China Just Issued America a Warning

Can an old dog learn a new schtick?

Xi Jinping must be wondering that himself after last week’s Trump-Xi bro-fest in Beijing.

Xi opened the summit with a Greek history lesson, asking Trump and the world whether the US and China can rise above the historical record to avoid the Thucydides Trap, the dangerous collision between rising and entrenched powers that has, more times than not, culminated in war between said powers.

The message had nothing to do with diplomacy, as much of the media tried to label it. Nor was it simple verbal pleasantries.

It was, straight up, a warning to Trump and America: We, China, are a rising power. You, the US, are an established power. Think very hard about your next move—especially regarding Taiwan—because history says this will end badly for everyone if you don’t stand down.

Now, did Trump, his team, and the US media catch on to Xi’s message?

Doesn’t seem like it.

All the coverage I’ve seen has sort of missed the point. And Trump, as one might expect, wrote on his Temu Twitter account that “When President Xi very elegantly referred to the United States as perhaps being a declining nation, he was referring to the tremendous damage we suffered during the four years of Sleepy Joe Biden.”

Right.

Now, I’m not gonna run through all the Thucydides stuff. I will only say that the “trap” is a term coined by a Harvard professor who studied 16 examples across history of rising/established powers clashing… and 75% of the time, the clash resulted in war.

What I care more about is that we are in a moment in history when the next great Thucydides Trap is playing out. The last trap was the US/Soviet Union Cold War… but frankly, that was never going to emerge into a full-fledged challenge for America. The USSR had a military, but nothing else that would allow it to rise up economically to claim primacy the way the US and its dollar had already done.

China is a very different story.

And the risk it represents has the power to fundamentally change America and the American standard of living.

I don’t say that to be provocative or hyperbolic.

I say it because, to prepare for the big risks that exist in the modern world, you have to understand what those risks look like, where they come from, why they exist, and the impacts they would have on your life and your country if they play out.

Xi has been using the “Thucydides Trap” phrase publicly for more than a decade, to define China’s rise against an incumbent America. When he invoked it at the summit with Trump, he was making a precise statement about where the two countries stand in the global order—and who holds the stronger hand going into whatever comes next.

And that stronger hand, Xi was saying, is connected to China.

A bold comment to make to the sitting American president. Yet, by any honest accounting of the last two decades, Xi wasn’t obviously wrong.
China has methodically built the world’s largest navy by ship count.
It has constructed the alternative financial architecture—the BRICS payment systems, the yuan-denominated oil trade, the bilateral currency swap agreements—designed to reduce global dependence on the dollar.
It has overtaken the United States as the largest trading partner for most of the world, and by a country mile.
And it has done all of this while Washington was consumed, in turn, by a financial crisis, two decades of Middle Eastern wars, a pandemic, an increasingly savage domestic political schism, and a focus on asinine culture-war mindlessness.

America has reached that stage of the Roman Empire in which society and politics are in clear decay. Don’t be mad at me for saying that. That’s just an honest assessment of reality. You can’t sprinkle sugar on vinegar and pretend it’s sweet.

To survive what’s coming, you have to accept what is reality… and then prepare accordingly.

(Now, is when I briefly segue into salesman mode and tell you that to prepare accordingly—and to better understand what’s coming—you might consider joining me in Dublin in October for my second Annual El Jefe’s Irish Whisky-Tasting and World Changing Confab… or what the marketing gurus are, less creatively, calling the Future of Wealth Summit.)

Again, I will say I’m not trying to be provocative or hyperbolic or melodramatic. I’m just looking at the landscape we live in at the moment, and I am asking: How do these dots connect, and what picture do those dots draw?

If you understand the picture, you have a better idea of what to do about it in your own life so that the future doesn’t destroy your wealth or your lifestyle.

Two and a half thousand years after Thucydides defined the challenges of rising and established powers trying to coexist, humans still haven’t figured out how to escape the trap that situation begets.

Xi knows that. I’m not certain D.C. does.

But I am certain that you can prepare for any trap before it springs.