Are there new analytical frameworks that can make sense of politics in an age of spectacle, social media and populism? We should certainly hope so. Democracy itself may depend upon it.
2️⃣ America’s China Contradiction
When convenient narratives meet inconvenient truths
In Washington’s polarised landscape, there’s one point of bipartisan consensus: criticism of China. The line most warmly embraced? “China stole our jobs.” Its political utility goes a long way:
For Republicans, focusing on external factors diverts attention from questions about ultra-rich backers or wealth inequality.
For Democrats, tough talk on China is a way to address working-class concerns without challenging financial interests or pursuing difficult domestic reforms.
The narrative abides not because of its accuracy, but because of its convenience.
Manufacturing employment has declined across virtually all advanced economies regardless of their trade position with China.
Germany, Japan and South Korea—all run substantial trade surpluses—and all have experienced similar manufacturing employment trajectories to America’s, suggesting it’s not just trade deficits.
Perhaps the next conversation America needs to have is with itself.
3️⃣ Trump’s Economic Overreach
Tariffs, tantrums and trade reality
President Trump’s latest tariff broadside on Chinese imports represents less an economic strategy than economic nostalgia—a longing for a time when America could bend global markets to its will through sheer commercial muscle.
Politico:
“The strategy is the classic Trump playbook—use leverage, be tough, go to the mat, don’t blink,” said one former Trump administration official. “Although he blinked already, which really does harm his credibility on these things.”
That era, if it ever truly existed, has long since passed.
And who to blame? The buck stops at the top—Politico again:
Asked who is leading the White House’s negotiations on China, [a person] close to the White House quipped: “A junior staffer named Donald Trump.”
Trump’s fixation with America’s $300 billion trade deficit with China appears to be operating from what might be called the “biggest customer fallacy”—the misapprehension that size confers decisive advantage. The reality is considerably more nuanced and, for Washington, rather more troubling.
Consider the fundamental asymmetry:
China buys soy and chicken “paws” from America’s migrant-dependent farms; America buys electronics and machine tools from China’s robot factories.
China now controls over two-thirds of global rare earth production and more than 90% of processing capacity—the vital ingredients of America’s most advanced technologies.
Beijing’s patient positioning has rendered traditional American economic bludgeoning increasingly ineffective.
Rather like Lions versus Christians nights at Rome’s Colosseum, the betting is not on who will win, but how long the unedifying spectacle will last.
Diversification by design
Since Trump’s first confrontation with Beijing, Chinese exporters have methodically reduced their American exposure, driving their share of US imports down from 21% in 2016 to 13% last year.
Meanwhile, they’ve constructed elaborate production networks across Southeast Asia—creating tariff-resistant supply channels that European companies have similarly employed.
The markets’ triple-punch reaction—simultaneously punishing Treasury bonds, weakening the dollar, and spiking volatility—reflects something deeper than inflation fears. It signals growing scepticism about America’s economic governance at a particularly precarious moment.
Jamie Dimon, America’s banker-in-chief, says erratic tariff implementation is “challenging” the US’s status as a “haven” of prosperity and rule-based governance. Markets call it simply “the moron risk premium.”
Perhaps most concerning is Washington’s apparent failure to recognise the transformed strategic landscape.
The nearest you can come to an independent Republican voice is Fox Business’s Charlie Gasparino:
The Trump trade strategy faces its ultimate test. Its weakness may soon be exposed as we gird for all out trade war with China while trying to convince the world now to join us. [Trump] decided to shoot first at the world, and then focus on China while now asking the same trading partners we pissed off to help us triangulate a common foe.
The current confrontation reveals not Chinese weakness but American vulnerability—an uncomfortable truth that challenges decades of assumptions about global economic hierarchy.
This cold trade war won’t be won through blunt instruments like across-the-board tariffs, but through strategic investments, diplomatic coordination and recognition of interdependence.
Until American policymakers acknowledge this fundamental reality, markets will continue delivering their verdict: pricing in the risks of economic nationalism—in a world where no nation, not even America, can truly stand alone.
4️⃣ “Here I Am, Stuck In The Middle With EU”
Europe would still rather go back to sleep.
“The West as we knew it no longer exists,” European Commission President Ursula von der Leyen told Die ZEIT this week, acknowledging from the top the fundamental change in the post-war international order that has defined US-European relations for over 75 years.
Trapped between giants
Europe finds itself in a precarious position. Its economic interests are entwined with an advancing China and a tariff-happy US. Its security threats? From the east, China’s partner Russia. And perhaps, from the west, its old ally gone cold—America.
Whilst Von der Leyen takes to ZEIT to talk up Europe, German business paper FAZ reports that German industrial leaders are warning their government about China’s growing technological advantages in sectors from battery technology to advanced robotics, arguing to “stay close,” or risk missing out on innovation.
Some companies listed on its DAX index generate about a third of their revenue in China, and see future profits potentially even more dependent on the Chinese market.
It’s not just Germany. Europe’s strategic confusion manifests at multiple levels.
The public-private divide: Jilted politicians’ atlanticist yearnings contend with constant humiliations from the Trump administration; meanwhile China-dependent corporate leaders want closer tech links whilst afraid of being labelled “panda huggers.”
Solidarity is more aspirational than operational. Spain’s government seeks increased Chinese investment whilst Poland insists that difficulties with America are temporary.
The uncomfortable reality is that Europe currently lacks both the military capacity to ensure its own security and the economic leverage to dictate terms to either China or America.
5️⃣ 5 Things I Learned Reading “House of Huawei”
When tech meets geopol, the plot thickens fast.
Eva Dou’s House of Huawei reads less like corporate biography and more like a Le Carré novel with spreadsheets. The tale offers a rare window into how the tectonic plates of great power competition shift beneath our feet.
The NSA’s “Shotgiant” operation—America’s ambitious programme to infiltrate Huawei’s servers—reveals Washington’s remarkable talent for projection. The circular irony now sees European officials carrying burner phones to Washington—a precaution once reserved for Beijing visits. When your closest allies treat you like a surveillance state, perhaps it’s time for some national reflection.
Meng Wanzhou’s airport detention drama over Iranian sanctions violations stands in curious contrast to how Western financial institutions faced similar charges. HSBC and others wrote cheques for billions whilst their executives maintained uninterrupted frequent flyer programmes. Justice isn’t blind but it can squint selectively.
The weaponisation of supply chains proved Washington’s most potent strategy. A few strokes of policy proved more devastating than aircraft carriers, demonstrating that in modern power politics, technological dependency offers extraordinary leverage. That was then though.
The 2003 Cisco lawsuit against Huawei over router code provided the US government with plausible deniability whilst advancing national interests through seemingly commercial disputes. These corporate manoeuvres reveal how the boundary between private enterprise and state interest has become blurred—particularly when technological supremacy is on the line.
Nations fear in others what they know themselves capable of doing. Having leveraged economic dependencies against adversaries for decades, America now worries about reciprocal vulnerabilities. This circular anxiety drives policy more profoundly than publicly acknowledged, creating a self-reinforcing spiral of mistrust. When you've written the playbook on economic coercion, you naturally assume others have studied it closely.
As Dou’s story makes clear, tech companies now serve as the primary battleground for great power competition. The Huawei saga isn’t merely about smartphones and 5G networks—it’s about who writes the rulebook for the 21st century. Recommended.
6️⃣ The Revolution Will Not Be Supervised
What AI means for the rest of us.
John Cassidy’s New Yorker piece, previewing his forthcoming book, raises several important points about artificial intelligence:
Technological change is political at heart: Resistance to technological upheaval—like the Luddite rebellion—reflects deeper political and social anxieties about inequality and power. AI is not just a technological issue; it is inherently a question of who controls the rewards derived from that technology. Wealth, work and social stability are all bound up in historic struggles over who benefits from innovation.
The “Turing trap” could fundamentally reorder society: Where AI substitutes for human labour, drastically diminishing workers’ economic value and political agency. Unlike previous technological shifts, AI may not simply reshape labour markets—it risks permanently entrenching fundamental inequalities and undermining already fragile democratic structures.
Incremental responses may fail—radical rethinking is required: Current political institutions may not be up to addressing AI’s unprecedented pace and scale. Cassidy implies that navigating this revolution successfully may require dramatic reforms—perhaps even radical social solutions like universal basic income, or fundamentally reimagining capitalism itself—to prevent deep societal fractures.
7️⃣ Odysseus
A kind of Homeric homecoming
As Christopher Nolan’s The Odyssey is set to give us Matt Damon as Odysseus, Ralph Fiennes has got there first as the siege of Troy’s sole surviving senior citizen.
The Return is about the brutal homecoming of a man who has wandered for a decade, losing both his followers and himself in the process.
This is a story the Greeks called “nostoi”—the word gives us nostalgia, but it’s not a rose-tinted recollection, more a tale of ordeal and survival.
The resonance of Homer’s story after all this time strikes an ancient human chord. There is the impossibility of truly returning to the past. The tension between memory and reality. The recognition that both traveller and home are transformed by separation.
And yet there’s something alien too. The ordinary but orgiastic bloodshed with which Odysseus re-establishes himself is foreign. We don’t see killing as a form of “necessary purification,” or violence as a “cleansing ritual.”
Perhaps it’s us who’ve come a long way.
Thanks for reading!
Best,
Adrian
Links
Trump wants to make a deal with China. Here’s how he’s trying to make that happen.
How China Took Over the World’s Rare Earths Industry
Does Germany Need A New China Strategy?