Let's talk about how China's trade war strategy is explained by ancient Chinese economics. Specifically, the Guanzi attributed to one Guan Zhong from -700, though really written by many people over many centuries. It's ancient, but it reads like an I told you so to the present.

Guanzi Theory

The Guanzi says, “To use the thing that is “heavy” to shoot at that which is “light,” to use the cheap to level down the dear, these are the great advantages that can be drawn from the application of the “light–heavy” doctrine.” Does that not describe the current fight? China is using heavy metals to shoot down American drones before they're even made, using relatively cheap rare earths minerals to level down America's luxury terrorism force. These are great advantages from a great-great-great-grandfather doctrine.

The Guanzi also said, “Heaven and Earth have divided up the land for planting grain and provided sources for weapons and money. Capable rulers will have more than enough, while those who are stupid will suffer shortages.” Does it not describe the positions of America and China, ant and grasshopper? The Communist Party of China follows methodical five-year plans while the American government is just an insider trading club that is now pumping-and-dumping their entire economy every few weeks.

Am I saying that the Communist Politburo is applying Guanzi? No, I'm saying that the theory applies them, consciously or unconsciously. As John Maynard Keynes said, “Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.” China is lucky to have a long civilization to draw on, rather than mere scribblers and madmen.

The Guanzi is so fundamental to Chinese economic thought that the Politburo is certainly aware of it, being educated people. Indeed, modern Western economist Isabella Weber devotes the first chapters of her vital book How China Escaped Shock Therapy to Guanzi and The Discourses on Salt and Iron. She makes you go through chapters of ancient theory before you get to the good stuff, because it is the good stuff. This ancient theory still has great predictive power, and a logic a child can understand through metaphor.

China was having debates about private vs. public ownership over two-thousand years ago, ie whether states should tax things or own the means of production themselves. These are broadly the two strategic positions in the current trade war—the US is taxing (tariffs) and China is owning rare earth production—and the Guanzi explains them better than any modern analyst. They say,

When the duke asked Guan Zhong what kind of tax he should impose, he answered that any kind of special tax on an economic activity or property would result in people reducing this activity or concealing their property (Guanzi as in Rickett, 1998, 372–373, 382–383). The state should instead generate revenue “by managing the mountains and seas” (Guanzi as in Rickett, 1998, 373), that is, by bringing salt and iron under state control.

Don't this describes the two strategies of trade war today? Duke Trump is imposing a tax (a tariff is just a port tax), suppressing that activity for dollars he can print anyways. Duke Xi, on the other hand, is “managing the mountains and the seas;” digging up mountains of rocks and bathing them in a sea of chemicals to produce rare earth minerality. This flows from an ancient philosophy of ‘heavy’ industry which goes back to the Guanzi.

Guanzi divides goods into 轻 and 重, Qing and Zhong, heavy and light. Western economist call this inelastic and elastic, which is far more confusing. Heavy and light explains why China is focused on heavy industry while America is focused on light LLMs. And it explains which way this trade war is headed as well.

Again, and I repeat, “To use the thing that is “heavy” to shoot at that which is “light,” to use the cheap to level down the dear, these are the great advantages that can be drawn from the application of the “light–heavy” doctrine.”

The Guanzi's Predictions

Trump enjoys holding up his signature and issuing edicts saying 100% tariffs on this, 30% tariffs on that. But this is light work, statements, not statesmanship. It's just the music on Titanic, steering into an iceberg they could have avoided but hubris. China, on the other hand, speaks softly and carries a big stick, as Teddy Roosevelt said back when America was no less evil but far less stupid.

It's a fundamental philosophical difference, stemming from the fact that China has a philosophy, whereas Trump is just an ignorant philandering, winging it. The Guanzi stipulates that taxes are a blunt instrument, whereas controlling the instruments themselves is real power. As the Guanzi tells us,

If you, my lord, were to issue an order stating, 'I am going to impose a special tax on all adults and children,' it would give rise to great yelling and screaming. But now supposing you issue orders adopting the salt plan, then even if the amount reverting to your government were a hundred times this, men would have no way to avoid it. Such would be the inevitable results.

Thus the Guanzi predicts the US market crash of last week (and hopefully this one), where Trump's tariffing (taxing) ‘gave rise to great yelling and screaming.’ When China then imposed export controls on rare earths (literally special salts that computers can't live without), the free-loading market in the US knew they would have no way to avoid it. Thus the inevitable results, with an I told you so from over two thousand years ago. Shout out nameless ancient scholars, saying I told you so from ancient tomes. I offer you last weekend's Bitcoin crash as a burnt offering.

Heavy Vs. Light

Heavy and light are a key insight, they help you see economics not in terms of vulgar average, but in terms of what matters, regardless of price. Rare earths are relatively cheap but disproportionately important. As the Daodejing says, “The heavy is the root of the light. The still rules over the agitated.” Don't you see this in modern geopolitics? China's heavy industry is at the root of the American economy, and thus they can just stand still (imposing exporting controls) and watch their (self-declared) enemy get more and more agitated.

America cannot even load its own guns without China's support. America is literally attacking its own supply lines by attacking China, a novel strategem of war. I say novel because it's moronic. As some deep state Govini report says, “More than 40% of the semiconductors that sustain DoD weapons systems and infrastructure depend on Chinese suppliers.” And, “between 2005 and 2020, the level of Chinese suppliers in the U.S. supply chains quadrupled… Between 2014 and 2022, U.S. dependence on China for electronics increased by 600%.” It is physically impossible for America to fight a long war against China. They'd be attacking their own supply lines!

All America can do in a petulant fury is tax its own importers, effectively blockading its own ports. They didn't even bother carving out exemptions for inputs they need, it's just blanket tariffs that Trump clings to like a blankey because he's an intellectual man-baby. America has no concept of heavy vs. light, they're just trying to go heavy while being philosophically light.

Heaven and Earth have divided up the land for planting grain and provided sources for weapons and money. Capable rulers will have more than enough, while those who are stupid will suffer shortages.
— The Guanzi

Synthesizing Guanzi and Communism

The Guanzi is ancient philosophy, but really it just looks at things logically. You can get the same insight from the Buddha, who said, “Viewing the non-essential as the essential as the non-essential they, nourished on false thinking, do not arrive at the essential.” Or you can get the same insight from communism, which says seize the means of production. America—devoid of insight and devolved into outward aggression—thinks that its consumption is essential and sneezes at China's means of production. They've got it, in traditional American fashion, ass-backwards and proceed, thus, to the current ass-whooping.

The key insight that connects Guanzi and communism (though not so much the Buddha) is the emphasis on tools and tool-making. As the Guanzi says,

Each woman must have a needle and scissors before she can carry on her work. Each person who cultivates the soil must have a digging fork, a plow, and a hoe before he can carry on his work. Each person who builds and maintains hand carts and small and large horse-drawn wagons must have an axe, a saw, an awl, and a chisel before he can carry on his work. Without such tools, no one in the world can be successful.

Modern electromechanical tools contain rare earths, which can only be refined by Chinese tools, which are also under export controls now. China happily traded rare earths with America for years, but now that America is obviously trying to lynch China, they've stopped selling them rope. And can you blame them? The Guanzi explains this modern predicament with an ancient story. It says,

If a mountain reveals its riches, the prince should take care to seal it off and conduct sacrifices to it. At a distance of ten li from the sealed-off site, he should establish a sacrificial altar. On reaching this place, those who are riding should be required to dismount and walk, and those who are walking should be required to quicken their steps. Those who violate these orders should be sentenced to death with no pardon. In this way, they will be kept far away from any opportunity to exploit the mountain's wealth.

China has long sacrificed to refine rare earths (it's capital intensive and not very profitable) though they didn't have to execute people to keep them away. It's a dirty, difficult business. China happily traded these (not so) rare earths with the rest of the world, until America openly began using them to threaten China. The Guanzi predicted this also. As the Guanzi continued the same story, describing what happens when ‘the mountain's wealth’ is not protected,

These instructions were carried out for ten years, but then flood waters in the Gelu mountains washed down metal. Chiyou took control of it and used it to produce swords, armor, spears, and halberds. In this same year, he annexed the territory of nine feudal lords. Then flood waters in the Yonghu mountains washed down metal. Chiyou took control of it and used it to produce the Yonghu halberd and the Rui dagger axe. In that year, he annexed the territory of twelve feudal lords. Thus the princes of the world blunted their halberds in simultaneous anger, and fallen corpses filled the wastelands. Such was the origin of warfare.

If rare earths continue to ‘wash down’ to the violent Americans, more ‘feudal lords’ will fall (like Iraq, Libya, and Syria, and possibly Iran and Venezuela). It will be (if it isn't already) the origin of world war, just see the fallen corpses in the wasteland of Gaza. Just as Chiyou used washed-down metals to produce halberds and axes, America uses rare earths to make F-35s and submarines. And what do they use these weapons for, and how long before they're turned against China? The Guanzi called it, and China's Ministry of Commerce recalls it when they say,

China has taken note of the important uses of medium and heavy rare earths and related items in the military field. China, as a responsible major country, employs export controls on related items according to the law, in order to better defend world peace and regional stability, and to fulfill non-proliferation and other international obligations.

Ain't it so?

Common Logic and Conclusion

History rhymes and everything is a remix and boy am I sick of it. A lot of this is just common sense. If someone is yelling at you, don't sell them sticks. In this common-sense way, I'm not saying that China is following trade policy from the ancient days. I don't think Xi is reading the Book Of Rites and taking a ritual position facing south, though he might. I'm simply saying that these policies are logical. Some truths are self-evident, as the hypocrites say.

The ancients did not pull this wisdom out of their ass but from observing material reality—the natural power of the mountains and the seas—which still governs base reality. You can get these basic insights from anywhere, if you just listen and care. As the Quran says,

In the creation of the heavens and the earth; in the alternation of night and day; in the ships that sail the ocean bearing cargoes beneficial to man; in the water which God sends down from the sky and with which He revives the earth after its death, scattering over it all kinds of animals; in the courses of the winds, and in the clouds pressed into service between earth and sky, there are indeed signs for people who use their reason.

However, Americans approach elder civilizations with such basic disrespect that they're incapable of learning anything. Even if China and Iran are enemies, there is no greater teacher than the enemy, as Mazer Rackham said in Ender's Game. But America has outsourced its manufacturing and then manufactured those same countries into enemies. It's literally self-defeating, and I for one am here for it. As Napoleon said, when your opponent is defeating themselves, why interrupt? America's policy—especially under its idiot it in Trump—is shoot first and ask questions never, including where do we buy our buckshot? The answer is, from the people that invented gunpowder, and now they've cut us off! As Sun Tzu said in the Art Of War, and I paraphrase, you fucking morons!

America has marched into a trade war with only enough tinder to blow their own feet off. Which they have done, through tariffs. And what are they marching on? Their own supply lines, which China has just cut off, without firing a shot. This is why you don't attack your own supply lines or start multiple land wars in Asia, but Americans ‘know neither the enemy nor themselves’ as Sun Tzu actually said, so they ‘will lose every battle, certainly.’ Now witness a trade war that's going to go like every American war I've ever seen. They're going to lose, and lose ugly.