Authored by Charles Hugh Smith via OfTwoMinds blog,

What we do know is that things have internal structures with dynamics that operate whether we “like” them or not.

Correspondent Manoj S. recommended an essay from the always-insightful John Michael Greer on the dissolution of unproductive classes behind the smokescreen of AI: A Game of Musical Chairs

“You can sell Americans on anything, no matter how wretchedly unsatisfactory it is, by labeling it as progress. That’s what’s being done now, with AI being used as a justification for firing useless workers, deleting unnecessary departments, cutting office staff down to scales that actually make sense, and shutting down the classroom-to-cubicle pipeline that once poured new graduates into salary class jobs. We can expect that process to accelerate dramatically in the years ahead.”

Greer begins by laying out a compelling taxonomy of class in America, four self-explanatory classes defined by this question: how do different groups in today’s America get their income?

1. investment class: income from investments (i.e. capital)

2. salary class: income from a monthly salary with benefits

3. wage class: income from an hourly wage with no benefits

4. welfare class: income from welfare programs

Greer argues that the salary class is now the gravitational center of power in the U.S., absorbing much of the national income in unproductive faux-problem-solving for fabricated problems explicitly devised to justify generous salaries and benefits.

The nation can no longer afford this staggeringly costly unproductive work force and so “replacing cognitive work with AI” is the cover story for the mass evisceration of this class, in a parallel to the previous gutting of the factory work force by automation and offshoring.

I’ve been addressing the class taxonomy of the US since 2012, and I’d like to add some commentary on the dynamics Greer so succinctly describes. In America’s Metastasizing Class Wars (August 27, 2020), I laid out ten classes, based not just on sources of income but on several additional criteria:

Systemic Power: political control of the state’s monopoly of force / coercion; financial control of the system’s taxation, incentives and optimizations; corporate control of essential technologies – platforms; corporate-state “soft power” control of cultural, social and intellectual belief structures and sources of influence: media, social media, think-tanks, foundations, the Higher Education Clerisy, etc.

The power to protect bureaucratic-institutional fortresses from budget cuts, transparency and accountability.

Agency: the power to leave employment or a locale and change one’s life; freedom from debt-servitude / employment bondage.

My ten classes: yes, this is more complicated that Greer’s four classes but since power has sources other than income, accuracy demands an accounting not just of income but of power and agency, which is an individual form of power with systemic consequences such as social mobility.

1. The Deep State. Unelected, unaccountable, they wield state power. Call them if you’re about to be renditioned. But you need either power or relationships to have their number. Relationships are a form of power.

2. The Oligarchs. Top bidders in the auction for political and financial influence. The top .001%. Able to rig the structures of power to serve their private interests.

3. New Nobility. The super-wealthy class just below the Oligarchs. The top .01%. They have the means to serve their private interests via lobbyists and campaign contributions. $10 million in campaign contributions nets $100 million in tax breaks / subsidies.

4. Upper Caste. The technocrat/professional class that manages the Status Quo for the upper classes. This includes wealthy entrepreneurs and owners of enterprises: rich but not rich enough to rig the structures of power to serve their private interests.

5. State Nomenklatura. Well-paid government administrators with ironclad job security and power.

Together, the Upper Caste and the Nomenklatura comprise the upper-middle class. Owners of enough capital (real estate and stocks) to cheer serial credit-asset bubbles. Since I’m doing well, the system is working great.

6. The Middle Class. Wage-earners and salaried employees, owners of traditional sources of financial security: family home, 401K retirement funds, etc. Due to high debt, many qualify as debt-serfs / wage-slaves with minimal agency despite their ownership of middle-class status signifiers.

7. The Working Poor. Households with earned income but it is not sufficient to secure the basics of middle class life. Many qualify for social welfare programs such as food stamps and Medicaid. Due to high debt, many qualify as debt-serfs / wage-slaves with minimal agency.

8. State Dependents. Though often labeled “poor,” those with cash / black-market income often live better than the working poor, due to generous social welfare benefits.

9. Mobile Creatives. Self-employed independents, entrepreneurial sole proprietors with adaptive skills. They may collaborate with other Creatives rather than have employees, and may have part-time conventional jobs. They have mobility between sectors and ways of earning income sufficient to acquire capital / assets. They “own their livelihoods.” Their credo is trust my network, not the corporation or the state.

10. Gig economy precariat. May supplement insecure employment (limited hours, no benefits, etc.) with gig work, may combine cash work with rideshare gigs, may juggle several delivery / eBay sales / rideshare gigs. The difference between precariats and Mobile Creatives is precariats are generally in survival mode (high debt, unreliable income, etc.) and are unable to acquire capital / assets. They “rent” their livelihoods rather than “own” them.

Here is a curated list of my essays on the taxonomy of class in the US:

The Three-and-a-Half Class Society (October 22, 2012)

America’s Nine Classes: The New Class Hierarchy (April 29, 2014)

What the Global Status Quo Optimizes: Protecting Elites and the Clerisy Class That Serves Them (September 26, 2014)
Explicitly describing what the system optimizes would trigger social instability.

The New Class: Mobile Creatives (May 1, 2014)
The key characteristic of the Mobile Creative class is that they live by this credo: trust your network, not the corporation or the state.

When Belief in the System Fades (March 12, 2008)

Let’s distill the key dynamics this structure reveals.

1. This is a neofeudal society passing itself off as a free-market democracy. Power is concentrated in the top state-private sector classes. No one below has any real power. Electing another leader or party changes nothing: life gets more difficult, insecure and expensive for commoners regardless of who’s in office. The Imperial project grinds on, regardless of the delusional hope that electing someone else will change anything. Everything else is an illusion of power, not real power.

Try switching the 37% tax rate on labor to capital gains and all income from capital, and see how far you get.

2. Debt and social engineering are the foundations of America’s neofeudalism. The essence of neofeudalism is debt penury and wage-slave bondage to the owners of the debt, which is capital that generates income. Commoners have no agency because they have to work for corporations or the state to service their debt. They can’t change jobs because they’ll lose healthcare insurance, and so on.

Social engineering: as Greer highlighted, Americans can be sold anything, no matter how destructive, unhealthy and exploitive, as long as it’s packaged as Progress, especially technological Progress and novelty-as-progress. This is the power of The Mythology of Progress.

3. Beneath the endless marketing of “free market capitalism,” few have any real agency. Stripped of PR gloss, the majority of workers have a false choice of servitude: they can serve their current oligarch / state agency / corporation, or they can toil in another noble’s domain. Six one way, half-dozen the other.

4. America’s neofeudalism now depends on inflating an endless series of credit-asset bubbles that generate phantom wealth, financial claims that are easily inflated without actually creating any real value via increasing income streams by means other than inflation and monopoly extortion.

This has worked so well for so long that recency bias has kicked in and we now believe this is a well-oiled permanent mechanism we can rely on. Alas, credit-asset bubbles are inherently unstable and the current system-wide bet on AI being something that will actually generate value / massive new income streams is an all-in last-ditch bet. When this bubble pops, the conditions enabling a future bubble will no longer exist.

But nobody says that, do they?

5. Here is a chart of the income distribution from owning capital. Note that it follows a power-law distribution: the few collect the lion’s share of the income generated by capital. The vast majority don’t own any income-generating capital, and the top 20% are delighted by the steady rise in their phantom wealth as the bubble-du-jour inflates the nominal price of the assets they own, setting up the inevitable crash when tulip bulbs revert from “investments” to flowers.

Meanwhile, those collecting 95% of the income from capital look down on the toiling peasantry from their Kafkaesque castles with amusement. Student loans, mortgages, 27.99% interest rate credit cards–it’s really quite marvelous, isn’t it?

6. Symbolic work versus productive work. Much of the work Greer describes as unproductive is considered highly productive because our exploitation of hydrocarbons and technology has generated such a vast surplus that we could spend it on symbolic work–meetings about meetings, compliance reports, marketing plans, projections, consulting, and so on, work that despite claims to the contrary has little to do with harvesting grain, connecting pipelines, replacing transformers, making beds, performing surgery or any other real-world work.

What If the Work We’re Busy Automating Is Needless? (June 19, 2026)

Try telling the priesthood of the temple gods that their work is symbolic. Ours is the most valuable labor, as we’re the ones keeping the whole thing glued together. If we stop, the gods will be angered and all will fail. Indeed.

As a result, we have no experience of a way of life stripped of symbolic work based on seeking positions of status, accumulating credentials, and so on.

7. The number of Mobile Creatives is modest. Some years ago I dug into IRS data on types of income and found that only a tiny sliver of the workforce is truly independent / self-employed, i.e. they earn a middle-class income from royalties, ownership of enterprises or professional services. Out of roughly 160 million employed people, around 16 million are self-employed, but only 6.9 million are professional-class with some form of incorporation, and around 3 million others make enough income to live well. So around 6% of the work force is truly independent.

We’re inundated with glowing accounts of individuals earning big bucks on “passive income” schemes, just as there are endless posts about how to make six figures using “can’t lose” techniques that just so happen to cost $200.

The reality is it’s extremely challenging to live outside the peasantry-Nobility arrangement. In my experience, it takes a willingness to constantly absorb risk and failure, and wear an absurd number of hats: accountant, manager, programmer, laborer, creative wizard, psychologist, consultant, student–and even after all that, success is not guaranteed. The difference between living in a shack and “success” is often some form of luck.

8. Something’s gotta give. Soaring debt, public and private, rampant corruption, extortion, exploitation, dynamic pricing, unaffordable shelter, utilities and food, tulip-bubble scale euphoria, moated bureaucracies, complexity thickets that stifle competition, neofeudal lords digging bunkers and hiring private armies as they sense the peasantry’s distemper–something’s gotta give, we just don’t know what will break first.

The usual explanations no longer explain anything. Their incoherence is obvious but lacking anything more coherent, we go back to insisting that all will be well if only everyone would wear their Silly Hats. What Once Explained Everything Now Explains Nothing.

What we do know is that things have internal structures with dynamics that operate whether we “like” them or not. I put together this chart of the Lifecycle of Bureaucracies some years ago to illustrate how institutions decay as self-interest replaces the original purpose of the organization. This leads to implosion – collapse. Again, whether we “like” it or not.

Greer’s forecast of the end of white-collar symbolic work may well be prescient. Costs are funny things. We can play games with “money” and think we’ve solved the problem of costs, but costs are weirdly embedded in the real world, and so thinking that we can overcome all those costs by requiring everyone to wear Silly Hats doesn’t actually work.

As Peter Drucker observed, enterprises don’t have profits, they only have costs. This is also true of governments, households, institutions and, well, everything else. Calling tulip bulbs “wealth” works like magic for a time, and then reality intrudes.

*  *  *

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With US-Iran tit-for-tat strikes on their ninth day and the Russia-Ukraine war grinding on in Eastern Europe, US inventories of certain air-delivered munitions are being depleted. This has made the rapid procurement of lower-cost missiles and bombs a top priority for the Trump administration.

The Wall Street Journal reports that defense giant Lockheed Martin is planning a low-cost version of the Patriot interceptor missile that will cost less than half as much as the current version.

The PAC-3 Adapted Capability Effector will cost less than half the price of Lockheed’s PAC-3 Missile Segment Enhancement interceptor, which currently costs $4 million per round.

.@LockheedMartin introduces PAC‑3 ACE™ – a low‑cost, high‑performance interceptor built on the trusted PAC‑3® family. Designed for our allies, it delivers rapid‑field capability against short‑range ballistic, cruise and air‑breathing threats. pic.twitter.com/YW87z3Mq9f

— Lockheed Martin Europe (@LMEuropeNews) July 20, 2026

The new missile is designed to counter cruise missiles and short-range ballistic threats while using existing Patriot launchers.

A separate report from the Financial Times states that Lockheed is exploring a European production line for the new low-cost interceptor missiles, which could drive the price down to between $1.5 million and $2 million per round.

Lockheed is already considering European suppliers for solid rocket motors, guidance electronics, and other critical components, potentially through a partnership with a leading defense contractor on the continent.

Lockheed’s decision to look toward Europe, rather than expand exclusively in the US, may signal limitations within the domestic defense-industrial base, just as the Trump administration’s war economy begins to accelerate.

So about lead time for these new missile? How many years?

SpaceX has slipped below its heavily hyped $135 IPO price and has been nearly halved from its all-time high, which was reached during the June 15 gamma squeeze that briefly sent shares above $220 in overnight trading.

Last Thursday’s scrub of Starship’s 13th test flight added further downward pressure, with shares touching $119 on Monday. The stock rebounded on Tuesday ahead of Thursday’s next launch attempt, positioning Flight 13 as a near-term catalyst.

Now targeting to launch Starship’s thirteenth flight test as early as Thursday, July 23 → https://t.co/Rp7VwBzpWx pic.twitter.com/Y0YNzfc5zk

— SpaceX (@SpaceX) July 19, 2026

The last-second abort was triggered after four of the Super Heavy booster’s 33 Raptor engines failed to ignite, prompting an automatic shutdown. “To be confident of a good flight, two Raptors will be removed and replaced,” Elon Musk wrote on X.

Flight 13 will be the first Starship launch conducted with SpaceX trading as a public company, giving investors direct exposure to the mission’s outcome. A successful flight could help restore confidence in the company’s stock and bonds, while another failure would likely deepen the latest sell-off.

Credit markets are already flashing caution. SpaceX issued $25 billion of bonds across five maturities, including $3.5 billion of 6.65% notes due in 2056, which have moved steadily lower since entering secondary trading.

Quite a divergence today…

The question now is whether a successful Starship launch Thursday can put a floor under SpaceX shares, which have underperformed most other major Nasdaq IPOs during the opening days and weeks of trading.

Wall Street, however, remains broadly bullish on the stock, except for Morningstar’s Nicolas Owens with the only “Sell” rating. 

Authored by Micah Zimmerman via BitcoinMagazine.com,

Coinbase Vice Chair Ryan VanGrack said the Clarity Act has gained “tremendous momentum” in the Senate, in a CNBC “Squawk Box” appearance that made the case for a federal crypto framework and touched on bitcoin, blockchain, and the industry’s uneasy truce with Wall Street.

VanGrack, a former SEC official, framed the Clarity Act as an overdue set of rules rather than a giveaway.

“It’s not about no regulation,” he said.

“This is about imposing regulation on the industry for the first time.”

He described a “win-win-win” for American investors, innovators, and standards should the measure pass, and said a bipartisan group of senators has kept up work “even in the last few weeks and days.”

Clarity Act updates

The House passed its version of the Clarity Act last year, and attention has shifted to the Senate, where the path to 60 votes remains the central hurdle. 

The Senate Banking Committee advanced the bill in a 15-9 vote this spring, with two Democrats crossing over, and House members have urged the Senate to act before the August recess. The measure sits in a narrow window as negotiators work out remaining terms.

President Trump added his voice last week, posting on Truth Social in support of Senator Lindsey Graham and calling on the Senate to pass the bill. Trump framed the stakes in terms of competition with China, a message he has repeated as he presses the chamber to move.

VanGrack said Democrats have won concessions that strengthen the bill’s consumer protections. 

JUST IN: 🇺🇸 Coinbase Vice Chair talks CLARITY ACT on CNBC

“The Democrats have obtained meaningful concessions to make what was already a strong consumer protection bill, THAT much stronger” 👏 pic.twitter.com/y3n04dKdRi

— Bitcoin Magazine (@BitcoinMagazine) July 20, 2026

He pointed to an illicit-finance framework, an “FTX loophole” that the text would close, insider-trading safeguards, and added disclosures. 

“Across the board, the Democrats have obtained meaningful concessions to make what was already a strong consumer protection bill that much stronger,” he said. 

He said the bill would not change how crypto is classified as a commodity or a security in a fundamental sense, and would preserve the registration, examination, and surveillance structure from the House version.

Asked how the industry reconciles with skeptics like JPMorgan chief Jamie Dimon, VanGrack pointed to a wave of bank and institutional deals. 

“Not a week goes by,” he said, where a firm fails to announce a new crypto project or investment. He predicted an “inevitable convergence,” a point at which the market stops separating traditional finance from crypto and treats each as a modern financial institution.

That convergence has played out in public, and in conflict. JPMorgan and Coinbase announced a partnership to widen crypto access, and the bank has moved to accept bitcoin as loan collateral and to let clients trade it. 

Dimon, for his part, has declared war on the Clarity Act and aimed a crude insult at Coinbase CEO Brian Armstrong, a reminder that the détente carries friction.

The odds of the Clarity Act being signed into law in 2026 jumped notably today…

Is bitcoin real? 

The interview turned to a sharper question from CNBC’s Andrew Ross Sorkin: whether blockchain is real but bitcoin is not. VanGrack called it “a fair question” and said the technology’s benefits stand on their own — faster settlement, more transparency, and round-the-clock transactions. 

He argued that no one building a financial system today would recreate the infrastructure of the past century. He cited Citadel Securities, which he said made another large investment in the crypto economy last week, as a sign that major institutions are trending the same course.

Sorkin pressed the harder edge of the design: the technology aims to remove the counterparty a customer might call when something goes wrong. VanGrack conceded the point as fair, then countered with the costs of the current system — days to reconcile trades and the counterparty risk that delay creates. 

“I’m not here to tell you it’s the wrong technology,” he said. He acknowledged open questions, including whether crypto accounts should carry interest or loyalty rewards, a debate that bankers have raised and that the law will settle as “a blunt instrument.”

He closed on the case for Clarity Act passage.

“In the absence of clarity, you do not have a federal oversight and framework,” he said. “So whether you love crypto or hate crypto, you should want” the Clarity Act.

Authored by Steve Watson via Modernity News,

A viral video from inside a Home Depot in Dearborn, Michigan shows department signs for the likes of Appliances, Paint, Plumbing now carrying Arabic script alongside the English.

This is not some minor accessibility tweak. It is another clear marker of demographic transformation in a city where Middle Eastern and North African ancestry already exceeds 54 percent.

The footage captures shoppers navigating orange-and-black signs that translate core retail categories into Arabic. A woman in full niqab walks the aisle as the camera pans across the bilingual displays. The same pattern has appeared at other major chains serving the area, including Walmart, Costco, Kroger and Albertsons.

WOW ? Home Depot in Dearborn, Michigan has added Arabic to their signs inside the store

This is not assimilation, this is an Islamic Takeover of America

I found many major retailers in Dearborn have also added Arabic, locations at stores like Walmart, Home Depot, Costco,… pic.twitter.com/bWPmpeuHyO

— Wall Street Apes (@WallStreetApes) July 16, 2026

This represents the quiet rewriting of the public commercial space to accommodate a parallel linguistic reality.

Dearborn has long been held up as the model of successful Arab-American settlement. What the signs demonstrate is something different: the expectation that American businesses will adapt to the language of the newest arrivals rather than the other way around.

One commenter wrote, “That doesn’t encourage integration. It only causes increased segregation for a people which don’t want to integrate anyway. If I were to move to an Arabic country. I would never expect them to learn to speak English. I have too much respect for other lands to consider thinking like that. US citizens have been down that road, encouraging segregation is wrong.”

Another simply stated, “Gross. Never going to Home Depot again, it’s tainted now.” A third declared, “Damn, I guess I’ll be shopping at ACE or Lowe’s from now on. This is fucking absurd.”

Dearborn’s large immigrant population from Iraq and other Middle Eastern countries is the stated rationale for the change. Yet the practical effect is to normalize foreign-language dominance in everyday American retail.

English remains the common language of the country. Private businesses are free to chase customers however they choose. That does not make the visual result any less revealing of the direction of travel.

This development sits on a continuum of institutional accommodation that has also reached local law enforcement in the same metro area.

Just months earlier, the Dearborn Heights Police Department became the first in the United States to introduce an official uniform patch featuring Arabic script. The episode revealed how quickly “diversity” initiatives move from optional gestures to official symbols of authority.

Dearborn Heights has a combined Middle Eastern and North African population of around 40 percent, while nearby Dearborn has a majority 55 percent.

Both areas, along with other towns such as Hamtramck, have attracted Arab communities with immigration from Lebanon, Yemen, and other Middle Eastern countries.

Islamization of Michigan!

Just days ago, thousands of Shia Muslims marched down the streets of Dearborn, Michigan, in the Tenth Annual Ashura Procession.

This controversial event took place in Muslim Congresswoman Rashida Tlaib’s district, and as you will notice, there… pic.twitter.com/Gwxj9zUUfR

— Amy Mek (@AmyMek) July 17, 2024

This is Dearborn, Michigan.

It’s known for being the first Muslim-majority city in the US.

What many don’t know is that before Muslims moved there, it was a majority Middle Eastern Christian town, mostly populated by Lebanese Christians and Assyrians fleeing persecution.

The… pic.twitter.com/WK8VSVvwDx

— Dr. Maalouf ? (@realMaalouf) April 15, 2025

The city of Dearborn in Michigan is home to the largest Muslim population in the United States per capita as well as the largest mosque in North America.

Large anti-Israel protests have been taking place there over the past 24 hours. pic.twitter.com/WqxgGgQp3X

— Visegrád 24 (@visegrad24) January 7, 2024

While there are Arabic speaking Orthodox Christians in Dearborn from earlier immigration movements in the late 19th and early 20th centuries, they have become proportionally smaller due to immigration trends favoring Muslim-majority groups, which now define much of the city’s Arab identity.

Did you know that before becoming America’s jihad capital, Dearborn, Michigan, was a thriving center of Middle Eastern Christian culture?

Not a lot of people know, but Dearborn was initially settled in the early 20th century by Lebanese Christians and Assyrians/Chaldeans fleeing… pic.twitter.com/quIAQ2933K

— Dr. Maalouf ? (@realMaalouf) February 5, 2024

This has sparked controversies, such as over public broadcasts of the Islamic call to prayer.

Your support is crucial in helping us defeat mass censorship. Please consider donating via Locals or check out our unique merch. Follow us on X @ModernityNews.

Chips are scorching hot on Tuesday, but not the kind made by Nvidia, AMD or Intel.

Shares of Utz Brands, the Hanover, Pennsylvania-based snack maker known for its potato chips, cheese balls and red-and-white “Little Utz Girl” logo, erupted after European snack giant Intersnack agreed to take the company private.

Utz Brands surged 90% after European snack maker Intersnack agreed to take the potato-chip producer private for $14.25 a share in cash.

Utz Brands

The transaction will be financed with about $920 million from Intersnack, new term and asset-backed loans, and rollover equity from the Rice and Lissette family. BofA Securities advised Intersnack and arranged the debt financing.

“Intersnack shares our vision for Utz, and their marketing, manufacturing, and technology capabilities will be invaluable as we continue to invest in our brands and accelerate our strategy,” Utz CEO Howard Friedman said.

The Utz take-private deal is expected to close in the fourth quarter of 2026, pending shareholder and regulatory approvals. Holders controlling about 42% of the stock have agreed to support the transaction. Utz will delist from the NYSE, with Intersnack and the Rice and Lissette family each owning 50%. Dylan Lissette will become executive chair.

“Our partnership with the Rice and Lissette Family, and commitment to Utz, represents a compelling opportunity for Intersnack to expand our exposure into the large and attractive US snacking market, where we do not currently have a presence,” Intersnack Executive Chairman Johan van Winkel said.

The deal gives Intersnack its first foothold in the US snack market. Utz, which maintained its 2026 organic-sales growth forecast of 2% to 3%, reports second-quarter earnings early next month.

Utz shares are trading nearly 90% higher, close to the $14.25 take-private price. Short interest stands at roughly 11% of the float, equivalent to about 8 million shares and 3.9 days to cover, likely amplifying the move.

Shortly after Utz completed its SPAC merger with Collier Creek Holdings in August 2020 at roughly $10 a share, the stock surged to nearly $30 before entering a five-and-a-half-year downtrend.

Authored by Molly Schwartz, Rabobank cross-asset macro strategist,

Trading Playbooks

The advancement of one of China’s AI models, Kimi, has sharpened attention on the latest US plans to counter China’s growing AI challenge. Kimi is reportedly more powerful than several US flagship models, though not yet as powerful what lies on the frontier. However, Kimi operates at a fraction of the cost per token. That cost advantage raises the competitive threat to US AI leadership more broadly, including for other leading firms in the space, and Trump is once again taking a page out of China’s playbook by cracking down on the free market and unfettered competition. With tariffs, the US sought to limit China’s influence to bolster its own struggling manufacturing sector. Now, the more immediate question is whether Washington will do the same in an attempt to maintain its lead in the AI race…and if it will be successful.

According to Axios, “the Commerce Department last year considered adding multiple Chinese AI labs to its ‘Entity List,’ which would effectively cut off US access without a license.” The US is considering other avenues of approach as well, such as banning Chinese AI for national security reasons. But not all in the land of the free are happy with Trump’s interventionist approach to global markets. Axios reports that David Sacks said on X that “we are at a critical inflection point in AI policy,” warning that leading closed labs want the government to eliminate their open- source competition. For markets, the issue is not just who builds the best model, but whether AI becomes another front in the fragmentation of global capital, technology, and trade flows.

But protecting US AI dominance domestically may not be enough. China has made itself the manufacturing hub of the world, exporting cheap, shiny goods at a rapid pace and allowing its sphere of influence to grow throughout developing and emerging markets. As these same markets adopt the need for AI infrastructure, who are they more likely to turn to? The niche technically superior (?) and more expensive US AI models, or the cheaper Chinese alternatives that do almost as good of a job?

While the US tries to restrict China’s access to new customers in the AI market, the Houthis may be unintentionally squeezing China’s access to its existing customers in the physical goods market. The Houthis have announced that they plan to impose a sea navigation ban against the Saudis, blocking off the Bab el-Mandeb Strait, which separates the Red Sea (and the Mediterranean Sea via the Suez Canal) from the Arabian Sea.

As the flow of vessels through the Strait of Hormuz remains limited under the current escalation, additional risks to the global supply chain are the last thing global economies need. Brent crude oil opened above $90/bbl yesterday—the highest price since June 11—and diesel traded around $16/bbl—the highest price since May. Additional upward pressure on oil prices because of the Houthis only further increases the fears of a supply-side-driven inflation shock and a consequential slowdown in economic activity as consumers struggle to keep up with the cost of living.

That means fewer consumers willing and able to purchase Chinese imports. A significant part of the current energy narrative, which is also informing our energy forecasts, is that China has more oil reserves than many once thought, giving China more room to wait out the war by drawing on its reserves. Therefore, yes, disruptions to the Bab el-Mandeb Strait may have little direct impact on China’s energy supply, but Xi is unlikely to welcome the pressure they put on China’s customers.

Europe, meanwhile, remains firmly behind the curve on both AI development, and the situation in the Middle East. It is, however, seeking to build its own additional barriers to global trade as Brussels tries to enforce new sanctions on Russia. But the EU’s habit of regulating itself into irrelevance is once again making an appearance, and several member states are putting up barriers of their own against Brussels. The Financial Times reports that Greece refused to sign on to the sanctions agreement, demanding a carve-out that would allow it to continue transporting Russian LNG. Austria, France, Greece, Germany, Italy, and Portugal also came to the table with their own demands. The FT cites a diplomat saying that “around the table, the moral imperative is functioning less and less. Capitals all agree on tough rhetoric and talk of solidarity, but then it all melts away.”

Over the weekend, the World Cup was able to do what the USMCA wasn’t – bring the leaders from the US, Canada, and Mexico together. Many people (mostly economists and market-types) wondered if the three would have some trilateral conversations about trade and the ambiguous status of the USMCA. An announcement from yesterday would suggest that if those conversations did happen, they didn’t go especially well for Canada.

As highlighted earlier in this article, Trump is no stranger to trading playbooks with leaders from more centrally planned economies, and tariffs have emerged as a signature tool of this Administration. Yesterday, Trump signed three proclamations to enforce additional tariffs on Canadian goods, covering motor vehicles, alcoholic beverages, and dairy. These proclamations enforce 50% tariffs across several product lines “ranging from wine to hockey sticks to cement” by leveraging Section 388 of the Tariff Act of 1930. Bloomberg notes that Section 338 has never been used by a President to impose tariffs. As a major distinction from previous tariffs we have seen the Trump Administration enforce on Canadian and Mexican goods, these explicitly “apply to all covered goods regardless of whether a good originates under the USMCA.” They are currently scheduled to take effect in 30 days.

Just because proclamations are signed does not mean that these tariffs will come to fruition, or that even if they do come to fruition, they will be long-lasting. This is not the first time the Trump Administration has leveraged tariffs as a negotiating tool, and then dampened them once demands were met. Given the USTR National Trade Estimate Report on Foreign Trade Barriers, issues involving the dairy, alcohol, and vehicles were always bound to come to the forefront in the USMCA negotiations. These tariffs likely serve as an intended message to Canada that the US wants to “even out the playing field” and will not take no for an answer.

The next step is for Ottawa to negotiate with the US before these tariffs come into effect, or, forbid, try to call Washington’s bluff.