The Coming Border War

The (New) Mexican-American War

The trade war with Mexico is on hold. A shooting war, however, might be imminent.

We’ll get to the tariff situation shortly. But another matter takes precedence this morning.

“I expect a shooting war between Mexico and the U.S. in the near future,” said Jim Rickards yesterday in a brief note to Rickards’ Strategic Intelligence readers.

“The Mexican drug cartels are planning to use drones for aerial attacks on Immigration and Customs Enforcement. This is war. Trump, [Secretary of State Marco] Rubio and [Defense Secretary Pete] Hegseth won't put up with it for much longer.”

I haven’t had a chance to draw out Jim on the topic yet…

But it’s not an outlandish prediction in light of recent events…

• Monday, Jan. 27: The State Department warned against travel to the area around Reynosa, Mexico — just across the Rio Grande from McAllen, Texas — describing “frequent gun battles occurring in and around Reynosa in the late night and early morning hours.” There’ve also been routine sightings of “improvised explosive devices” — or in plain English, roadside bombs

• Yesterday: The U.S. consulate in Nuevo Laredo — on the other side of the Rio Grande from Laredo, Texas — reported several gunfights throughout the city. U.S. government personnel were advised to “shelter in place.”

And that’s in just one Mexican state, Tamaulipas.

In his inauguration speech, Donald Trump promised to designate Mexican drug cartels as “foreign terrorist organizations” — presumably a first step toward military attacks on the cartels.

When he was still in Congress, Trump’s national security adviser Mike Waltz sponsored a bill that would have authorized the use of force against the cartels.

Thing is, a battle with the cartels would be no cakewalk. Their capabilities are formidable — drones, roadside bombs, surface-to-air missiles.

It would be like Afghanistan — but on America’s doorstep, says Cato Institute scholar Brandan Buck: “Sending U.S. Special Operations into a direct confrontation with the Mexican cartels would pit them against a near-peer competitor, who, like the Taliban, would likely enjoy the direct or tacit support of the local populace and the luxury of hiding in punishing terrain.”

A more sane approach was proposed yesterday by Sen. Mike Lee (R-Utah).

In a thread on X, Lee proposed a remedy laid out by the framers of the Constitution — that Congress grant “letters of marque and reprisal.”

"Letters of marque and reprisal,” he said, “are government-issued commissions that authorize private citizens (privateers) to perform acts that would otherwise be considered piracy, like attacking enemy ships during wartime. Privateers are rewarded with a cut of the loot they bring home.”

How would it work here? "Congress could issue letters of marque and reprisal authorizing private security firms or specially trained civilians to intercept cartel operations, particularly those involving drug shipments or human trafficking across borders," Lee said. "Focus on disrupting supply lines, capturing high-value targets or seizing assets like boats, vehicles, cash, gold or equipment used in criminal activities."

The usual suspects in liberal media are dismissive — The Daily Beast, for example, calling it a “crazy plan.”

But is it crazier than the alternative?

The day after the 9/11 attacks in 2001, Rep. Ron Paul (R-Texas) proposed that Congress issue letters of marque and reprisal to bring Osama bin Laden and crew to justice.

“When we retaliate for this horror we have suffered, we must be certain that only the guilty be punished,” he said. “More killing of innocent civilians will only serve to flame the fires of war and further jeopardize our security. Congress should consider its constitutional authority to grant letters of marque and reprisal to meet our responsibility.”

Would it have worked? Maybe, maybe not. But we know for sure what did not work — 20 years of “forever wars” that killed over 7,000 U.S. troops… as well as 4.5 million foreigners (whose survivors hold a grudge against the U.S. government)... while adding $8 trillion to the national debt.

(Those figures come from the authoritative Costs of War Project at Brown University.)

We’ll see what unfolds on the border in the weeks and months ahead. It’s not headline news, not today — but that’s all the more reason for us to give it top priority today.

Trump’s (Narrow) Tariff Window

Now for the tariff situation: “There's a storm cloud with a silver lining to Trump's approach,” says Dan Amoss, lead analyst for our Jim Rickards unit.

As we chronicled in real-time yesterday, Trump’s threatened tariffs against Mexico are on hold for 30 days. After we hit the “send” button, Trump’s threatened tariffs against Canada were also paused for a month. Both Ottawa and Mexico City have promised to beef up border security.

An added 10% tariff on Chinese goods, however, is taking effect today. Beijing has responded with a 15% tariff on selected U.S. goods.

With the last-minute climb-downs by both the Canadian and Mexican governments, there’s a lot of “winning” gloating on social media.

But those “wins” are only temporary — which comes back to the uncertainty we mentioned yesterday and Friday.

“The storm cloud,” says Dan, “is the disruption to status quo channels of trade, currency and capital movements that make it hard for businesses and households to plan. The uncertainty freezes activity, which in turn sets off a chain of events that could be unpleasant.”

Thing is, it’s that uncertainty that’s the key to Trump’s art-of-the-deal mindset. “For Trump to keep winning, he needs to remain unpredictable and willing to do wild-man stuff,” says Dan — “to force an incentive on trade counterparties to be first in line to sue for peace to avoid the tariff ‘stick.’”

The problem is when Trump’s wins turn into corporate America’s losses. “Too much uncertainty for too long can do permanent damage to capital formation and employer-employee skill matches,” says Dan. If Trump pushes his luck, Dan believes companies will pull in their horns the way they did during COVID, albeit to a lesser degree.

Solution: “Trump should just make clear rules of the road, and business can adapt,” Dan says. “But timing is of the essence.

“Trump will be a wild man for perhaps two–six months. Then he'll need to convey stability and vision for what (more or less) sustainable trade arrangements will be.

“I'm rooting for Trump,” Dan concludes — “but the path is narrow and loaded with constraints and pitfalls.”

Amid that backdrop this morning, the major U.S. stock indexes are in the green. But they’re still below where they sat before the tariff news broke Friday afternoon.

The S&P 500 is up a half percent and back over 6,000. At its peak on Friday, it was in record territory over 6,100.

Tariffs will presumably take a back seat to earnings as the week goes on. Google parent Alphabet will report its numbers after the close today — and Amazon on Thursday. At that point, six of the “Magnificent 7” names will have reported. (The seventh, Nvidia, releases its figures closer to the end of February.)

Precious metals continue to rally — and for once, it’s silver and the mining stocks outpacing gold. The Midas metal is up nearly three-quarters of a percent to $2,834. But silver is up nearly 1.4%, touching the $32 level and challenging its mid-December highs. The HUI index of mining stocks is likewise challenging its mid-December peak at 320.

Crude has pulled back below $73. Crypto is stuck in the mud, Bitcoin under $100,000 and Ethereum a hair below $2,800.

Will Ukraine Become “Trump’s War”?

It seems Donald Trump is determined to keep the Russia-Ukraine war going to assure U.S. access to rare earth elements.

Of course, neither mainstream nor alternative media are framing it that way, so it falls to us.

“We’re looking to do a deal with Ukraine where they’re going to secure what we’re giving them with their rare earth and other things,” Trump told reporters in the Oval Office yesterday. “We want a guarantee. We’re handing them money hand over fist.”

In case you’re a newer reader, rare earths are a group of essential minerals used in everything from your smartphone to hybrid car batteries to guided missile systems. They’re not really “rare” except in the sense that miners have to sift through ungodly quantities of rock and dirt to get at them.

Late last year, Sen. Lindsey Graham (R-South Carolina) said he expected Trump to “do a deal to get our money back, to enrich ourselves with rare earth minerals… Ukraine’s ready to do a deal with us, not the Russians. So it’s in our interest to make sure that Russia doesn’t take over the place.”

Here’s the problem: Many of Ukraine’s rare earth deposits lie in the east of the country — territory populated by Russian speakers and now controlled by Russia. Russia will not give up this territory without a fight to the death.

Is that what Trump is willing to take on?

As Jim Rickards told his readers yesterday, “The choice for Trump is whether he wants the war to end quickly (mostly on Putin’s terms) or wants it to continue in which case it will quickly become known as ‘Trump’s War.’”

Reminder: Trump’s Ukraine envoy, retired Lt. Gen. Keith Kellogg, is tasked with reaching a settlement to the war by the end of April.

Mailbag I: Tariffs and the Elites

“Isn't it interesting that taxes (in the form of tariffs) are the leading policy to make America great again?” a reader writes.

“For decades, Americans have been told that free trade, capitalism and democracy work for everyone. They'll get ahead if they work hard, create value and play by the rules. But that's not what happened. Instead, wealth and power concentrate at the top, while people are left working harder every day just to stay in place.

“The system isn't broken — it's designed this way. Economic stratification isn't a bug; it's a feature. Tariffs and trade deals, policies and regulations, aren't about fairness or efficiency; they're about control. Governments don't create value; they allocate it, deciding who wins and who loses. For the last 60 years, those decisions have overwhelmingly benefited corporate elites, financial speculators and political insiders.

“As a result, America has shifted from a nation of 'producers' to a nation of 'consumers.' The drive to create, build and innovate has been replaced with dependency on wages, debt and cheap imports. And when people feel powerless to change their circumstances, they either tune out, fight each other or look for false saviors (King Trump).

“The partisan fight of left versus right is a deliberate distraction. What the elites work so painstakingly to conceal is the long game of the takers pillaging the makers. The problem isn't capitalism or socialism — it's a system that rewards rent-seekers over value creators. The game will remain rigged until people realize the truth and act to break the rent-seekers’ dominance.

“The real question is: What will it take to play a different game?

“It looks like we're going to find out.”

Mailbag II: Tariffs and Mind-Altering Substances

“I would like to take a philosophical break from the usual banter about tariffs,” writes another — “particularly one of the main espoused reasons for them, ‘the stopping of fentanyl into the U.S.’

“From my perspective I somewhat reckon this back to the Prohibition period when alcohol was made illegal in the U.S. I don't recall reading from the history of that period where the U.S. placed blame on other countries for the alcohol being smuggled into our country — then placing tariffs on them to get it to stop being sent from overseas to the U.S.

“With that I ask why do we blame other countries for the substance abuse problem here?

“Should it not be our problem to find the ‘why’ for the rampant substance abuse here and ‘fix that’? You can call it fentanyl, acid, pot, alcohol, benzodiazepine, hydrocodone or whatever you want — they are all abused to ‘cover up something.’

“I have read multiple reports that the majority of imported drugs come through major ports of entry and not through very rural, out-of-the-way places along the border. Should it not be our problem to have better security at our borders to find, confiscate and eliminate the illegal drugs?

“It is also relevant to mention that these same drugs are illegally made right here in the U.S. So again why is it ‘other countries’ problem’ and in trying to force them to increase border security we place additional costs on the everyday working folk of the U.S. (for it is those people who will suffer and face the dilemma of having to choose what to buy and what to do without)?

“I doubt very seriously the upper 1% will be cutting back on their household spending due to the increased cost of basic goods and it seems these are more and more the people making the country's decisions.

“I've been a reader of the ‘5’ for a number of years enjoying the perspective/opinions of the editors as well as some of the customers.”

Dave responds: “As drug warriors have been discovering since Congress banned nonmedical use of opiates and cocaine in 1914,” writes Jacob Sullum at Reason, “prohibition creates a strong financial incentive to evade any obstacles that the government manages to erect between suppliers and consumers.

“That problem is compounded in the case of fentanyl, which is cheap to produce and highly potent, making it possible to smuggle large numbers of doses in small packages.”

Sullum spotlights a 2018 report from the American Enterprise Institute — which concluded that even if Washington somehow stopped all direct fentanyl sales to the U.S., “enterprising dealers [would] simply sell into nations such as the U.K., repackage the product and then resell it into the U.S."

So yes, you’re right. As the military analyst William Schryver tweets, “Fentanyl use in the United States is an indicator of socioeconomic despair and spiritual malaise.”

But it’s a lot easier for politicians to blame foreign devils, no?

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets