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

The genius of the American experiment is that it allows for course correction — but only if we remember our role. Not as subjects, but as stewards.

Your role, good sir or wise gentle lady, is to continue doing what you’ve always done: managing your affairs with clear eyes and a steady hand, educating those who’ll carry the torch, and resisting the ever-present temptation to comply just for comfort’s sake.

Yes, the government will grow. Yes, the financial world may turn inside out before breakfast — possibly before your second cup of coffee. But you still have the right to think. To choose. To invest in your own way.

For now, the mixed economic data means stocks will likely trend higher, until there’s a crisis. And when there is a crisis, the Fed will finally make its move and aggressively cut rates.

And, for now, bond yields are still near their highest level in 15 years. Bond yields, even on U.S. Treasury bonds, are over the rate of inflation.

In short, it’s not a bad time to lock in bond yields now – which will go lower during a crisis, pushing bond prices higher. And in a crisis, today’s high-flying stocks, driven by retail investors with a fear of missing out – could easily get crushed.

Markets are humming, policy dazzles, but beneath the gloss — tech booms, liquidity surges, digital currencies — the very foundations of money, governance, and investor sentiment are cracking, realigning, even smoldering.

The post-World War II Pax Americana isn’t evolving; it’s being dismantled rather quickly.

What’s emerging is accompanied by a load of distraction and showmanship. So it’s important to focus on the actual events taking place right now that are going to affect your portfolio this year.

And, we can’t overstate this, the changes that are actually happening right now to your money.

Today, digital dollars masquerade as cash, tariffs are cloaked as protection, AI layoffs spun as productivity, private assets packaged as democratized. And yet, none of it matters if the final pillar — confidence — crumbles.

When belief falters, no trumpet of “seismic event” grants you shelter.

Private equity tends to perform better than the stock market, provided you do so over time.

Private credit, a newer asset class but a rapidly growing one, also shows strong returns, as well as relatively high current income.

And if you have a retirement account, chances are you’re willing to think long-term.

Win-win, right? Not necessarily.

First, these new funds would also come with an incentive structure similar to investing in a hedge fund. That includes a higher fee than a market index ETF – think 2% compared to 0.1% (or less).

Plus, many of these funds have a hurdle rate attached to them as well. Once they clear 5% returns – which, with private credit, can be easily cleared by making deals with cash returns over 5% – additional incentive fees may kick in.