When combined, 土皇帝 (tǔ huángdì) creates a powerful oxymoron. It's an “emperor” of “dirt.” The “local” or “uncultured” nature of 土 undermines the legitimacy and grandeur of 皇帝, perfectly capturing the image of a petty tyrant who has delusions of grandeur in their own small fiefdom.
The term 土皇帝 is deeply embedded in China's two-thousand-year-long imperial history. The concept of a single, all-powerful emperor is a fundamental part of the Chinese cultural psyche. This term cleverly hijacks that historical symbol to critique modern-day power dynamics. It's closely related to the famous proverb 山高皇帝远 (shān gāo huángdì yuǎn) - “The mountains are high, and the emperor is far away.” This saying describes how central authority's control diminishes in remote regions, allowing local officials or strongmen to operate with impunity. The 土皇帝 is the very person who thrives in such an environment. They are the local manager, corrupt official, or powerful family head who acts as the law because the “real emperor” (i.e., the central government, the CEO, the law) is too far away to intervene.
土皇帝 is an informal and highly derogatory term. You would use it to complain about someone, but almost never say it to their face unless you were seeking a direct and serious confrontation.