Why This Post Exists
Tariff headlines got you yawning—or panicking?
One minute it's "talks collapsed," the next it's "markets in turmoil," and you're just trying to figure out if you can still afford oat milk this week.
Ever wondered:
- How do trade wars even start?
- What fuels them beyond the political posturing?
- And more importantly... what do they have to do with you, a regular person trying to stay financially afloat without selling a kidney or starting a crypto cult?
If you're like me—someone who normally couldn't care less about political drama unless it's wrapped in memes—you probably assumed these international "my tariff is bigger than yours" contests had zero relevance to your job, wallet, or mental health.
That's what I used to think too.
Until I read Trade Wars Are Class Wars by Matthew Klein and Michael Pettis, and it hit me like a shipping container full of inflation.
Because here's the twist:
- These conflicts aren't really about nations clashing over trade deficits and surpluses.
- They're about capital vs. labor—a global tug-of-war between the owners of production and the workers who make it run.
- About who gets to sip champagne in Davos—and who gets squeezed like a tube of overpriced, ethically-sourced, gluten-free organic toothpaste back home.
Maybe You're an Investor...
Watching your portfolio nosedive like it's competing in a synchronized swimming event labeled "Global Recession." Prices going down, down, down—like your favorite stocks are on clearance in the "Financial Apocalypse" aisle. Buy 2, Get Existential Crisis Free.
Sound familiar?
Yeah, same here.
Because for us—people whose surnames don't sound like Musk, Trump, or anything Monaco-adjacent—this system wasn't exactly built with us in mind.
- We don't have trust funds.
- We have trust issues—mostly with the economy.
- We're not IPO-ing side hustles—we're figuring out how to stretch our salaries like pizza dough in a recession.
But Here's the Kicker...
Once you understand how this cycle works—how capital zigzags across borders, how trade wars are just class wars in suits—you realize...
💡 You don't have to be crushed by the system. You can learn to read it, outmaneuver it, and even profit from it.
The global economy isn't a monolith—it's a complex, interconnected web of capital flows that follow predictable patterns if you know how to spot them. And those patterns create opportunities for the savvy observer.
And if you're thinking this sounds suspiciously like market cycles, you're catching on fast. As Howard Marks explains in Mastering the Market Cycle, "We may never know where we're going, but we'd better have a good idea where we are." Understanding where we are in both market cycles AND trade war cycles is the ultimate cheat code for financial survival.
What This Is (And Isn't)
Below is my own commentary on the book—plus practical strategies on how to actually position yourself to win in this rigged system.
Quick caveat: This isn't a financial guide, and I'm not your advisor. I'm not promising you'll become the next Warren Buffett or Ray Dalio. But what I am saying is this—focus on what you can actually control.
Because the root cause of trade wars isn't just politics or bad policy. It's the imbalance of capital between classes—a structural dysfunction baked into the global system. You and I? We don't get to rewrite the rules of international finance.
But we can understand the landscape, stay alert to the real causes behind the chaos, and learn how to maneuver around it like pros.
This Isn't Just About Trade Wars
It's about class dynamics, capital flows, and how you—yes, you—the worker, freelancer, side hustler, or investor—can leverage global economic shifts to climb the ladder.
Trade wars are just symptoms of deeper imbalances between labor and capital. When wages are suppressed in one country to boost exports, that capital has to flow somewhere—creating bubbles, crashes, and opportunities if you know where to look.
Once you understand the cycle, you can stop being exploited by it—and start profiting from it.
Why This Matters to You (Yes, YOU)
If you're in a surplus country like China or Germany:
- Wages are often suppressed to keep exports competitive (just look at Germany's wage stagnation since the early 2000s despite productivity gains).
- Workers create the wealth—but don't share in it (China's household income as a percentage of GDP is about 15% lower than the global average).
- Profits are hoarded by elites or shipped offshore (ever wonder why German banks were buying Florida real estate before 2008?).
If you're in a deficit country like the U.S. or U.K.:
- Industries hollow out, jobs vanish, and you're left juggling gig work, overpriced oat milk, and rising debt.
- Your purchasing power feels artificially high (cheap imports!), but your economic security is being undermined.
- Politicians blame foreigners, but it's the global capital flows—not foreign workers—that are squeezing you.
But here's the twist: you can hack the system. You just need to understand the cycle—and know where to position yourself at each stage.
How to Tell if a Country Is Surplus or Deficit
Here's a cheat sheet to help you figure it out:
Trade Balance
- Surplus: Exports > Imports (e.g., China, Germany, Russia, South Korea)
- Deficit: Imports > Exports (e.g., U.S., U.K., India, Brazil)
Current Account Balance
- Surplus: Saves more than it spends (Germany: +7% of GDP, Netherlands: +9%)
- Deficit: Spends more than it saves (U.S.: -3% of GDP, Australia: -2%)
This is the comprehensive measure of a country's international transactions, including trade, investments, and transfers. A persistent current account deficit means a country is borrowing from the rest of the world.
Domestic Consumption
- Surplus: Household consumption <50% of GDP (China: ~38%, Singapore: ~35%)
- Deficit: Household consumption >60% of GDP (U.S.: ~68%, U.K.: ~65%)
When citizens can't afford to buy what they produce, countries must export the surplus or face economic contraction.
Wage Growth vs. Productivity
- Surplus: Wages lag productivity (German wages flat since 2000 despite 30% productivity growth)
- Deficit: Wages rise, but so does debt (U.S. wages up slightly, but consumer debt reaching $17 trillion)
The gap between productivity and wages is effectively a transfer from labor to capital—creating the imbalances that drive trade wars.
Currency Policy
- Surplus: Weak currency supports exports (e.g., China's yuan policy, Japan's yen interventions)
- Deficit: Strong currency supports imports (e.g., U.S. dollar dominance, U.K. pound)
A manipulated currency can be like a stealth tariff or subsidy, distorting "free trade" more than any official policy.
Middle-Ground Countries (Balanced)
- Rare, but some do exist.
- Examples:
- Switzerland: Goods surplus, services deficit
- Canada: Balanced trade but runs deficits in downturns
- Australia: Resource exports balance manufactured imports
Signs of Balance
- Stable current account (±2% of GDP)
- Wage growth ≈ productivity growth
- Healthy mix of domestic consumption and exports
These balanced economies typically weather global shocks better than extreme surplus or deficit countries.
The 4 Phases of the Trade War Cycle (And How to Win in Each)
Phase 1: Capital Accumulation (Surpluses Build)
What Happens: Elites suppress wages → Capital piles up → Excess production floods the world.
This is where countries like China in the 2000s or Germany post-Euro adoption found themselves. Domestic consumption is too weak to absorb production, so exports surge and capital accumulates.
Winners:
- Asset owners (stocks, real estate, export firms)
- Consumers in deficit countries (cheap imports)
- Financial institutions that recycle the capital flows
Losers:
- Workers in surplus countries (low wages relative to productivity)
- Workers in deficit countries (lost jobs, downward wage pressure)
- Small businesses that can't compete with subsidized imports
Invest in Yourself:
Surplus Country (China, Germany):
- Skill up in high-value exports (EVs, machinery, tech) – these sectors get government support
- Buy undervalued local assets (trapped capital = opportunity) – real estate in Shanghai circa 2005 or Berlin circa 2010
- Develop international connections – the elite are already moving capital abroad
Deficit Country (U.S., U.K.):
- Learn crisis-resistant skills (semiconductor manufacturing, infrastructure maintenance, healthcare)
- Short overvalued consumer stocks (debt bubbles ahead) – remember Circuit City or Bed Bath & Beyond?
- Build expertise in sectors with national security protection (defense, energy, food)
Phase 2: Backlash (Trade Wars Begin)
What Happens: Deficit countries retaliate with tariffs (think U.S.-China under Trump, EU steel duties on China)
Political pressure builds as job losses mount in deficit countries. Populist leaders promise to "bring back jobs" through tariffs and trade restrictions.
Winners:
- Protected industries (local manufacturers, steelworkers)
- Black/gray markets (tariff evasion becomes profitable)
- Compliance specialists and trade lawyers
- Politicians who channel economic anxiety into nationalism
Losers:
- Export-dependent industries (Chinese electronics, German cars)
- Consumers (tariff-driven price hikes) – remember when washing machines jumped 12% after 2018 tariffs?
- Global supply chains – just ask anyone trying to build a factory in 2019-2020
Invest in Yourself:
Surplus Country:
- Pivot to domestic-demand industries (healthcare, education, entertainment)
- Learn logistics, trade compliance (profit from the new rules) – Chinese logistics experts made fortunes rerouting through Vietnam
- Develop expertise in sanctions workarounds – legal or otherwise
- Foster relationships in neutral countries for triangular trade
Deficit Country:
- Bet on reshoring plays (semiconductors, rare earths, pharmaceuticals)
- Develop geopolitical expertise (sanctions, export controls)
- Skill up in formerly offshored manufacturing (CNC machining, industrial maintenance)
- Position yourself in industries receiving government subsidies (EVs, green energy)
Phase 3: Rebalancing (Temporary Reset)
What Happens: Surplus countries raise wages to boost demand. Deficit countries reshore industries.
Economic pain forces political change. Surplus countries realize they need domestic consumption; deficit countries invest in production capacity.
Winners:
- Skilled labor in deficit countries (manufacturing revival)
- Consumers in surplus countries (rising purchasing power)
- Automation companies (as reshored production seeks efficiency)
- Construction firms (factories don't build themselves)
Losers:
- Elites in surplus countries (lower margins, higher labor costs)
- Companies with stranded assets in now-tariffed regions
- Purely arbitrage-based businesses with no real value-add
Invest in Yourself:
Surplus Country:
- Shift to rising service sectors (luxury retail, healthcare, tourism) – Chinese domestic tourism boomed as incomes rose
- Hedge with inflation-proof assets (gold, commodities) – wage increases eventually drive inflation
- Develop skills in consumer experience – as disposable income rises, so do expectations
- Position in domestic brands aiming to capture new middle-class spending
Deficit Country:
- Short bloated sectors (commercial real estate, zombie firms kept alive by cheap debt)
- Upskill in automation (robots replace expensive labor) – even reshored factories need fewer workers
- Invest in productivity enhancement tech (IoT, logistics optimization)
- Build expertise in resource security (recycling, alternative materials) – reshoring means resource competition
Phase 4: Repeat (New Imbalances Form)
What Happens: Elites adapt, suppress wages again. New surplus countries emerge (Vietnam, Mexico, India).
The cycle never ends—it just shifts geographically. Capital always seeks the highest return with the lowest labor costs.
Universal Moves:
- Own capital, not just labor (invest in stocks, real estate, side hustles) – become the exploiter, not just the exploited
- Exploit geographic arbitrage (earn strong, live cheap) – digital nomads figured this out years ago
- Stay mobile—opportunity shifts across borders – today's hot market is tomorrow's bust
- Build skills that travel well (coding, design, marketing) – portable income is freedom
The System Is Rigged—But You Can Outmaneuver It
Strategy 1: Own Something That Appreciates, Not Just Labor
Problem: Workers trade time for money. Elites own assets that grow exponentially.
Your salary might rise 3% per year if you're lucky. Assets can compound at 7-10% or more. That gap is how wealth inequality grows.
Solution:
- Buy what the system props up.
- In surplus countries: real estate, local equities
- In deficit countries: tech, defense, infrastructure stocks
- Can't afford assets? Own tools that appreciate with inflation.
- Example: A mechanic leases his truck during supply shortages for 2x normal rates
- Example: A nurse turns her rice farm into an inflation hedge as food prices rise
- Start micro: fractional shares, REITs, crowdfunded real estate
- Even $100/month into index funds creates an asset base
- Join lending circles (common in immigrant communities) to pool capital
Strategy 2: Exploit Labor Arbitrage
Problem: Surplus countries train workers but don't pay them. Deficit countries import cheap labor, crushing wages.
Solution:
A. Move Where Your Skills Are Scarce
- Example: A Romanian engineer moves to Germany (surplus), then relocates to Canada (deficit) for 3X higher pay.
- Remote Work Loophole: A Thai designer charges U.S. rates on Upwork but lives in Chiang Mai (70% lower costs).
- Credential Arbitrage: A Filipino nurse gets certified in Australia, quadrupling income overnight.
- Tax Arbitrage: A digital nomad works from zero-tax jurisdictions while serving high-tax market clients.
B. Upskill for Trade War-Proof Jobs
Deficit Countries Need:
- Tariff-proof skills (welding, HVAC, chip manufacturing—can't be outsourced)
- Example: A U.S. retail worker trains as an electrician. Unions protect wages; infrastructure bills guarantee demand.
- Security-critical roles (defense, grid maintenance, water systems)
- Resource management (farming, energy, minerals become strategic priorities)
Surplus Countries Need:
- Export compliance specialists (navigate tariffs, sanctions)
- Example: A Vietnamese factory worker learns customs brokerage, now earns fees helping exporters avoid U.S. duties
- Luxury service providers (as domestic wealth accumulates)
- Capital flight facilitators (legal ways to move money offshore)
Strategy 3: Play the Currency Game
Problem: Trade wars destabilize currencies. Elites hedge; workers get crushed.
When trade tensions rise, currencies can swing 10-30% in months. The wealthy diversify globally; the average worker holds cash in one currency.
Solution:
- Earn in strong currencies, spend in weak ones
- Save, invest, and spend where the currency works in your favor.
- Example: A Nigerian freelancer gets paid in USD, converts to naira during devaluation spikes
- Example: A Colombian developer banking in dollars while living in Medellín during peso weakness
- Use currency-diversified savings approaches
- Stablecoins (if legal in your jurisdiction)
- Multi-currency accounts (Wise, Revolut)
- Hard assets (gold, silver) during currency crises
- Time major purchases with currency swings
- Example: Europeans buying American products when EUR/USD is strong
- Example: Americans traveling to Asia during dollar strength
If You Can't Move Yet—Survive and Thrive Anyway
Avoid Debt Traps
- Don't overborrow in countries where wages can't keep up
- American student loans are dangerous in manufacturing regions
- Chinese mortgage debt is risky as growth slows
- Avoid adjustable-rate loans in economies vulnerable to rate hikes
- Remember 2008? That wasn't just subprime—it was global capital flows reversing
- Borrow strategically in inflationary environments
- Fixed-rate, long-term debt on productive assets can be positive
Learn Crisis-Proof Skills
- Fixing things (auto repair, appliances, electronics)
- Trade wars make replacements expensive; repair becomes valuable
- Local food production (urban farming, beekeeping)
- Food security becomes national security in prolonged conflicts
- Energy efficiency and alternatives
- Trade wars often target energy resources (Russia/Europe)
- Mental health and community building
- Economic disruption creates social disruption
Network Like the Elite
- Pool resources (e.g., join credit unions, investment clubs)
- Example: Immigrant lending circles helped build businesses despite bank discrimination
- Build international friendships and connections
- Your network is your escape valve when local economies falter
- Create cooperative purchasing groups
- Bulk buying power mitigates inflation and supply shocks
- Share knowledge and opportunities
- The elite do this at Davos; you can do it on Discord
Psychological Shifts for Long-Term Success
Ignore Nationalist Hype
- Trade wars aren't country vs. country. They're capital vs. labor.
- German workers didn't steal American jobs; German corporations reallocated capital
- CEOs offshored your job—not the guy across the border.
- Executive compensation rose 1,460% since 1978; worker pay rose 18%
- Your real competition isn't foreign workers—it's robots, AI, and capital concentration
- Amazon doesn't need Chinese labor to replace warehouse workers with robots
Think Like an Elite
- Treat money as a tool, not just a reward.
- The wealthy use money to make more money; the poor use it to briefly feel wealthy
- Reinvest profits. Don't just consume—own a slice of the system.
- Even small ownership stakes compound over time
- Focus on cash flow and control, not just paper gains
- A small business you control beats a volatile stock portfolio
- Study how capital moves, not just how to earn more
- Understanding the system > working harder within it
Anticipate the Next Rebalance
- When wages rise in surplus countries, luxury and tourism will boom. Be ready.
- Example: Chinese luxury spending exploded as wages rose
- When manufacturing reshores, logistics and industrial real estate patterns shift
- Look at Mexico's northern border region during US-China tensions
- Resource nationalism creates new winners and losers
- Countries with critical minerals gain leverage
- Climate policy creates new trade barriers and opportunities
- Carbon border taxes will be the next front in trade wars
Trade War Cycles Meet Market Cycles
If you've made it this far, you're starting to see how trade war cycles and market cycles intertwine. As Howard Marks brilliantly explains in Mastering the Market Cycle, understanding where we are in these cycles is the difference between being the hammer or the nail.
Market euphoria often coincides with Phase 1 of trade war cycles, when surplus capital creates asset bubbles in deficit countries. Market crashes frequently align with Phase 2, when trade tensions explode and capital flows reverse. The recovery phase maps to Phase 3, as economies rebalance and find new equilibriums.
By combining your knowledge of trade war dynamics with Marks' insights on market psychology, you gain an almost unfair advantage—the ability to see around corners while others react to headlines.
Final Playbook: How to Win in Any Phase
| Your Situation | Short-Term Move | Long-Term Play |
|---|---|---|
| Surplus country worker | Buy undervalued assets | Shift to services/domestic demand |
| Deficit country worker | Bet on reshoring trends | Learn crisis-proof skills |
| Entrepreneur | Arbitrage trade barriers | Build import/export businesses |
| Investor | Short overvalued sectors | Buy inflation hedges (gold, land) |
| Student | Study strategic sectors | Develop cross-border credentials |
| Retiree | Geo-arbitrage living costs | Diversify currency exposure |
| Freelancer | Target clients in strong currencies | Build location-independent income |
Key Quote:
"You don't change the system by complaining—you outmaneuver it by understanding where the money is forced to flow."
Bottom Line: Be the System's Glitch
Trade wars are just another mechanism elites use to hoard capital. But if you understand how the cycle works, you can stop being a pawn.
You can't opt out of the economy—but you can outsmart it.
When trade wars strike, elites zig. Learn to zag.
When inflation hits, own tools, not toys.
When currencies shift, ride the wave, don't drown in it.
The system may be rigged. But that doesn't mean you can't win.
Remember: The game is global, the players are capital and labor, and you get to choose which side you're on.
🔍 Want to understand the full background behind these economic shifts?
👉 Read the full summary of Trade Wars Are Class Wars here for a detailed breakdown of how global imbalances are reshaping class and capital flows.