IN the early days of the 1970’s, a famous commercial aired about Calgon water softening products with the catch phrase “Ancient Chinese Secret” which was good enough to stick around until the 1980’s.
I shall let my readers on to another “ancient Chinese secret” that our current administration is ignoring and the markets are not paying any attention to.
“He will win who knows when to fight and when not to fight.”
― Sun Tzu, The Art of War
Sadly, President Trump and his team has chosen to fight without a coherent unified strategy of alliances to overcome the world versus the United States on the global stage. To take on China the first year should have been spent prompting the strategic industries needed to sustain our military and industrial base so a trade war would have reduced the level of disruption to production.
I. China Will not Fold
Starting with this Sunday’s rounds on the talking heads programs and social media, this was the theme:
Really?
China agreed to the pause in the most severe of the counter tariffs to Trump’s actions prompting the US media to proclaim the absurd over a “pause” while negotiations take place:
Thus with a huge stock rally preventing a major crash, what is the truth? Let’s review the real headlines the mainstream media promoted and where we are today.
The call never happened.
Trump is trying to meekly insinuate president Xi called him. But the problem is, President Xi has been on state visits in Southeast Asia for the past few days.
— Zhao DaShuai 东北进修🇨🇳 (@zhao_dashuai) April 18, 2025
Did President Xi call him from Cambodia?😆 pic.twitter.com/GJ9Q7tMD9a
The call never happened, again. One week later he still claimed it did. Moving forward, did anything else change?
trump doubles down, says he’s spoken to xi “numerous times” amid trade war
— ian bremmer (@ianbremmer) April 25, 2025
beijing says the two leaders have not spokenpic.twitter.com/3HQNIkMlcB
So far, the credibility is 0 for 2. Maybe things improved soon after.
Uh, that’s a no also. The credibility factor is now starting to show. Perhaps last week things got better?
Donald Trump 2 weeks ago: “We reached a breakthrough agreement with China.”
— Republicans against Trump (@RpsAgainstTrump) May 29, 2025
Treasury Secretary Bessent today: The talks between the U.S. and China are a bit stalled… I believe at some point we may have a phone call between Trump and Xi
Total clown showpic.twitter.com/S4cOJS25WL
Fast forward to today. Here is a world in total turmoil. Markets are under the belief, in this author’s opinion falsely, that the administration knows what they are doing with fiscal and international economic policy.
Below is just a sample of the statements from two of the leading administration spokespeople in the paste 72 hours.
Wow. Key White House strategist Stephen Miller added fuel to the fire shortly thereafter also on May 30th:
The real kicker came today however. The following statement spoke volumes about the panic apparently setting in on the US side.
II. How much of a crisis is this?
This article published this afternoon by The Drive highlights just a small portion of what is about to come:
The Next Car Production Crisis Could Be Caused by Magnet Shortage
The money quote from the article is this one, which just highlights how unprepared for this trade war America truly is:
Switching to a non-China supplier would also be a significant feat when more than 90% of the planet’s rare-earth production capacity, a group of 17 elements, is in China. There is one U.S.-based mine located in Oklahoma, but it still relies on China for processing. E-waste recyclers are working on increasing production, however, such expansion will take years, not days or weeks.
Emphasis is from yours truly and for obvious reasons. Just in this one item, we have no control of our own future and no serious efforts underway to begin assembling a manufacturing plant to undertake the processing that is needed.
If it is potentially this much of a crisis for the car industry, what about national defense, power generation, and other aspects requiring strategic metals?
Sadly, it’s not just rare earths that are at risk.
III. America Does NOT Have the Juice
The most amazing thing about all of this trade conflict is that the American people believe the nonsense spouted by a speaker in their living room or on their cell phone as fact. If one digs deeper into the artificial intelligence and data centers required for its enhanced viability, the problems that America faces are monumental and that should terrify any ration person; or non-sentient artificial intelligent being.
Goldman Sachs started the parade long before the trade war started with this paper on February 4, 2025:
AI to drive 165% increase in data center power demand by 2030
One key chart from this piece is highlighted here:
Two things the United States is sorely lacking in is available ready to convert real estate in coordination with an accessible, reliable increased power supply.
ESG News highlighted the problem which ties into the trade war on April 10, 2025 with a story summed up best in this statement:
The report flags rising concerns around cybersecurity and critical mineral supply chains—both vital for AI infrastructure. Gallium, used in advanced chips, is 99% refined in China. By 2030, data centres could require over 10% of today’s gallium supply.
And that’s just addressing the capacity to develop the necessary power supplies for AI and figuring out how to obtain critical rare earth metals for its expansion. But wait, it gets worse, as America’s ability to build for the future is further cast into doubt.
IV. How Does the New Grid Function With a Major Shortage?
While most Americans ignored the winter power outages in Texas years ago and dismissed the annual California shortages causing brownouts every summer, the reality of a capacity crunch exists despite the proclamations that solar, wind, and “green” energy could not only replace but supplement the existing grid.
WoodMcKenzie published a fascinating paper on May 7, 2025 which highlights the crisis the US might face with the problem highlighted in the following excerpt.
Power issues are consistently the most common cause of serious and severe data center outages – and they are likely to get worse. In its latest Long-Term Reliability Assessment, the North American Electric Reliability Corporation (NERC) found that lower than needed dispatchable capacity points to ‘critical reliability challenges’ facing the industry. It concluded that around half of the United States is at risk of shortfalls that could cause reduced power supply and outages in the next decade. According to the US Energy Information Administration, states with the biggest issues in terms of both frequency and duration include Maine, West Virginia and Vermont. Meanwhile, in a separate study looking specifically at data centers, Gartner predicted that 40% of existing facilities globally will be operationally constrained by access to sufficient power by 2027.
Emphasis, again, is this author’s not the original story.
Why is this suddenly a critical issue?
What if I told my readers it has been, the warnings have been there, and people who wrote about this subject and were dismissed are now suddenly seeing their works on this subject justified.
The majority of Americans have an average understanding of the grid thinking it is like this drawing or just some wires that hook up to an oil filled can above their homes or vented metal object on the ground outside of their homes or neighborhoods.
This all sounds great as long as the United States is in control of the majority of the production for copper wire, transformers, and other parts within the grid.
The key portion however is the transformer enabling the electricity being transmitted upstream or downstream to be converted into practical commercial or residential usage. Powermag.com highlighted this issue in their story on June 26, 2024:
The Transformer Crisis: An Industry on the Brink
If one thinks they need to understand just how bad the crisis is, here is an excerpt that will cause the “data center AI” geeks nightmares for many months to come:
In April, global research and consultancy firm Wood Mackenzie warned that transformer lead times have continued an upward trajectory and now stand at 115 to 130 weeks—more than two years—on average. Lead times for large transformers, both substation power transformers and generator step-up (GSU) transformers, have surged to 120 to 210 weeks—or 2.3 to 4 years. At the same time, depending on the size and application, transformer prices have risen 60% to 80% on average since January 2020, driven upward by raw material commodities. Prices for grain-oriented electrical steel (GOES), though significantly volatile, have almost doubled since the pandemic, while copper prices surged upwards of 40%
In other words, it’s not just a capacity problem to create the electricity for the grid to allow for data center investment and expansion, it is the ability to transmit the power to the very centers themselves.
This chart from the OEC (Observatory of Economic Complexity) a project by MIT might provide some perspective as to how the trade war could actually worsen regarding America’s ability to invest further in artificial intelligence, data centers, and our own power grid just to keep the light’s on.
In summary, the United States is not even a serious competitor on the global stage, much less even close to having the ability to produce enough product for domestic demand.
It is so bad, Utility Dive just posted this story on May 29th to highlight the problem:
Transformer, breaker backlogs persist, despite reshoring progress
Read the following excerpt and think my fellow travelers:
On average, customers today wait three years for high-voltage transformers and one year for distribution transformers, said Adrienne Lotto, senior vice president of grid security, technical and operations services at the American Public Power Association. About 80% of the former and 40% to 50% of the latter are imported, according to Benjamin Boucher, a Wood Mackenzie senior data analyst focused on electrical supply chains.
Meanwhile, the National Electrical Manufacturers Association predicts 2% annual electricity demand growth through 2050. Given load growth expectations, fully reshoring transformer production could take years and cost many billions of dollars — if it’s even feasible, Boucher said.
Years after the problem was recognized, the United States has yet to seriously address this problem and there are zero initiatives from the Trump administration to deal with this issue.
Until the United States starts a serious investment program to accelerate development of power supplies for the burgeoning artificial intelligence industry and data centers, including project development of nuclear, natural gas, and even coal back up systems for these locations, China will surpass the US probably within the decade.
The assumption we shall always remain dominant in this field is similar to the ignorance of our logistics capabilities which tie in quite nicely to this discussion. If one doesn’t own the ships or manufacture them to haul the freight from one nation to another, they can and will work elsewhere. Electrical generation and distribution is no different.
That high voltage charge will seek out the nations that will pay them that provides the most bang for the buck. So far, it would appear that the United States, again, is at least a half decade behind in recognizing this basic fact.
