Palantir Co-Founder Peter Thiel Says America Needs 'Drastic Reset' With China, But So Do Others

Peter Thiel said the United States urgently needs an overhaul in its economic relationship with China, highlighting that China directly accounts for roughly a quarter of America’s trade deficit, with another quarter linked indirectly.

What Happened: Theil spoke with fellow Palantir co-founder Joe Lonsdale on the American Optimist podcast, discussing President Donald Trump's escalating tariff policy, where he framed the issue with China as both an economic and a geopolitical challenge.

"We need a very drastic reset with China … about a quarter of the US trade deficit is bilaterally with China and another quarter is indirectly with China," Thiel said. He suggested that while shifting production to other countries like Vietnam could help curb China's influence, such a move would require careful coordination and improvements in U.S. industrial policy.

Thiel also pointed out that economic ties with China are often viewed narrowly, omitting strategic risks: "There are ways that the economic relationship with China is fairly efficient … we don't really want a lot of these jobs in Wisconsin. But it's this geopolitical rivalry that's in the background that you have to factor in. The economists never factor it in properly with China."

Beyond manufacturing, Thiel hinted that artificial intelligence and automation may allow certain high-tech production lines to return to the U.S. but cautioned that any major reshoring effort would depend on regulatory changes and the cost-effectiveness of advanced machinery.

See also: Trump Tariffs Have Put ‘America Last’ For Investors, Peter Schiff Warns Of A Financial Crisis Worse Than 2008

Why It Matters: Theil’s comments arrive on the back of Commerce Secretary Howard Lutnick’s forceful defense of the Trump administration’s tariff policies, emphasizing the United States’ role as a key consumer of global goods. Critics, however, argue that the aggressive tariffs on imported goods expose America’s vulnerability to retaliation targeting its thriving services exports.

It is also worth mentioning that Michael Kratsios, a former deputy to venture capitalist Peter Thiel and one of Silicon Valley’s most influential tech policy figures, is currently in charge of the U.S. government’s AI strategy amid escalating competition with China’s tech giants.

Photo Courtesy: Mark Reinstein On Shutterstock.com

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