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

Mining stocks amplify everything. First Majestic went from losing money to 45% margins without building anything new. They just held the line on costs while silver did the heavy lifting.

That cuts both ways. If silver drops hard, margins compress just as fast. Same leverage, opposite direction.

The miners with the lowest costs and cleanest balance sheets will hold up best in a pullback and capture the most upside if the deficit keeps grinding.

Economists at Goldman Sachs said this morning they expect core inflation to finish the year around 2% even while GDP rises at a “surprisingly strong” 2.5% clip.

In our view, their inflation forecast is optimistic. Their GDP call? Modest.

The last time we pumped this much liquidity into the system — 2020 through 2022—the result was a manic asset bubble, runaway inflation, and an epic hangover at the Fed.

Goldman’s optimism has triggered a fresh round of bullish bets: cyclical stocks are rallying, “dispersion” in the S&P 500 is spiking, and the Fed is expected to cut interest rates twice before Jerome Powell gets kicked out of Washington at the end of his term on May 15.

Anecdotally, we’re hearing stories of warehouses full of GPUs sitting unused for lack of energy to power them. It’s a natural feature of the heavy capital investment in new machines. The grid has to catch up!

While Trump’s great reset rolls on in 2026, keep an eye on modular nuclear reactors and increased demand for uranium, natural gas and related resources.

These PM producers are literally printing the most ‘hard money’ that they ever have at these metals prices and record margins here at the midway point in Q4.

If there ever was a time for this sector to get overheated and frothy, this would be it… only that isn’t what we’ve seen playing out.

PM producers are still insanely profitable at even at current metals prices and should be far more valuable based on their margins, revenue generating potential, and their resources still in the ground.