Happy 25th Anniversary of granting China permanent normal trade relations, to those few who still celebrate. The Chinese Communist Party marked the occasion by announcing sweeping export controls on rare earth minerals, reminding us how foolish we were to integrate our economy with, and become dependent on, an adversary that we’ve helped develop into a peer competitor. It’s worth remembering who was Wrong All Along and who was Right from the Beginning, and contemplating which side we should listen to about what to do next.
President Trump has responded to China’s threat with some rather robust ones of his own. Presumably his Nvidia-branded “China Hawk Badge of Shame” is in the mail from Jensen already!
What’s on Daniel’s mind:
On Wednesday, the Senate Committee on Health, Education, Labor, and Pensions held a hearing titled “Labor Law Reform Part 1: Diagnosing the Issues, Exploring Current Proposals.”
Considering the Republicans control the White House and both chambers of Congress, the hearing was notable for at least two reasons. First, the primary legislative proposal in focus was the Faster Labor Contracts Act (FLCA), bipartisan, bicameral legislation championed by Senators Josh Hawley (R-MO) and Bernie Moreno (R-OH) and backed by organized labor, which aims to remedy delay tactics deployed by employers that prevent workers from reaching a first contract after they vote to unionize.
Second, Sean O’Brien, the general president of the International Brotherhood of Teamsters, testified as a witness—at the invitation of Republicans. This development would have been a head scratcher to most observers just a few short years ago. The last time the labor leader appeared before the committee, in November 2023, he almost got into a physical altercation with Sen. Markwaynne Mullin (R-OK), a former mixed martial arts fighter. On Wednesday, Mullin welcomed O’Brien as a “friend,” noting that they “talk all the time,” even if they “don’t always agree.” That exchange between foes-turned-friends was emblematic of the hearing’s mostly cordial tone. Republicans ranging from Hawley and Mullin to Sens. John Husted (R-OH) and Jim Banks (R-IN) asked O’Brien questions, attempting to identify opportunities to collaborate on a range of policy areas, including labor and immigration law, reindustrialization efforts, and how best to deploy new technologies in a manner that benefits workers.
These constitute small but promising steps for those who want to renew America’s ossified labor law. In 1935, President Franklin Delano Roosevelt signed the National Labor Relations Act (NRLA), the foundational statute of labor-management relations that provides private-sector workers with the right to unionize and collectively bargain with their employer. Despite widespread acknowledgment that America’s system of labor-management relations is broken, Congress has failed to act. During the past 70 years—a time period in which union density collapsed from more than one in three private-sector workers to barely one in 20—both parties have effectively engaged in a form of surface bargaining. Republicans have introduced labor reform legislation that favors management (e.g., the National Right-to-Work Act), while Democrats have introduced omnibus legislation that favors organized labor (e.g., the Protecting the Right to Organize Act). Rarely, if ever, did either party reach across the aisle to engage the other on opportunities for collaboration, or acknowledge the validity of the other’s concerns and interests. Notably, neither side’s priorities were well aligned with the interests of workers themselves. Instead, both sides postured with maximalist legislation that had no chance of becoming law. Consequently, labor law remained inert, and efforts to reform it have gone nowhere.
Wednesday’s hearing marks a deviation from such partisan exercises and offers evidence that lawmakers might be able to move the ball down the field for workers. Chairman Bill Cassidy (R-LA) has set the table for good-faith negotiations, demonstrating a willingness to be the mediator between the members of his conference who have historically been deferential to the business community and those interested in how organized labor can advance the interests of the working-class voters that represent a growing share of their political coalition. This is a significant development. Whether the parties—Republicans and Democrats, labor and management—will negotiate in good faith, and be able to identify the contours and components of a labor reform package that levels the playing field between workers and their employers while also curbing the excesses of organized labor, remains to be seen. But at least the bargaining table is set. — Daniel
GOOD WEEKEND READS
Ambassador Lighthizer has Lunch with the FT: “I notice I’m eating mine a little faster than Lighthizer, in part because I’ve got him railing against the ‘libertarian approach’ to trade. ‘What is there in your life that you know well, that doing nothing is the answer to a problem?’”
In Jacobin, Luke Goldstein details how “Everything Is Becoming a Bank.” Not satisfied with simply selling products and services, nonfinancial corporations—from airlines to Starbucks to Big Tech—are increasingly lending capital to be repaid with interest and collecting fees on financial transactions. Writes Goldstein: “These are snapshots of the new wave of financialization sweeping across the country, where the lines between finance and commerce are being blurred.”
WHAT’S THE MATTER WITH DEMOCRATS
Since being swept out of power in the 2024 elections, left-of-center pundits have lamented the hold that “The Groups”—progressive nonprofits and their affiliated activist organizations—excercise over the Democratic Party, especially insofar as they subject candidates to purity tests in primaries that become political liabilities in general elections. Is their power over the party waning—and are they, and the progressive politicians that defend them, willing to moderate their maximalist approach as a means of taking back the White House and the Congress? In Slow Boring, Matt Yglesias writes that “The Groups Have Learned Nothing”:
Most politicians hold safe seats, and most politicians want upward mobility, whether that’s chairing committees or running for higher office or being considered for executive branch appointments. If you hold a safe seat (as most elected officials do) there’s very little short-term downside to embracing demands from these groups, even if they don’t perfectly align with voters’ views. And interest groups like the League of Conservation Voters (L.C.V.) can meaningfully impact your odds of being considered for upward mobility. This creates an incentive to say “yes” to whatever they happen to ask for. Moderation-skeptics keep making the point that it’s increasingly difficult for individual members to distinguish themselves from national party brands, but that just means that the groups’ sway over safe seat members is a big deal, even if they’re more pragmatic in their attitude toward frontline races. The groups define the national policy agenda, and the national policy agenda influences the fate of the whole party. And looking at the L.C.V. questionnaire, it’s clear that for this particular group, at least, nothing has changed since the fall election.
In the Atlantic, Jonathan Chait declares that the “Democrats Still Have No Idea What Went Wrong:” “The Democratic Party’s pragmatic wing has been pleading to broaden the tent…The party’s progressives seem determined to reeducate the public rather than compromise for their votes. This is a seductive approach if the goal is ideological purity. It is a problem only if the party hopes to win elections.”
New survey research from the Searchlight Institute asked what voters think Democrats and Republicans want for them, finding that respondents view Republicans as the party that wants them to get married, have kids, own a home, have a good job, and be able to go on vacation and retire. The Party of Actual Abundance, if you will. Democrats remain the go-to leaders if you want a wind farm near your house to be proposed, subsidized, and then stalled indefinitely by community hearings and environmental review.
Meanwhile, the Democratic National Committee will withhold publication of its 2024 autopsy until after November’s gubernatorial elections in New Jersey and Virginia. Reports suggest that the postmortem “will not include scrutiny of how Joe Biden’s late withdrawal from the race was handled” and will focus on methods and messaging rather than a frank discussion of how the party’s policies enabled President Trump’s return to the White House. Truth and reconciliation this is not.
ALL IN THE FAMILY
A recent meta-analysis finds dogs have become core family members in U.S. households, occupying roles once reserved for close human relationships. Childless owners are especially likely to describe their dog as a “soulmate.” National and county data link falling birth rates to rising pet spending, suggesting dogs increasingly absorb caregiving once devoted to children and close kin.
Surely the publication of this meta-analysis is why Taylor Swift, whom many conservatives hope will usher in rising rates of family formation, mocks people who want “those three dogs that they call their kids” on her latest album. Swifties, deliver us.
Whenever mainstream publications publish an anthropological study of generations younger than ourselves, it’s difficult to determine whether the reporting represents the whole or merely reflects anecdotal evidence that makes us feel like we’re through the looking glass. In this case, we hope it’s the latter. The New York Times reports that Gen Z—“a generation that can walk away quite easily” because of a “general sense of having endless options” sees “marriage as a commitment that is neither final nor exclusive” and the divorces “often feel less like scandals and more like rebrands.”
IMMIGRATION
The Border Is Closed: U.S. Border Patrol apprehended 238,000 migrants crossing the southern border illegally in fiscal year 2025 (which ended on September 30)—the lowest level in more than five decades and one-tenth of the record 2.2 million apprehensions recorded in fiscal year 2022. Remarkably, that figure understates the impact of the current border policy: 60% of those apprehensions occurred in the Biden administration’s final three months, before President Trump took office. The latest Harvard/Harris poll finds that 68% of respondents support “closing the border with added security and policies that discourage illegal crossings,” including 87% of Republicans, 65% of Independents, and 51% of Democrats. President Trump has demonstrated that the border can be closed. If the next Democratic president doesn’t keep it closed, that would be a deliberate policy choice (as was the last one)—and a conscious break with public will.
Also worth noting: the Harvard/Harris poll finds that “deporting immigrants who are here illegally and have committed crimes” gets 78% support, while, “deporting all immigrants who are here illegally” gets 56% support, including 76% of Republicans and a majority of Independents (54%).
The New York Times asked a similar question in its most recent poll and found that “deporting immigrants living in the United States illegally back to their home countries” gets 54% support, including 92% of Republicans and 53% of Independents. But asked whether “Donald Trump’s actions on immigration enforcement have gone too far,” “not gone far enough,” or “been about right,” 51% overall and 57% of Independents chose “gone too far.”
And the Migrant Outflows Are Real: In August, the Center for Immigration Studies (CIS) analyzed the monthly Current Population Survey (CPS) and estimated that from January to July, the foreign-born or immigrant population (legal and illegal) declined by 2.2 million, with illegal immigrants accounting for nearly three-fourths of the decline. At the time, CIS qualified its estimate, suggesting there could be a non-response bias due to a reluctance among immigrants to participate in the monthly survey. Now, they’re no longer hedging: “...based on multiple months of data, response rates to the CPS, continued willingness of survey participants to answer immigration-related questions, slowing job growth reported by employers, anecdotal evidence, and other data, we find no reason to doubt that the decline in the foreign-born is real.”
Meanwhile, the New York Times reports that the number of international students arriving in the United States, which hosts the most international students of any country, fell by 19% in August compared with last year—the largest decline on record outside of the pandemic.
American Truckers First: In late September, Transportation Secretary Sean Duffy issued an emergency order requiring states to stop issuing or renewing non-domiciled commercial driver’s licenses (CDLs) to end the widespread practice in many states of issuing CDLs to immigrants without work authorization or extending them beyond when a driver’s employment-based visa expires. Consequently, Craig Fuller, the CEO at FreightWaves, reports that “trucking bankruptcies could surge in coming months,” especially among companies that built their business models on the backs of an illicit labor pool”:
Over the past few years, motor carriers have increasingly hired drivers with non-domiciled CDLs. These drivers have been attractive hires because they often accept wages below those of their American counterparts and are willing to violate hours-of-service (HOS) rules without fear of repercussions. Many non-domiciled CDL holders are individuals who might otherwise be homeless and are prepared to live in their trucks, as living conditions in their home countries are often far worse than those in a truck cab. A significant number of these drivers hail from Eastern Europe or the Indian subcontinent. Trucking firms, frequently owned and operated by foreign individuals, have developed a compelling business model: import drivers from their home countries, pay them below-average wages, and have them operate nearly nonstop. While these working conditions are grueling for anyone, they are often preferable to conditions back home, with wages far exceeding what drivers could earn there. Additionally, since drivers live in their trucks, housing and personal transportation costs are eliminated. This model has proven highly effective.
On X, Fuller gets at the heart of why a competitive advantage premised on brazenly violating our nation’s immigration laws undermines American workers: “As a libertarian, I [have] always been pro immigration and have an enormous amount of empathy for people that are born in very poor and unstable countries. I know how fortunate I am to be born in America. But over the past few years, my perspective has changed. I’ve seen what unrestricted immigration has done to the trucking industry and how it has destroyed the livelihood of millions of veteran American truck drivers. It has made the trucking industry an economic wasteland and made it impossible for legit operators to make a profit and survive.”
TRADE AND GLOBALIZATION
One of the underappreciated effects of the Trump administration’s trade agenda—including direct and indirect tariffs on China—is how it has shifted the deleterious effects of Chinese overcapacity onto the ledgers of our trading partners, forcing each of them to choose: absorb China’s export surplus to the detriment of your industrial base, or join us in erecting trade barriers to protect yourself against China’s beggar-thy-neighbor industrial strategy.
This week, we saw further movement towards the latter, with the New York Times reporting that the EU has taken steps to impose higher tariffs on steel imports:“The European Commission’s proposal would slash the amount of steel that can be imported without incurring tariffs to 18.3 million tons per year, a nearly 50 percent reduction from the 2024 quota. At the same time, it would double the tariff on steel imported above that quota, pushing it to 50 percent. The goal is to hit back against global overcapacity, as cheap steel imported from China and elsewhere gains market share in Europe and costs steelworker jobs across the 27-nation bloc.”
Somewhat comically, Economic Innovation Group chief economist Adam Ozimek attempted to cite this action as evidence that supporters of the Trump administration’s trade agenda have been too quick to celebrate the lack of foreign retaliation, because here we have an example of someone else raising tariffs. But the EU’s proposed steel actions are not “retaliation” against the United States. Rather, they signal convergence toward a multilateral response to Chinese overcapacity. China produces roughly half of global steel and, amid a property-sector slump, it is exporting more and more of it—Chinese steelmakers are projected to export a record volume of steel this year. Because steel is a globally traded commodity, additional Chinese supply pressures international benchmarks that shape contract prices irrespective of origin. In June, President Trump doubled the Section 232 steel tariffs from 25% to 50%. The EU’s proposed steel actions are, in turn, an effort to shield its market from redirected flows and China’s chronic surplus. With the United States no longer absorbing the glut, Europe faces stronger diversion effects and is moving to contain them.
Reports from this week suggests the EU should replicate this response across product categories:
China Reroutes Clothes Exports to Europe After US Tariffs Upset Trade (Financial Times): “China’s textile exports into the EU have surged as manufacturers hit by heavy US tariffs redirect goods to Europe, the European textile industry body has said…‘The Chinese companies, because they cannot sell in the United States, are behaving in a very aggressive way to sell in Europe.’”
China Bets on Europe for Self-Driving Tech Expansion (Reuters): “Blocked from the U.S. market, Chinese self-driving technology firms are accelerating their push into Europe, setting up headquarters, striking data deals, and road-testing - prompting alarm from local rivals over competition concerns.”
And a smattering of headlines from the week underscores China’s ever-growing dominance of the auto sector—at home and abroad:
See How China Is Dominating the Global EV Market (NYT)
UK Becomes BYD’s Largest International Market After Sales Surge (FT)
Mercedes Sales in China Slide 27% as Demand Crisis Deepens (Bloomberg)
BMW Shares Slump as China Woes Prompt Guidance Cut (WSJ)
Porsche Deliveries Fall on Weakness in China (WSJ)
Finally, the Wall Street Journal reports on how Newell Brands developed and executed a playbook for making low-cost, high-volume Sharpies in the United States. The secret sauce? Investment in robots and training has increased production speed by three to four times, while boosting quality and not raising prices. The kicker: There’s been no headcount reduction, and average wages have increased by 50%. The disciples of I, Pencil, said it couldn’t be done. However, readers of American Compass know that high wages and technological innovation can be self-reinforcing—and that a successful nation has no choice but to pursue both. Reindustrializing our atrophied industrial base requires us to replicate Sharpie’s playbook.
Enjoy the weekend!
Right now Trump dominates the Republicans but the Bushies are biding their time and will attempt a comeback for their globalist policies. So the populists can't let their guard down. Closing the deal with the private sector unions is very important.
I hope the Dems make the mistake of taking Yglesias' and Chait's direction