Despite being more vulnerable to trade war pain due to its export surplus, China has adroitly managed to gain the upper hand in the economic conflict by taking advantage of the fact that semiconductors require input factors that are almost entirely under Chinese control......
......With the new rare earth restrictions, China flips the logic back to the US. Beijing has announced any non-Chinese companies operating anywhere must obtain Beijing’s approval to export rare earth magnets or semiconductors if those products contain Chinese original rare earth, or if they are produced using Chinese rare earth technology, process or equipment.
Beijing is denying all rare earth products, technology, equipment, and technical support to fo⁰reign end users it doesn’t approve.
The Chinese economic strategists understand that in an economic war, pain flows downstream. The US thought it was in the driver’s seat – and indeed, I assumed much the same due to the fact that the US economy would benefit greatly from refraining from importing goods from China and onshoring its now-absent industrial manufacturing capabilities.
But the stranglehold China has upon the materials required for modern warmaking materials, particularly drones and semiconductors, means that the USA will have to choose between its ability to make war and its ability to maintain the global Clown World economy. And for the first time, it is not possible for Uncle Sam to choose guns and butter.