Economics

Stratechery this morning was v good.

🧵: If China invaded Taiwan tomorrow, our entire global supply chain would collapse regardless of military outcome. The economic pain would dwarf anything we've seen from COVID disruptions or last week's tariff announcement.

This structural risk is real and worsening.

The post-WWII economic system, particularly after Nixon's 1971 dollar de-peg, has hollowed out US manufacturing while China's capabilities compound. It's not just labor costs — it's an ecosystem we dismantled as China built theirs.

Complex systems built over decades don't respond well to top-down remakes. New economic systems typically emerge *after catastrophes*, not by administrative fiat. There's a reason we're seeing such resistance by status quo.

For tech, this is deeply problematic. Apple faces impossible choices on iPhone pricing and will likely lean harder into services. Ad businesses (Meta, Google, Amazon) face demand contraction. Only Microsoft's software-centric model looks somewhat insulated.

So we have this fundamental problem: tech companies aggregate enormous demand to offset massive fixed costs. Economic friction reduces velocity, hurting them precisely when they face rising costs and potential regulatory backlash globally.

There are better paths: relieve regulation, ensure equal opportunity, and address China-Taiwan risk by deepening economic ties, not severing them. Kicking the can down the road isn't always wrong when the alternative is a self-induced disaster.

I'm still cheering for startups that can seize this rebuilding opportunity — but incumbents face guaranteed costs with very uncertain rewards. 

The time to build may be here, but the timing couldn't be worse.

https://stratechery.com/2025/trade-tariffs-and-tech/

New administration's approach to restructuring global incentives through blanket tariffs has theoretical validity — but I'm skeptical we'll have the stomach for the economic pain required to reforge the global order. Just look at the market's immediate reaction.

It's a mix of outrage and tacit mutiny.