How Trump’s tariff chaos is reshaping global trade

Today’s episode of Decoder is a little different, and I think it’s one of the more illuminating conversations I’ve had in a while. I’m talking to Evan Smith, the cofounder and CEO of Altana, a company that makes software to track and manage the global supply chain.

Smith started Altana in 2019 because he predicted that the first wave of globalized manufacturing and free trade would come to an end, and companies would need powerful tools to adapt their supply chains as borders, tariffs, and tensions got more complicated. Here in 2025, that looks like it was a pretty good bet, even if the way it’s playing out is a little more stressful and chaotic than anyone really wants.

The easiest way to think about Altana’s product is that it’s a map of the global supply chain — you’ll hear us call it that several times in this conversation. What that means is that Smith has a front-row seat to how things like Trump’s tariffs and isolationist trade policy are playing out in real time. So while we talked about Altana as a company a little bit, we really spent our time talking about where things like the iPhone are made and where they might be made in the future.

You’ll also hear us talk a lot about China and how the Trump administration is focused on reducing our dependency on Chinese manufacturing — a goal that may or may not be possible on the kinds of timelines that matter to politicians, especially ones like Trump.

Smith has a lot of insight here, and he’s very even-keeled about what Altana’s map of the world is showing us about trade policy and conflict between major powers like the United States and China. There are some big, unsettling ideas here, but talking about them directly and with clarity at least made me feel like I had a framework to understand the endless on-again, off-again tariff news cycle.

Oh, two notes before we start. You’ll hear us mention John Mearsheimer, who really was my international relations professor at the University of Chicago in the early 2000s. Mearsheimer is a famous proponent of what’s called realism, a philosophy that says great-power competition dominates world affairs.

The other note is that you’ll hear us talking about China being granted membership in the World Trade Organization in 2001. That probably seems like a bit of trivia now, but it was a major political decision at the time — a decision that you’ll hear Smith characterize as the end of the first wave of globalization and the end of the post-WWII world order. You can certainly argue with that characterization, but it’s worth calling out because it was indeed a major, controversial decision at the time. There’s a lot in this one; I’m very eager to hear what you all think about it.

Okay: Altana CEO Evan Smith. Here we go.

This interview has been lightly edited for length and clarity.

Evan Smith, you’re the co-founder and CEO of Altana. Welcome to Decoder.

I am excited to talk to you. Altana builds software that helps people think about supply chains and logistics. There’s a lot to talk about there.

I was reading the company’s manifesto, which you wrote in 2022. You founded the company in 2019 on the thesis that globalization as we knew it would break down and change, and Altana could build some software to help people in a new era of globalization. That bet seems very prescient right now — but also maybe a little bit destabilized, given how globalization might change. Explain what you mean by that manifesto, that founding statement that globalization is breaking down.

The premise was that the side effects and the unintended consequences of globalization since World War II were creating its demise. That breaks down into a few dimensions, principally around geopolitics. So it’s the US and China playing out a great power competition principally in the supply chain and economic theater. We can go back to that—the other one’s around climate. So you had this race to the bottom, where everything was outsourced to the lowest cost, just-in-time manufacturing locations, and the world’s physical production became dirtier and dirtier and dirtier. And you have these increasing climate dislocations and the policies, and the corporate actions, and the capital market actions that are following as a result.

The third one was around the destabilization of the middle class of the West. So if you have a rapid sort of outsourcing and a collapse of manufacturing, then the point of view was you’re going to have a populist response. And I think we’ve seen that play out. The fourth thing we said was that these just-in-time supply chains are only economically efficient under conditions of stability. Because of reasons one through three, our point of view was that the world was getting a whole lot less stable. Therefore, the supply chain itself — the fabric of the world’s physical economy — was going to break down. And I think that’s borne out since COVID. We didn’t literally predict COVID-19, but we did predict the fragility in the system.

I am the editor-in-chief of The Verge; I often think about things in terms of the iPhone. I’m a kid of the ‘80s and ‘90s. I remember Ross Perot saying that NAFTA, the North American Free Trade Agreement, would lead to a giant sucking sound of labor being moved to Mexico. I think a lot of people believe that it played out exactly that way.

But at the same time, you also get the ability to make a product like the iPhone, which is just inherently global. It’s manufactured in several countries around the world, principally in China, but lots of parts flow back into China so Apple can make that product. They make it at an enormous scale. But then you can look at the Tim Cook era, and you can say from one perspective, “He increased Apple’s stock price.” But from another perspective, you can look at it and say, “Oh, the iPhone has actually prevented the great power conflict,” right?

Everyone wants an iPhone. If the Chinese government somehow makes it impossible for people to buy iPhones in China, that would be bad. If the US government makes it impossible for US customers to buy the iPhone, that would be bad, and both economies would crash. And that’s going to keep us from being in a war.

And again, I’m a kid of the ‘80s and ‘90s. When I was in college, John Mearsheimer wrote The Tragedy of Great Power Politics, which is a big book that predicted the United States and China would go to war, and the next day was September 11th, and then that whole thing got sent to the side. Now maybe we’re back to it, but I just look at all of that, and your thesis, which feels correct, like it’s being borne out, and I’m like, “Oh, this thing is actually being held together by some consumer products.”

Making those consumer products and making our economies interdependent is the thing that keeps us from going to World War III. Are you all the way there? Are you building software to be like, “Okay, I’m going to try to hold this together a little bit longer?”

I’m building software and AI to help the public and private sectors navigate that dislocation and hopefully build resilience and some amount of decoupling without it resulting in a hot war.

But look, the version that you described of the economic ties that bind, I too kind of had that economic worldview. I got an economics degree from Yale in 2007, so at the absolute apex of the neoliberal and kind of neoconservative worldview, where… I literally went to school with Thomas Friedman’s daughter, and I read all of his books. His famous thing was the Golden Arches theory, right? Countries that have McDonald’s don’t go to war with each other, which was true then. So, the premise was that free trade and economic interdependence result in peace between nations. And as I’ve gotten older, I’ve kind of watched the world progress, studied more of history, and read some Mearsheimer, and I’ve actually kind of come to the exact opposite view — meaning peace gives rise to free trade and not the other way around.

When there is an equilibrium in the whole global geopolitical great power competition, then what you see through history is that trade progresses between nations; and then in the moments of disequilibrium and big shifts in power, those become more violent. Then trade collapses. And so, my fear right now is that we’re in a disequilibrium. You have a rising great power. You have multipolarity with Russia and the EU asserting themselves in different ways, and the US, at least on a relative basis as a declining power, is no longer the single global hegemony. Over the last 15 years, if you look at the world, it’s in a state of disequilibrium, and I see the tariff issue. I see all this trade policy and volatility. I see all the economic security policies and industrial policies following as a result. So it’s all sort of nested within that big geopolitical circumstance.

When you think about the thesis of Altana, in which you identified that globalization is running one version of its course, and there’s going to be a next version… I’m reading your manifesto. Your idea here is: We’re going to need a lot more data so we can build supply chains across our partners that we trust, across actual suppliers that we trust, so we can see the social costs in other countries of outsourcing or the social cost of outsourcing labor to other countries. I look at that, and what I see is, “Oh, we should make globalization better.”

It’s changing. There are some great power dynamics, but we are still going to have this. I look at the Trump administration and the imposition of tariffs, and the idea that we’re going to annex Canada, and we should stop it, right? The response from basically every member of the Trump administration to the question “Are tariffs going to cross prices to go up?” Is, “Well, then you should manufacture it here.” That seems wholly unworkable to me.

Again, I just go back to the iPhone. I’ve listened to every explanation from every Apple executive, from Steve Jobs on down, about why the iPhone can’t be built in the United States of America. And they seem correct. I take them at their word that if they could solve the problem, they would. And yet the Trump administration seems to think that just by turning the knob on costs they will be able to bring manufacturing back to the United States. Do you think that’s possible?

I think it’s certainly possible to bring some manufacturing back to the United States. I also think it’s possible to bring a lot more manufacturing into North America. So, in other words, we’ll do some things more and better, and you have both the labor cost environment and the national security, or sorry, the natural resources, starting in southern Mexico and going north. You have that stratification of low-cost, relatively low-skilled labor going to higher-skilled, higher-cost labor, and you can manufacture most of everything that the United States consumes in our backyard, so to speak.

So that’s just sort of a fact of the market around us. Will that happen entirely? No. And will that happen immediately? No. So then, what’s the policy objective of the Trump administration? I’m not in the Trump administration, so I won’t speak to it with total authority, but I have spoken with people who are in the Trump administration, and I think there are two key themes. One is yes, absolutely, there’s a motivation to bring manufacturing back to the United States and back within the USMCA, which is the US, Mexico, Canada Free Trade Agreement that replaced NAFTA under the first Trump administration.

Which might be again replaced by the annexation of Canada. Even that doesn’t seem like a stable foundation, but okay, continue. We’ll take it, but some people in the Trump administration published that data.

Objective number one. Right. So, theatrics aside, policy objective number one is that we want to bring industry back generally, and we want to rebuild a middle class. It’s an industrialization initiative, and they want to do that by creating trade barriers. The Biden administration had a similar objective, but they did that through very large-scale subsidies and industrial policy initiatives to direct capital toward those industries they wanted to see in America. So that’s thing one.

The second thing is there’s a very clear objective, which he’s given to his policy team, to be strategically decoupled from China in critical industries by the end of his term. Critical industries — a kind of policy-speak for things that matter a lot, like food, telecom, aerospace, defense, and advanced electronics. The things that we couldn’t do without. Everyone’s less concerned about toys and apparel and more concerned about the things that are critical to our economic and national security. He’s told his team that within four years, we need to bend the supply chain such that the United States no longer has these fundamental dependencies on China. So that’s going to impact everything from critical minerals to chips to everything downstream of those, like pharmaceuticals. It’s a huge, huge economic policy objective with sweeping consequences for the private sector.

I want to hold on discussing China for one second because I want to come back to it and talk about it in depth.

Altana builds software that helps people see these supply chains. Describe how you build the software and what it does for your customers because I think understanding your viewpoint and your visibility into these supply chains will help me understand how you can see the shift from China in real time.

The whole world’s a supply chain. At the base level, what we do is model the whole physical world of companies making things and buying and selling them from other companies. So it’s like a bottom-up, Google Maps-style view of all the companies — where they operate, what they make and sell, and the connections between them. In the same way that Facebook built a social graph that connects everybody within six degrees of Kevin Bacon, and LinkedIn is our professional relationship graph which shows how you’re connected to all your colleagues and counterparts… We’re doing the same thing but at the scale of the whole global supply chain network. So that’s the foundation. And the way that our customers primarily use that is to understand and manage what are called value chains. This matters in the context of the globalization discussion we were just having.

So, what’s a value chain? A value chain for any product is the whole network of production all the way back to the soil. Let’s take the iPhone: The silicon comes out of the ground, it turns into chips, and it turns into all the logic in your phone. The graphite comes out of the ground, the aluminum comes out of the ground. The whole system of raw materials through the intermediate goods, through the final assembly, and the sale and end use of the product is called the product value chain. We make it possible to know and manage that whole network for all the products in the world, and it sits on top of that map of the world that we’ve built. So why is that novel? Because of globalization and outsourcing.

There was a deliberate move to outsource that whole value chain. The whole theory was that we should only do our comparative advantage. We should only do the most specialized version of that within our borders, and everything else got outsourced and outsourced and outsourced and outsourced. So it became impossible to really know your supplier’s supplier or your supplier’s, supplier’s supplier, and even in the other direction. Western electronics companies keep seeing their stuff get into Russian weapons systems. Well, they’re mostly not selling to Russia, so it’s that customer’s, customer’s, customer that’s receiving the electronics, right? That’s the value chain.

We make it possible to know that and to map it, manage it, and actually collaborate with those value chain partners. The story I like to tell is in the 1950s, Ford Motor Company used to own the entire value chain of its cars. They owned rubber plantations in Brazil to make tires, and now they just do the final assembly. So that’s the point. Boeing doesn’t own its value chains anymore. They can’t even make an airplane. Ford is in the final assembly business. Apple doesn’t even manufacture anything; they just create the software and the designs, and everybody else manufactures it. So what we’re doing at our core is we’re kind of making it possible to do what the industry used to do, which is to see and connect and have some control over that whole network.

In our case, you don’t have to own the whole network. You can illuminate it to see the compliance, security, and resilience dimensions of it. And we can actually give our customers the ability to map, manage, and collaborate across that whole network.

So you collect a bunch of data from across these value chains from different suppliers. Why do these companies give you that data?

They don’t share it in the broadest sense. What they’re doing is they’re connecting to a network that we provide. And the thing we built the company around, the core invention of Altana, was that everybody could kind of keep their data sovereign, siloed, private, and connected to the network, and we’d sort of solve for both at the same time. What that means practically is that it’s like a hub-and-spoke federated data model. So we provide the shared map of the world and all the software and AI systems in the hub, and our customers keep their data in a spoke, and we bring the platform down to their data and not the other way around.

There’s a Maersk spoke, there’s an LL Bean spoke, there’s a General Atomic spoke. None of those customers are sharing all their raw data with each other. They’re not allowing us to pool it all centrally, but what they are doing is subjecting their data to the network; they’re connecting their data to our platform, and they’re seeing how they fit within the broader network. We learned from that. We build out the network connections, and we train AI systems, and that all adds up to a model where every customer that joins adds to the visibility, connectivity, and intelligence for all the other parties.

Put that into practice for me. Let’s just use LL Bean. LL Bean wants to manufacture some more hats for the stores for ski season. What does Altana help them do?

LL Bean tends to know not just the garment manufacturer it buys from and has a direct relationship with, it will also sometimes know the textile manufacturers that feed into those garment facilities. What it doesn’t know is everything upstream of that. It’s like, where does the cotton come from? Where does the polyester come from? Where does the zipper come from? At the base layer, we just help them answer the question: What’s the whole network of the value chain for every one of my goods, all the way back to the soil? They’re motivated by a few things.

One is ensuring that their goods are compliant and free of forced labor. So speaking of trade barriers, that was a big one that happened in 2022. The US banned all imports of goods into the United States that have any of that upstream value chain content coming from Shenzhen, China. So it’s a rebuttable presumption that the Uyghur forced labor issue was sort of infecting all those goods. So that’s a big one.

You literally can’t import to the United States, and they’ve had detentions; everybody in the industries had detentions. And so, navigating through that, making sure the value chains are healthy and compliant, and that you don’t have these big multi-million dollar, tens of millions of dollars, hundreds of millions of dollars of border interruptions and delays.

So that’s one. And now they’re expanding that to look at all things sustainability in their value chain. So how do you use Altana to understand your carbon footprint? How do you understand the workers’ rights and ecological impacts of production, all the way through the chain, and on and on and on? We become that sort of foundational network that they use to not just see the whole global value chain network but then engage it and make it better over time.

I’m still just thinking about the incentives to expose any data to your network. I get it at the top level, right? A car company or a shipping company at the top level wants to see all this data, but then you need information from the lowest levels of that from the soil. Why does the big industrial producer in China want anyone to know where its products are coming from?

I’m not sure they do in all cases, but what’s interesting is they now have to in more and more cases. The big arc of policy here, whether it’s tariffs, forced labor bans, or a carbon border adjustment in Europe… I can paint a big picture, but in the last two years alone, there have been 1,200 net new trade barriers added. And basically, what it says is that if you want the downstream goods, the car, the iPhone, or the clothes to make their way into the UK, the US, Europe, Australia, or Canada, then the large upstream manufacturer has to disclose all this information about your goods and your production practices.

That’s always been a little bit true in the context of moving goods across borders. There are certificates of origin and customs classifications that depend on the nature of the goods, and that’s how you pay your tariffs and duties. And you give the Food and Drug Administration the certificates and permits. That all is kind of business as usual. What’s so different over the last few years is they’ve created so many new and more stringent requirements on that whole upstream value chain, saying, “You have to share this information with us, you have to make these declarations, and it’s a matter of market access.” So your customers and your customers’ customers can’t get their goods into the biggest markets in the world without it.

When you look at what Altana provides in that, that’s a problem to be solved. You can say, “Okay, well, add some software to make it easier to share data better.”

You’re also talking about adding AI to it. What kind of insights are you generating from collecting all this data? It seems like you have an enterprise data provisioning problem, but then you also, generally with AI, want to see all the data and collect an insight [from it]. It seems like there’s a tension between wanting to see the information across the whole network and actually generating insights.

Where do you get the data, and what kind of insights do you generate?

We get the data across both the publicly available and commercially purchasable universe of data. I mean, we spend a lot of money bringing all the data to us that we can get our hands on. And then, as I mentioned earlier, every customer that joins the platform is connecting their data to that model of the world, and then it’s subjecting their data to that whole framework of visibility and shared learning. So we’re now at the place where roughly half of all that supply chain connectivity, all the supply chain visibility, is coming from our customer network itself. That’s another way of saying that we’ve doubled what you can theoretically do by going out and scraping the internet, getting publicly available data, and licensing data from commercial vendors. So we’ve exhausted what you can do in the public domain, and we’ve now about doubled that, and the lead keeps compounding.

We use AI to connect all that data together. So it’s billions and billions of data points. It’s really messy stuff. It’s in Chinese, Cyrillic, and Spanish, so it’s in many different languages. You don’t have the benefit of unique IDs, like you do in personal data, where an email address or a telephone number can help you join all the records together, like Nilay or Evan. In the world of businesses and transactions, purchase orders, and shipments, you just have this messy, semi-structured text. You need AI to process all that data and connect it into one clean, unified representation of the world. We’ve been building our own homegrown AI systems since day one to do that. Then, you need AI to map out those value chains. So that’s where we’ve invested really heavily over the last few years.

We can almost instantaneously illuminate the inputs and outputs of anybody’s products across the whole global network with very, very high fidelity. So that’s always a jaw-dropping wow moment with customers, where it’s like, how could you possibly know this, and how could you possibly draw these connections? And then, on top of that foundation, we have AI systems that are doing everything from detecting single points of failure and business interruption risks. We can look at the whole network and say, “Here are upstream suppliers that are at risk of failing financially, just by sensing what’s happening in the supply chain.” That’s been one of our crazy success stories over the last year, just seeing the model perform on that.

We have AI systems that automate all of the cross-border tariff and customs compliance work and all the logic associated with that. So that’s a $150 billion per year industry — just humans reading text about the nature of the goods and then assigning them the codes when they come across a border that say, “Here’s the tariffs and duties, and certificates, and permits.” So we have an agentic AI system that’s doing all of that. You can put the customer’s broker in the loop and give them ultimate control, but that’s become wildly performant. That’s not the whole list, but the point is that it’s AI constructing the map. It’s AI to show the customers how they fit inside of the map, what are the networks that are relevant to them, and then also AI that generates insight and automates entire workflows.

Let me ask the two Decoder questions, and then I want to put all this into practice with what’s happening in trade right now. How big is Altana right now, and how have you structured the company?

We’re about 240 people and our two primary lines of business are enterprise and government. We then have financial services partners and logistics partners through whom we service the enterprise. So, they connect to our platform to better serve their customers and connect them to the network.

How do you make decisions? What’s your framework?

This has evolved pretty meaningfully in the last few months. So, where I have little depth or relatively little depth, depending on the team around me, I try to speak last and ask questions, and then decide when I need to break ties or move the group forward. And then, the net new thing over the last couple of months is permitting myself to be very decisive when I’m deep in the details and driving the company forward that way. So I’ve actually leaned in pretty aggressively on product management and some big audacious product bets we’re making right now, and a lot of the network architecture we’re building to connect the public and private sectors into this whole global value chain network. And so, on those two dimensions, I’m highly opinionated, and I’m driving very, very fast decision-making by doing it myself and bringing groups along with me.

Do you think that’s reflective of the fact that the foundation of the entire global economy seems to be changing very quickly?

It’s a big part of it. We started the conversation where you’re like, “Hey, all these things seem to be coming true,” and that’s true. Our lived experience is that these things we kind of expected would be relevant products that could exist on top of our platform… Over time, we’ll do this, and then we’ll do this, and we’ll do this. There’s demand for most of it right now. And so, the big scramble in Altana is like, how do we launch new software? How do we meet the demand? How do we get out there, and how do we do this from a unified base? I’m finding myself in wartime mode and calling a lot of shots to get through that stuff with velocity.

How real-time is the insight you get? You mentioned being able to detect when an upstream provider might be failing, right? Is that in real time? Is that… You wake up, and there’s a map, and there’s a blinking red light, or is it on a trailing basis?

It’s actually a spectrum. So some of the data we process is — I think of it as negative latency. You see the intent of a transaction before it occurs in real life through what are called booking requests and shipping instructions. That could be a thing that will happen five weeks from now. And then, we get the shipment itself, and then we get the customs entry associated with the shipment. So you see this life cycle of the supply chain activity. We also have real-time event feeds through a partnership with Dataminr, and we can overlay that on the whole map of the world and contextualize that for our customers. You see some things that kind of develop over time — in that, you need more pieces of data, pieces of signal to kind of build up a broader picture you feel good about. So it’s really a spectrum. There are some things that you can see far ahead of the curve. It’s totally predictive. Some of it is more… there’s something sort of taking shape in the network, and then some of it is sort of post-factum.

All right, let me put all of this into a blender. I think I’ve got a sense of the company and what you can see. Trump announces tariffs; 24 hours later, he walks back the tariffs, and then he announces them again. Maybe they’re on. Howard Lutnick, the commerce secretary, shows up on CNBC and says they’re going to go away. Do you see that reflected in the data? Do you see that across the network?

What does that look like? Do you see the aftershocks of it? Do you see the supply chain reconfiguring?

Yes and yes. And this goes back years because the first Trump administration was the first to go hard with tariffs, and Biden continued it. So yeah, you do see a couple of things. The obvious one is for the goods that have tariffs applied. You see a redistribution of imports associated with the tariffed goods from the tariffed countries, and then this is kind of obvious, but it’s either going to be manufactured locally, or it’s going to come from other places where the tariffs don’t apply. The more interesting thing that you see is that the ownership structures associated with these big global supply chain networks change, and so does the nature of the value chains. So what happened in Trump’s first term, when there was a bunch of Chinese economic policy and trade barriers that were put up, was you saw a big shift in Chinese supply chains going to Mexico and Canada, where two things happened.

In one case, they would just do final assembly, so they’d ship all the refrigerator parts to Mexico, turn it into a refrigerator, and then import it into the United States under USMCA and not pay tariffs. The other version of it was through what’s called the e-commerce de minimis threshold, where the premise was like, if the goods are under $800, we don’t need to do a whole customs entry, pay tariffs, and put a trade compliance process in place. Let’s just rip it into the country and get consumers what they want.

So then, unsurprisingly, you had these mega warehouses built up on the Mexican and Canadian borders, where they were drop-shipping items under $800, or even components that were sort of disassembled so that each of them was under $800 and then imported into the United States through that loophole. Both of those things are coming to an end, and it’s obviously a little chaotic, but I see the whole USMCA tariff thing through those lenses. And the other thing I should say is that it’s really interesting when you see the ownership networks because we map those too. You’re seeing all these Chinese companies open Mexican and Canadian subsidiaries to import goods from themselves and then bring them into the United States, subject to those exemptions I just spoke to.

Is that what’s driving all of the posturing towards Canada and Mexico? Is it an underlying sense that China’s actually taking advantage of those agreements?

Yeah. I have to get a little wonky to argue the case. So yes is the answer, and if you look at where the tariff thing landed, and again, by the time this airs, who knows where we are, but where it landed three or four days ago was they said, “Okay, we’re going to do the 25 percent Mexico and Canada tariffs for any goods coming into the United States that are not registered under the USMCA.”

That was fine print in the announcement. That is pretty consequential. What that means is that companies that bother to prove that the material origin of their goods is within the value chain definitions of the USMCA — again, this is the free trade agreement that replaced NAFTA — those companies and products are not subject to the tariffs. That’s roughly 40 percent of Mexican and Canadian trade with the US. So the 60 percent that hasn’t done the work, to say the raw materials and the intermediate goods are all eligible as per the USMCA — and they’re part of our free trade world — those 60 percent of goods are still subject to the 25 percent tariffs. At the same time, they hit China with extra tariffs. So they’ve now done two, a 10 percent and another 10 percent on all Chinese imports. The dotted line through all those things is that the Trump administration is trying to bring Mexico and Canada into tighter alignment with the United States and its trade policy vis-à-vis China.

And all of that is to say, we want more manufacturing here in the North American continent and to get away from China.

You’ve got a big map of the world. You see the value chains, you see where things are manufactured. If you just look at where all the puzzle pieces are today, can you actually accomplish that in four years? Can you decouple the United States from China at the end of Trump’s term? You said that was the goal, and I don’t know how to take those Jenga blocks and make that tower. I know how to knock the tower down; that seems very obvious to me. But I don’t know how to make the tower or make a new tower.

What I believe is that they’re going to try, and then in some cases, you’re talking about billions of dollars, tens of billions of dollars of capital expenditure (CapEx) in the ground in China. Some of the biggest chemical companies in the world have manufacturing locations in China that feed into all of our pharmaceuticals and advanced manufacturing processes. Is that kind of CapEx possible to replicate elsewhere within a four-year timeframe? That’s going to be pretty tough.

Do we even have the capital to do it?

There’s a lot of capital sloshing around the world.

Yeah. So, should the US government invest in that, and will it? Certainly not in this administration. It will not do that, right?

I suppose the operative part of my question there was the “we.” There is a lot of capital, but do we in the United States have the ability, the will, or the coordination to do it? That seems up in the air.

I do think, philosophically, what this administration is saying is rather than the Biden approach of using mostly incentives and capital to build the things that we want here… So the IRA, the CHIPS Act… those deployed a lot of capital and loan guarantees and other ways to kind of subsidize and motivate the manufacturing of those things here. What this administration is doing is saying, “We’re going to use trade barriers to restrict the market access of competitive products,” and a lot of it’s aimed at China obviously, “and we’re going to let the market figure out the rest.” So we’re going to create the barriers. We’re going to distort supply and demand and then let capitalism figure it out from there.

On what timeframe do you think capitalism figures that out? Again, I’m just looking at Altana’s product, right? You have a view of this system and how it reacts to different kinds of shocks. What timeframe do you think that we can figure this out?

It is just a spectrum. I mean, a lot of these things are already in motion, so you’re just accelerating the near-shoring of advanced electronics. You’re accelerating the near-shoring of automotive supply chains. The pharmaceutical CEOs I’ve talked to in the last six months have already been talking about creating new manufacturing locations outside of China for all their key stuff. Some of these things are going to move a lot more quickly, and some of these things are going to be pretty tough. I think for those examples where you just have massive CapEx in China, it’s really hard. And I think the most intractable one, honestly, is what are called critical minerals.

It is rare earths, which we all have heard of, and then the other metals that go into all of our most important electronics. So, think nickel. Nickel’s not rare, but it’s critical. And China has a virtual lock on all of the world’s critical mineral processing. They don’t have a lock on the raw material itself. The raw materials are pretty pervasive. They’re abundant. China, over the last 25 years, was very deliberate about building a stranglehold on the refining of the raw ores. And this is nasty stuff, right? These are typically big open pit mines where they’re doing cyanide leaching to separate these ores from other metals and refine them. So it’s stuff we don’t actually want in our backyard, which is all well and good if there’s a free trade environment. But in a world of geopolitical and economic competition, China now has between 60 percent and 98 percent of the world’s critical minerals on lockdown, and they use that market position now to kill any emergent refining in a country or a company that they don’t control.

So a new one pops up, and we’re refining lithium, and we’re doing Lithium oxides. Well, you’re going to see, and this has happened repeatedly, China floods the market, depresses the price, and puts that company out of business. They either go away, or the Chinese company buys them. And so, the reason this really matters is that you can’t make missiles, airplanes, guns, telephones, or GPS [without these minerals]. Our everyday modern economy depends on all these critical minerals, and they all run through China. So, can that be fixed in four years? No, not without a radical sort of World War II-style change in our regulatory stance, our willingness to invest, and a massive cross-border partnership with our allies. I don’t see that happening.

When you describe that, I think about directed industrial policy, right? China made a decision. They made a huge trade-off against their environmental policy, the air quality that their people breathe and the labor abuses their workers might suffer, but they said, “It’s worth it, because over some timeframe we will have this stranglehold on the market and that will create peace, create prosperity,” some set of goals that industrial policy will deliver.

We can look at Taiwan, for example. On this show, we’ve talked a lot about TSMC and Taiwan’s massive investment in the chip industry because it saw the future and said, “We’re going to do that here. We’re going to make an industrial policy from the top down that says all the chips are going to be made in Taiwan. TSMC is our national champion; here we go.”

Those things came true. Again, the trade-offs are very real, and very clear. We don’t have a directed industrial policy in the United States. To the extent that the Biden administration was trying, they were doing it in the most Freakonomics neoliberal way you could do it, right? They created a bunch of incentives, and they hoped people would not game them. You can see how that played out for them.

The Trump administration is doing the exact opposite, right? They’re creating a bunch of impediments and saying, “Our market is so valuable that if you want the n+1 American consumer to buy your car, you have to do a bunch of stuff to get to our market.”

That seems just as naive. It’s still not directed industrial policy. It’s negative incentives instead of positive incentives, and you still might game the system in some way. But it doesn’t seem like that plan of, we have to actually say out loud, “We’re going to do nickel refining to decouple from China.” They haven’t said that out loud.

They’ve said, “Here’s a bunch of structural impediments that might result in some capital directed at nickel refining in the United States.”

And that to me seems again, for all the criticisms of the Biden programs, like you run into the same problems. You’re not actually saying what you want. You’re hoping that the negative incentives will create momentum for the market to deliver the result.

I would add one thing to the picture you painted, though, just to be fair about it. The other thing that the Trump administration is trying to do is massively deregulate. So, why isn’t there nickel refining in the United States? Because it’s impossible to get it permitted. It’ll never happen, right?

But again, that’s a trade-off, right? There’s a reason we don’t want nickel refining.

I’m not making a normative judgment. I’m just describing the landscape I see. I think the Trump thesis here is, “Let’s remove the barriers to building, let’s create the barriers to what they view as unfair trade and economic abuses by adversaries. Let’s let the market figure out the rest.”

And you’re asking, is there a third way? In general, my perspective is that the United States can’t possibly out-centralize China. It can’t possibly out-execute top-down economic control better than China does. Our comparative advantage, our right to win, is through innovation. So create a rule of law and a risk capital environment, and a labor environment where the best ideas can win, people can take risks, and that can flush through the system — that has been our comparative advantage. I’m more sympathetic to an economic security framework that plays to our right to win than one that doesn’t. I think the Biden kind of Freakonomics thing you described was very much like, “Okay, let’s sort of take other examples of central planning and industrial policy, and make these big billion, a hundred billion dollar, trillion dollar injections into sectors of the economy and specific recipients of aid, and then hope it works out.”

That’s what China does. I’m not so optimistic about that working for us. So I do think there’s a big question of, “Is there a third way, and what should the economic security policy framework of the United States be?” That’s a conversation I’m getting into more and more in the academic and think tank worlds. I don’t think we have a coherent answer to that as policymakers, and I don’t even think we have the language for it in a lot of cases.

A lot of what you’re talking about with the comparative advantage of the United States historically being risk-taking innovation, I agree with that. The foundation of that has been the relative stability of the United States after World War II. I’m not saying it’s been totally stable — it hasn’t. No one listening to the show looks back across the last 20 years and thinks, “That’s been stable.”

But fundamentally, politically, we’re stable. Economically, there is a sense of stability. Data-wise, we have not, until recently, had the United States government deciding that it will redefine how GDP is calculated. There’s sort of an essential policy and economic stability to how the United States works.

Your company relies on some amount of stability in the system, right? Even to just look at a system and say, “We can see how things are moving,” implies that all the actors in the system are rational or predictable in some set of ways, or at least participating. That is what feels destabilized right now.

The tariffs are on, the tariffs are off. We’re going to export bourbon to Canada. We’re not going to do that anymore. Trump is going to say, “We’re going to cut our own lumber in the United States,” but all the trees are in Canada. That seems destabilizing. We’re going to decouple from China in four years. Inherently destabilizing. Apple is going to announce $500 billion worth of investment that they already planned for, and somehow, that’s going to make it okay. All of that seems new and destabilizing in a way that, even in Trump’s first term, didn’t exist. Do you see that? Is that reflected? Do you worry about that?

I mean, back to the beginning of the conversation, we bet our careers on it. I just see it as an inevitability. I am a macro guy. I like these big systems problems, and I’ve seen, for a long time now, the gears of history cranking. It’s pretty obvious to me that the system I grew up in, and I think the orthodoxies of our time, have come to an end. And so, yeah, it’s destabilizing. The moment in time is one of instability and destabilization. I see these trends playing out almost irrespective of who’s in office here or there. Like, look at Brexit, look at what’s happening in the EU. Look at all the climate dislocation and the waves of immigration across borders that then result in nationalism and populism. And you kind of add all these mega-trends up. The rise of China, the relative decline of the United States, the global debt burden and how that’s playing out in economic policy, and wealth inequality are these asset bubbles inflated and reflated. All these things, to me, signal a breakdown of the system.

When you look at your map and you see China in the center of it, and almost all these value chains end up flowing through or around China, can that be reallocated? Can you shift things around to a world where you have the United States and its allies’ value chain and China and its allies’ value chain?

I mostly see it going there, at least for the more sensitive critical value chains. I don’t see it playing out any other way. And this isn’t just a sort of the US doing its thing. China publishes its economic intentions every five years, and then they reify them and the national addresses. This is their explicit strategy: to create economic resilience and dominance in the technologies that they believe will be the commanding heights of the 21st century. And to ensure that the value chains associated with them as either critical imports or as exports where they know they need to deploy their production capacity (because they’re an export-driven economy) — they are explicitly trying to secure both. And they write it down, and they do what they say. To some extent, how did we get here? We had a rules-based free trade order that the United States architected, and everything made a lot of sense economically, middle class impacts aside.

The admission of China to the World Trade Organization in 2001, I think, was the end. That was the beginning of the end. And you had a very large and growing economy that was exploiting the free trade system systematically, stealing trillions of dollars of intellectual property to feed their industrial engine and subsidizing their exports at the expense of everybody else’s markets. And so, 25 years later, we are where we are. And so, it was sort of bigger than its neighbor at an unprecedented scale, and I think the system is responding to that fact, right? That was the catalyst. It wasn’t that somebody here or there was elected and did some policy actions. So I view things in sort of this multi-decade lens, and the policy environment, the political environment right now is a consequence of that as opposed to the primary driver of it, if that makes sense.

I wrote my law review article in law school on China’s use of open-source software to get itself into the WTO. And their approach to intellectual property was, “Oh, well, we’ll do copyright law,” because that is a foundation for open-source. And now we have Linux. That was a fascinating rhetorical move. I don’t know if my law review article was any good, and I don’t know if anybody understood what I was talking about at the time, but I was like, “Pay attention to Red Flag Linux.”

The other end of that, the positive end of that, is one where we start, the iPhone. The iPhone exists at scale, at a massive scale. The idea that we manufacture as many iPhones as we do with three nanometer TSMC chips in them is mind-boggling.

There are many criticisms of Tim Cook one could issue, but… Did you maintain the rules-based world trade order for as long as you did because the iPhone is such a successful product, and you managed all of those supply chains? You managed both Trump’s first term and the Biden administration through COVID-19. That’s a remarkable fact of American industrial policy, right? Apple exists, and it held the world together for a minute.

Do you think that there are still those kinds of products or those kinds of companies that will keep this thing going even as everything else gets destabilized? Because that is the success. There has not been a great power conflict or a hot war between the United States and China in all this time. Even as things frayed, even as both sides felt taken advantage of or felt hostile towards each other, or sent fighter jets flying at each other for no reason, just to have a good time.

Honestly, I hope that I can look back at the whole arc of Altana and say that we are one of those companies that bent the arc of history in that way.

I think we’re making it possible to be resilient and to navigate this change for both the public and private sectors. I mean, we work with governments of the West and allies to enforce this stuff, to navigate it, to find some of the dependencies and vulnerabilities in these networks, and to mitigate them. We also help them simulate policies and see how they might play out. What are the direct impacts for the second, third, and fourth order impacts so that better decisions get made? And then we work with the private sector to navigate all that stuff. And so, if we succeed at the scale that we’re trying to, our mission is to fix globalization.

Then, I think you can envision a world where business in the West and business in the East continue to be transnational, and you have these miracles of productivity, and you have the economic ties that bind. At the same time, you de-risk the most critical infrastructure and the most critical supply chains. Through that de-risking, you prevent accidents from happening, and you prevent the worst from happening.

So, paint a picture like, let’s say China moves on Taiwan by the end of the decade. And I’ve been in a war game with US military leadership, where one of their assumptions is that GPS goes off, and all of the critical water and electricity facilities in America are shut down. Our cars can no longer navigate because of all the logic in our cars. And those are all through supply chain exploits that have been built into the systems by China over the last two decades and known vulnerabilities, known state-sponsored cyber attacks that create those exploits…

In that scenario, is America more or less likely to go to war? I actually think it’s more likely to go to war. I think there’s a higher probability that escalation occurs and tensions fray. There’s more popular support for conflict. And so, in a world where we’re more and more de-risked, where you don’t need to go to war over an island, where you don’t need to defend a specific supply chain or you don’t need to react to a vulnerability that your adversary exploited and shut down all the critical infrastructure in the country, that’s a world that, to me, is less likely to go to war.

I feel like some people will take issue with your characterization of Taiwan as an island, but I get it. Is there enough world? This is the biggest question that I have for you. Your software builds you a picture of the value chains across the world.

I don’t know if there’s enough capacity. I mean, it’s a big world. I am not saying all of it has been industrialized. We’re producing everything everywhere. But it does seem like with the past 25 years of globalization and maybe the next wave of globalization that you’re helping bring about, it has reached an equilibrium. And destabilizing that equilibrium just implies there will be more capacity, that we’re going to move the chips out of Taiwan and make them in India or something. I’m not sure that there’s enough capacity to reorient everything and maintain an equilibrium or to change it without something even more destabilizing happening.

I’m wondering if that’s where you’re at or if you think you can actually make the shift. Because if you’re like, “We need to move to the next phase of globalization,” my view is that Trump may kind of want it to stop, right? And it still feels like tension.

I think there’s enormous production capacity at basically every stage of the value chain. So I don’t think there’s any kind of fundamental limit that we’re bumping up against, either in terms of labor price, labor skill, raw material availability, or manufacturing sophistication. And I’m also reasonably optimistic. I’m not maximally optimistic about automation and software-defined manufacturing and where a lot of this is going. So I think there’s an enormous amount of capital out there chasing good returns, and there’s an enormous wave of productivity gains that are already underway, and it’s going to keep scaling with AI and robotics. All those things add up to the means to refactor.

You’ve got the big view; you’ve got the software. If you’re someone listening to this, you’re an entrepreneur, you’re a builder — we have a lot of those listening to the show — where would you go build? Based on your map, what seems the most stable right now?

Geographically or in terms of industries?

So, tariffs notwithstanding, if I were starting from scratch and not doing Altana, the thing I’d be most excited about is building a software-enabled and AI-driven manufacturing value chain for advanced electronics in North America. I’d be focused on producing in Mexico, sourcing most of my components from North America, serving US and Canadian markets, and taking advantage of the free trade agreement that exists.

And again, the way that the tariffs just played out only applied to anything that wasn’t certified under the USMCA. As you know, North American origin got hit with tariffs, but everything that’s certified is still sort of free trade. I would go long on the Mexican demographics. I would go long on the Mexican economy, generally. I would go long on North American demand for advanced electronics components in everything from automobiles to aerospace, to defense, to the whole picture. And I would try to build a Shenzhen of North America. One big, integrated, and co-located value chain where you could really do mass-scale drone manufacturing, optics, the whole thing.

The Chinese government also made a huge investment in labor, right? When Obama asked Steve Jobs, “Why can’t you make the iPhone here?” His answer was, “There’s just not enough manufacturing engineers. It’s not going to happen.”

Do you see that labor pool existing in the United States, Canada, or Mexico? Do you have to create it? Is the Mexican government going to be better at that than we are?

Mexico’s a lot better at it. We’re terrible. And I think some interesting experiments were begun with junior colleges and community colleges and some of those initiatives. But we’re nowhere close to having the skilled labor necessary to execute the industrialization objectives of either the Biden administration or the Trump administration. So, there is a massive gap in both of those worldviews and approaches.

Do you think that can be reconciled?

Partially, through automation. Not fully.

Evan, this has been an incredible conversation. I obviously could talk to you for another hour. You’re going to have to come back.

I want to know more about your law school thesis. I think China’s doing the same thing with open source and AI that they did with open source back then. But anyway, maybe that’s for another one.

Thank you for being the only person, including the editor of the Wisconsin International Law Journal, who has ever said, “I want to know more about this thesis.” I appreciate you for that. It was a good suck up to end the show. We’ll have you back. Well, here’s what we’ll do. When tariffs go on, we won’t have you. When tariffs go off, we’ll have you. So, every few weeks, we’ll have you back on the show.

All right, I’m going to be a regular.

Yeah, that’ll be great. Evan, thank you so much. We’ll talk to you soon.

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