Key points
- Nilay Patel says supply chains may not survive AI's RAM demand, predicting the political breaking point comes when Grand Theft Auto 6 makes PlayStation 5s pricier.
- Willy Shih says he knew Foxconn's Wisconsin LCD plant would never happen once he learned there would be no glass plant across the street.
- Willy Shih says tariffs push assembly to Vietnam or Mexico, with new China-to-Mexico container routes feeding USMCA-bound goods.
Tariffs cannot bring back the factories economics moved away
Every product you buy is assembled wherever first-principles economics says it should be, and tariffs mostly reroute that flow instead of reversing it. A decade of reshoring promises produced few factories because the suppliers never followed. The US can compete only where it holds genuine technical advantage, and its rival is a Chinese state that plans in five-year increments and trains its officials as engineers. The AI boom's demand for memory is the stress test Nilay Patel expects to finally break the system.
Takeaways
- Tariffs redirect trade rather than reverse it. US imports from Ireland set an all-time record in the first quarter of 2025 before Liberation Day, and new container routes carry Chinese parts to Mexico for assembly under USMCA. The holiday TV sets advertised in America are assembled in Mexico from Chinese panels.
- Reshoring needs the supplier next door. Willy Shih knew Foxconn's Wisconsin plant would never be built once he learned no glass plant would sit across the street. A panel factory consumes enormous amounts of concrete and structural steel, and it needs its suppliers close by.
- Free trade's bargain broke down. Steel and aluminum tariffs pushed construction-equipment makers to import finished machines instead. The US never retrained workers displaced by China and has not run a trade surplus since exchange rates moved in the 1980s, while China's surplus now reads as an existential crisis in Germany.
- The US competes where it is differentiated. The US is a high-cost country, so it needs high productivity or products nobody else can make. Only three companies in the world can cast hot-section superalloys for jet engines, and two of them are American.
- China plans while Washington improvises. China's five-year plans and its 1986 863 plan set targets that officials trained as engineers execute, and provinces compete fiercely to hit them. Chinese factories rip out equipment two or three years old to upgrade to the latest generation, and China learns from its mistakes.
- Memory demand may break the supply chain. The system absorbed COVID and the Suez blockage, but Nilay Patel expects the AI buildout's demand for memory to be the real test. He predicts the political breaking point comes when Grand Theft Auto 6 launches and PlayStation 5s get more expensive.
How an iPhone gets made
- Apple buys titanium from Pennsylvania-based Pyramin, ships it to China for assembly, then ships finished phones back to the US, as it does with Corning's glass.
- The chips come from TSMC in Taiwan, made on equipment from ASML and Applied Materials.