The trade war between the United States and China reaches a new peak almost every week. This time, it was Beijing’s turn to move.
The United States and China exchanged a series of blows on tech exports, fueling the ongoing trade war between the world’s two largest economies. This week, China imposed restrictions on metal exports after months of similar measures by the United States.
Earlier this week, China unexpectedly announced restrictions on gallium and germanium exports, two key metals in the manufacturing of EVs, military equipment, solar panels, microchips, and other advanced products.
China produces 60% of the world’s germanium and 80% of gallium, CNBC says.
China does not, however, manufacture the advanced products these metals are necessary for. As a matter of fact, approximately 92% of the world’s microchips are manufactured in Taiwan, a staunch American ally.
Gallium and germanium can easily be replaced by other materials, and an upcoming mine in the Democratic Republic of the Congo is believed to make up for Chinese restrictions.
Indeed, China’s curb on gallium and germanium is only a warning to Western countries of China’s soft power. As China’s Vice Commerce Minister Wei Jianguo put it, the measure is "just a start".
60% of the world’s rare earths, materials that cannot be easily replaced, are produced in China. Beijing is signaling that, if provoked, their reaction could seriously hamper the world’s supply of electronics.
An exhausting trade war
Beijing’s new restrictions come after years of US sabotage against China’s industries.
Starting with Donald Trump, the United States has waged a full-fledged trade war against China. The Biden administration escalated measures by limiting exchanges of chip technologies between the two countries.
Microchips are vital components in virtually every digital and electronic product. Crucially, microchips are also the brain cells of modern military weapons.
At the moment, the United States has a clear advantage in chip technology over China. Every leading company in the chip-making industry, including NVIDIA, is based in America. Further, as we said, Taiwan holds steady its grip on chip manufacturing.
NVIDIA and other US corporations want to trade with China. It makes perfect business sense to keep economic relationships with the world’s second-largest economy.
But the United States cannot let China close the gap. If China reaches the US technological capabilities or, even worse, gets better at it, Washington’s military might won’t look that scary anymore.
China and the United States are the world’s two biggest rivals. A new Cold War is starting between Beijing and Washington, one that could become "hot" if the two countries reach a technological breaking point.
The United States needs to keep the status quo. To do so, they need China to stay behind in tech, even if that hurts their own businesses.
