Framing a Conflict With China

“We do not benefit from a relationship with China or any other country in which we put our values and our ideals aside.”

– Barack Obama

Author's Image

May 6, 2025 — The US has been on the road to conflict with China since 2001, when Clinton and Gore pushed for China’s entry into the WTO (World Trade Organization) by claiming that capitalism would inevitably democratize China.

It didn’t, but it did put on a course toward conflict.

Now that the conflict is finally reaching a breaking point (embargoes, tariffs, cyber disruption, potential invasions, etc.), let’s spend some time framing it in a way that will help us make sense of it.

Orienting the Conflict

The first step is to orient our thinking by determining what kind of war this is and what victory looks like.

While this conflict could become a war, that isn’t likely since it isn’t a struggle between existentially incompatible systems.
On the contrary, we both use the same system (capitalism) and profit mightily from participating in a global trading system. It’s in neither country’s interest to destroy that system through protracted military conflict.
With this in mind, a better historical template is a trade war. The century-long trade wars and struggles between Venice, Genoa, Byzantium, and Portugal for control over lucrative trade networks are a good starting point.

Trade War?

The historical examples of these trade wars can give us a ‘feel’ for this type of conflict.

Slow Victory. In this type of conflict, opponents attempt to squeeze and drain their opponents until they are no longer a threat or find ways to generate wealth that the opponents cannot access. It’s a slow race to see who can become the wealthiest and most capable of generating more wealth, until dominance becomes uncontestable. This conflict is similar to the Cold War, but instead of two separate economic systems, it’s inside the same system.
Reinvention. An opponent will attempt a strategic reversal by reinventing the contest when possible — for example, breaking a competitor’s monopoly by finding a way to produce it domestically (Byzantium and silk worms smuggled out of China), a new trade route (Portugal, around Africa), or unique defensive weapons that make their trade routes hard to disrupt (Byzantium’s Greek fire).
Sudden Escalation. Occasionally, trade wars escalate into hot wars that destroy the opponent. For example, the Byzantine crackdown and arrest of Venetian merchants led the Venetians to use debt to convince French crusaders to join them in sacking Constantinople. Another example: the Genoan fleet sent to blockade Venice was trapped in a Venetian lagoon for nearly a year before capitulating, leaving the city vulnerable to French domination.

Network War

Of course, the conflict between the US and China isn’t just a struggle over the global trade network. It’s a war for dominance over the entire global network and what it makes possible.

Logical connectivity — from sprawling JiT (just in time) manufacturing chains to energy flows.
Social connectivity — from social decision making to networked politics.
New technology — from AIs to advanced chips.

Now, let’s frame the orientation for this networked conflict.

The center of gravity of the conflict will be within the global network.
As a result, the war will mainly be in the network domain. Participants will focus on growing their access to the network, increasing its throughput, suppressing the opponent’s access to it, and increasing their control over it.

The goal of the conflict will be network dominance, while avoiding the overreach that would trigger a catastrophic conflict. Military action will only be effective if it advances the war in the primary domain — the network.

John Robb
Substack and Grey Swan

P.S. from Addison: Something’s definitely in the air.

Jennifer asked me yesterday why more people aren’t reading Empire of Debt, Demise of the Dollar, or Financial Reckoning Day. “So many of the themes you began writing about 25 years ago are happening right now,” she said. I’ve noticed she’s been more concerned lately — for our money, our future, and the kids.

Then this morning, three emails popped into the inbox.

The publisher at Wiley wrote: “Are you doing a new push for the books? The market’s right.” Nudge, nudge.

Brian Q. said: “I’m on page 80. I love the wit. I can tell Twain was an influence, but I’m scared. I’m retired. My kids are 32 and 30. I fear the worst. Is there any way out of this debt?”

And from Jerry N.: “I wish to purchase all three books. What’s the best way to do that?”

Coincidence? I don’t know, but something’s up. Jerry, you can get all three books at the links below. We haven’t bundled them into a set yet. Maybe now would be a good time.

Your thoughts before we continue? Add them to the mix here: addison@greyswanfraternity.com

“We do not benefit from a relationship with China or any other country in which we put our values and our ideals aside.”

– Barack Obama

Author's Image

It didn’t, but it did put on a course toward conflict.

Orienting the Conflict

The first step is to orient our thinking by determining what kind of war this is and what victory looks like.

While this conflict could become a war, that isn’t likely since it isn’t a struggle between existentially incompatible systems.
On the contrary, we both use the same system (capitalism) and profit mightily from participating in a global trading system. It’s in neither country’s interest to destroy that system through protracted military conflict.
With this in mind, a better historical template is a trade war. The century-long trade wars and struggles between Venice, Genoa, Byzantium, and Portugal for control over lucrative trade networks are a good starting point.

Trade War?

The historical examples of these trade wars can give us a ‘feel’ for this type of conflict.

Slow Victory. In this type of conflict, opponents attempt to squeeze and drain their opponents until they are no longer a threat or find ways to generate wealth that the opponents cannot access. It’s a slow race to see who can become the wealthiest and most capable of generating more wealth, until dominance becomes uncontestable. This conflict is similar to the Cold War, but instead of two separate economic systems, it’s inside the same system.
Reinvention. An opponent will attempt a strategic reversal by reinventing the contest when possible — for example, breaking a competitor’s monopoly by finding a way to produce it domestically (Byzantium and silk worms smuggled out of China), a new trade route (Portugal, around Africa), or unique defensive weapons that make their trade routes hard to disrupt (Byzantium’s Greek fire).
Sudden Escalation. Occasionally, trade wars escalate into hot wars that destroy the opponent. For example, the Byzantine crackdown and arrest of Venetian merchants led the Venetians to use debt to convince French crusaders to join them in sacking Constantinople. Another example: the Genoan fleet sent to blockade Venice was trapped in a Venetian lagoon for nearly a year before capitulating, leaving the city vulnerable to French domination.

Network War

Of course, the conflict between the US and China isn’t just a struggle over the global trade network. It’s a war for dominance over the entire global network and what it makes possible.

Logical connectivity — from sprawling JiT (just in time) manufacturing chains to energy flows.
Social connectivity — from social decision making to networked politics.
New technology — from AIs to advanced chips.

Now, let’s frame the orientation for this networked conflict.

The center of gravity of the conflict will be within the global network.
As a result, the war will mainly be in the network domain. Participants will focus on growing their access to the network, increasing its throughput, suppressing the opponent’s access to it, and increasing their control over it.

John Robb
Substack and Grey Swan

P.S. from Addison: Something’s definitely in the air.

Then this morning, three emails popped into the inbox.

The publisher at Wiley wrote: “Are you doing a new push for the books? The market’s right.” Nudge, nudge.

Brian Q. said: “I’m on page 80. I love the wit. I can tell Twain was an influence, but I’m scared. I’m retired. My kids are 32 and 30. I fear the worst. Is there any way out of this debt?”

And from Jerry N.: “I wish to purchase all three books. What’s the best way to do that?”

Coincidence? I don’t know, but something’s up. Jerry, you can get all three books at the links below. We haven’t bundled them into a set yet. Maybe now would be a good time.

Your thoughts before we continue? Add them to the mix here: addison@greyswanfraternity.com

Private education and health services accounted for the bulk of job creation over the past year.

Over the last twelve months, that category added roughly 780,000 positions. Excluding those gains, the economy shed approximately 350,000 jobs.

Manufacturing, the purported object of Trump’s tariff strategy, declined by about 100,000 in 2025. Transportation and warehousing fell by more than 100,000. Professional and business services contracted. Information and financial activities declined.

Federal employment dropped again in January, down 42,000. The civilian federal workforce now sits roughly 11% below its October 2024 peak.

Most investors are familiar with the price-to-earnings, or PE, ratio. But what if you invert that, and divide earnings by price? You get what’s called the “earnings yield.”

Earnings yield on the S&P 500 is near a 100-year low.

Moody’s Mark Zandi urged restraint. “I wouldn’t exhale,” he wrote. The data coming out of the Bureau of (be)Labor(ed) Statistics (BLS) is still undergoing an overhaul from years of wonky miscalculations.

Downward revisions erased much of last year’s gains. Since April, aggregate job growth has barely moved.

Over the past twelve months, private education and health services added roughly 780,000 jobs. Remove those gains, and the broader economy shed about 350,000 positions.

In 2025, the top 10% of households owned 93% of U.S. stocks, driving wealth concentration to 60-year highs. Those high-income households accounted for nearly 60% of total personal spending by the third quarter of 2025.

Wage disparity and an asset wealth gap define fractious politics in this midterm year. And help explain why both parties appear to be talking only to themselves.

Private education and health services accounted for the bulk of job creation over the past year.

Over the last twelve months, that category added roughly 780,000 positions. Excluding those gains, the economy shed approximately 350,000 jobs.

Federal employment dropped again in January, down 42,000. The civilian federal workforce now sits roughly 11% below its October 2024 peak.

Most investors are familiar with the price-to-earnings, or PE, ratio. But what if you invert that, and divide earnings by price? You get what’s called the “earnings yield.”

Earnings yield on the S&P 500 is near a 100-year low.

Downward revisions erased much of last year’s gains. Since April, aggregate job growth has barely moved.

Over the past twelve months, private education and health services added roughly 780,000 jobs. Remove those gains, and the broader economy shed about 350,000 positions.

Wage disparity and an asset wealth gap define fractious politics in this midterm year. And help explain why both parties appear to be talking only to themselves.