Our military is preparing for war with China in the Pacific and South China Sea. Military leaders don’t typically say that outright. But that is what the military is doing. War with China is kind of like a tropical depression out there, and various models have it growing into a Category 5 hurricane headed for landfall somewhere in the Southeast. So you start getting ready. It may stay off the coast but it may not.
If China decides to invade Taiwan and we intervene militarily, it is a pretty safe bet that trade between the U.S. and China will stop. I just don’t see big container ships leaving Chinese ports for the U.S. at that point. I don’t see container ships leaving Los Angeles and New Orleans bound for Chinese ports. For one thing, it is going to be hard to get insurance.
We imported $536 billion worth of stuff from China in 2022, up from an inflation-adjusted $10.5 billion in 1985. You can see the situation that U.S. companies have gotten us in, as they hunted for the cheapest labor. Our biggest adversary is now our biggest vendor, and it is our biggest adversary because of all the money we paid China, which it has used to build up its military to push us out of the South China Sea. Brilliant.
We also imported $91 billion from Taiwan. So that is $627 billion worth of stuff, total, that won’t be moving east across the Pacific for a while while the shooting is going on.
For context, our gross domestic product is $26 trillion annually.
There are some hints that U.S. companies are quietly shifting parts of their supply chain out of China, to places like India and Vietnam. Maybe that stuff can stay out of conflict areas. Ideally, the safest place for our supply chains are in the U.S. If you want a safe place to make T-shirts and wood furniture, there are plenty of towns in North Carolina to do that.
Another relatively safe space would be Mexico, where we now get $454.9 billion worth of stuff annually. I expect that if we go to war with China, production in Mexico will rise significantly.
A lot of things that might seem unlikely today would probably happen if war with China happens. There are some big, empty old mill buildings that would probably get tenants. Apparel companies may be scouting locations right now if they want to stay in the T-shirt business.