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China strikes back against US sanctions

The other shoe has finally dropped:

China said on Tuesday that it would begin banning the export of several rare minerals to the United States.... Sales of gallium, germanium, antimony and so-called superhard materials to the United States would be halted immediately on the grounds that they have dual military and civilian uses, China’s Ministry of Commerce said. The export of graphite would also be subject to stricter review.

China has only two critical exports to the US: pharmaceuticals and various key metals. It was sort of inevitable that China would eventually respond to our export controls with one of its own.

But I don't know how big a deal this really is. The US has moderate stockpiles of most critical metals, including rare earths, and they're also available from other countries. They just cost more than Chinese supplies. In the longer term, we're working on reopening domestic production. And the Chinese ban applies only directly to the US, not to countries that make intermediate products which end up back in China for eventual export to the US (like iPhones).

Still, the supply chain war is now well and truly on. Buckle your seatbelts.

33 thoughts on “China strikes back against US sanctions

  1. Joel

    " . . .and they're also available from other countries. They just cost more than Chinese supplies. In the longer term, we're working on reopening domestic production. And the Chinese ban applies only directly to the US, not to countries that make intermediate products which end up back in China for eventual export to the US (like iPhones)."

    So does this mean that in the era of global trade, trade boycotts and tariffs are mostly anachronisms?

    1. kkseattle

      Yeah, this is good news.

      We really shouldn’t be allowing dictatorial autocratic regimes to have a stranglehold over our economy.

      When they want to join the civilized world, they can give us a call. Until then, we’ll encourage trade with nations that aren’t run by repressive lunatics.

          1. emjayay

            The Constitution is just a piece of paper. We must have state level tariffs. State's rights!

            Maybe a different currency for each state like under the Articles of Confederation too.

  2. Art Eclectic

    In the 2025 Season of America!

    Will Americans be content with buying less because stuff is more expensive?
    Will American businesses be content with lower profit margins?
    Will businesses on-shore more factories and manufacturing or just find other sources?
    Will Amazon factor in tariffs to their importer marketplace?

    And our bonus episode: which products will become vastly more expensive?

    1. KenSchulz

      Companies that moved production to China for the cheap labor will relocate it to another low-wage country, if tariffs are imposed/increased. Tariffs can make domestic production more competitive in the domestic market, but won’t enhance international sales. The only way for a high-wage country to be competitive worldwide is to invest in automation and other advanced manufacturing technology, to reduce labor-cost content of tradeable goods. Tariffs don’t incentivize investment.

    2. Crissa

      Can't really on-shore production of these metals.

      Well, we might be able to get them from asteroids, but that's unknown technology at this point.

      1. aldoushickman

        "Can't really on-shore production of these metals."

        I mean, we could. The US has a _lot_ of geography, much of it with minerals and metals of all sorts.

        "we might be able to get them from asteroids, but that's unknown technology at this point."

        Absent some sort of over-the-horizon scifi-esque revolution in propulsion technology like warp drive, we will never mine asteroids for materials for use on earth.* It takes way, way too much energy to move even refined metals from an asteroid to earth (and even refining anything in situ would require fantastic advances in robotics, AI, and water-free chemistry) for it to ever come close to cost competitive with terrestrial mining.

        I guess that could change if we find an asteroid composed of some ridiculously valuable material, like antimatter, but asteroids composed of rocks, nickel, iron, and trace other metals don't offer anything we don't already have right here.

        _____
        *There may be a future for mining things in space for use in space, but that doesn't do much for us here on the ground, and nothing for us on the timescale of Chinese export bans.

  3. name99

    This was entirely expected. The general assumption is that tariffs (or equivalent) on China will first act by moving production to other countries, not (mostly) moving it back to the US. Whether the next stage, moving back to the US, happens probably depends on the success of the deregulation agenda.

    For those who want to hear how those actually in charge of this are thinking, I recommend https://www.youtube.com/watch?v=XkNKhcPELbo

    The first three minutes or so are generic campaign speech "here's why we, including Trump, are the greatest"; you can skip over it.
    But after that we get a fairly nuanced analysis of different factions within the Republican party, what each wants, and where they can compromise to a common goal vs where they are diametrically opposed.

    I keep trying to explain that the 2024 Republican Party is not the GWB Republican Party (meaning that analyses of immigration, or taxes, or tarrifs, based on lazy claims about the GWB Party are just dumb); maybe hearing this same analysis from the horses mouth will change a few minds?

    1. memyselfandi

      "Whether the next stage, moving back to the US, happens probably depends on the success of the deregulation agenda." That claim is completely imbecilic. Of course there is no chance of production moving back to the US since overall demand will plummet and the existing production will meet all of the much lower demand.

      1. d34df4n

        The idea that deregulation will make US manufacturing competitive with China is just painfully stupid.

        There is always - and I mean ALWAYS - a legitimate debate to be had on the correct type and degree of regulation. It's something that we should constantly be working to adjust to maximize output and minimize externalities. Nobody should oppose that. Unfortunately, conservative brains are simple, so their position is 'regulation bad', which makes any kind of nuanced debate basically pointless.

        1. name99

          "Unfortunately, conservative brains are simple"
          So you DIDN'T actually listen to the video, did you?
          And yet you feel comfortable calling anyone who disagrees with you "stupid"...

    2. kkseattle

      The only interest the Republican Party has in moving anything to the United States is to further enrich billionaires. They don’t give a crap about the working class. But they think they’re swell for paying Americans $10 an hour instead of paying Chinese $5 an hour.

    3. KenSchulz

      Deregulation is not going to bring any significant amount of production back to the US. Most companies moved production to China for the low labor rates. Few, if any, moved solely because of the lax environmental regulations. Nor is it likely that US environmental regulations would ever be set so much lower than China’s that re-shoring would be justified.

  4. memyselfandi

    Yes, trump fully intends to cause another great depression. His followers are going to get it good and hard. Too bad the rest of us will suffer with them.

    1. kkseattle

      Of course.

      We’ve had a recession under every Republican president since Hoover.

      Every. Single. One.

      We had no recession under Biden, Obama, or Clinton.

      Recessions are when billionaires snap up the assets of the middle class at fire-sale prices. What’s not to like?

  5. D_Ohrk_E1

    Australia is probably loving this decision, paving the way for its mining companies to fill the gap and avoid going bankrupt because of the Chinese competition.

  6. JJ

    Not that it really changes Kevin's point at all, but China isn't banning exports of rare earths. It's banning gallium, antimony, germanium, and some graphite. Rare earth elements are different.

  7. Ogemaniac

    Germanium and gallium are critical to the semiconductor industry. Germanium in particular is used extensively in cutting edge transistor designs. While the germanium based chemicals used for this are produced in the USA or our allies, the supply chain starts with germanium oxide coming out of China.

  8. tango

    Considering what we have done to them, we have this one coming.

    That said, if we want to quickly ramp up production in the US, we will have to set aside/not enforce/whatever many of the environmental restrictions on development of natural resources. I suspect that it is more likely that we will simply hope folks like Canada and Australia do that and buy from them. Although if there was an administration which has few qualms about setting aside environmental regulations, well, this is the one...

    1. lawnorder

      I think you will find that Canada and Australia have environmental restrictions that are just as tough as those in the US. Further, with respect to Canada there would be a serious hazard to the US in relying on lax Canadian environmental regulations if such existed; the border doesn't do a very good job of stopping pollution.

  9. ProgressOne

    Don't worry. Trump will just say he will raise tariffs even higher, and China will back down. Donald Trump, American superhero.

  10. ScentOfViolets

    What, you mean all those arguments about why "free trade" is economically sound and that "liberalization" promotes peace and stability were really about labor/environmental arbitrage and capital flight for the benefit of the donor class, and at the expense of everyone else to boot? I'm shocked, I tells ya, shocked.

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