Donald Trump’s trade wars have largely fallen off the headlines.
asserted
wars → fall → headlines
Fears of new tariffs flare up from time to time when the US president goes off the rails – for instance, threatening to end US trade with countries with which it has a deficit unless the Federal Reserve cuts interest rates.
asserted
Reserve → flare → rates
But the sense that the world’s two largest economies are plowing ahead into an overt economic conflagration has taken a back seat to other, more salient fears, about Trump ending American democracy, AI killing us all and stuff like that.
asserted
AI → plow → that
Under the radar, the world is marching toward an economic war of potentially epic proportions, one that, history suggests, could well spill over into the real thing.
uncertain
history → march → thing
The truce reached by Washington and Beijing last year in their escalating trade conflict, which has been extended until next January, lowered the heat between the two – putting an end to the escalation of tit-for-tat tariffs and opening a door to some as yet undefined future trade deal.
asserted
which → reach → deal
But neither China nor the US has done anything to establish the mutual assurances that could limit the outbreak of new hostilities.
uncertain
that → do → hostilities
Rather, they are both focused on gaining the upper hand in what seems like an inevitable next round, in a standoff that both sides have defined as a national security priority, essential to ensure economic, technological and military supremacy.
asserted
sides → gain → supremacy
Rather than building weapons to blow each other up, China and the US are focusing on ensuring the resilience of the international supply chains on which they rely and figuring out how to constrain – and if push comes to shove, throttle – the supply chains essential to the economic and technological progress of their rival.
asserted
push → build → rival
The paired strategies go back at least to the Covid pandemic, when China’s Xi Jinping called on the nation to “tighten international production chains’ dependence on China, forming a powerful countermeasure and deterrent capability against foreigners who would artificially cut off supply [to China]”.
asserted
who → pair → China
Early in the Biden administration, national security adviser Jake Sullivan articulated the American goals: to limit China’s access to a narrow set of advanced technologies with military applications without upending the global economic order.
asserted
Sullivan → articulate → order
He described the strategy as building a “small yard” of forbidden tech surrounded by a “high fence” of trade and investment controls.
asserted
He → describe → controls
By now, the conflict has breached the bounds of these initial rationales.
asserted
conflict → breach → rationales
Restrictions on American tech exports, investments and technology transfers to China have proliferated over the last half decade.
asserted
Restrictions → proliferate → decade
And they are hitting not only China’s military capabilities but slowing its technological progress writ large.
asserted
they → hit → progress
And Trump’s wanton deployment of tariffs is not helping.
asserted
deployment → help → tariffs
China, on the other hand, is becoming increasingly assertive, leveraging its overwhelming dominance over the supply of critical minerals that are essential to high-tech industries for civilian and military uses.
asserted
that → become → uses
Last year, it stunned the Trump administration by throttling exports of rare earths and magnets made from them to retaliate against US tariffs and efforts to restrict China’s access to high-end semiconductors and the lithography machines needed to make them.
asserted
it → stun → them
It has relaxed some of these controls, but it maintains many other restrictions.
asserted
it → relax → restrictions
While they have largely been imposed to retaliate against American actions, they have also been used to hit other countries for a variety of policies it dislikes.
asserted
it → impose → policies
The International Energy Agency has estimated that if China were to block the US’s and Europe’s access to rare earth magnets, it could cost their economies about $1.5tn per year.
uncertain
it → estimate → year
Where does the supply chain war go from here?
asserted
war → go → ?
The Trump administration is pouring hundreds of millions into projects to mine and process rare earths and other critical minerals, hoping to close China’s lead.
asserted
administration → pour → lead
It is also doubling down on efforts to limit China’s access to frontier semiconductors and to bar it from buying the machinery needed to make them.
asserted
It → double → them
China, on the other hand, has announced a range of high-tech export restrictions, covering things such as artificial intelligence chips and solar power technology.
asserted
China → announce → chips
Moreover, it has threatened to punish countries that work to reduce their dependence on its mineral inputs.
asserted
that → threaten → inputs
One hopes there is a path to a peaceful entente.
asserted
One → hop → entente
This would probably require some shared understanding of what constitutes a legitimate national security risk that may warrant actions to block supply chains.
uncertain
that → require → chains
Defining the “yard” is essential.
asserted
Defining → define → yard
Frustrations of standard commerce should not be dealt with on a wartime footing.
asserted
Frustrations → deal → footing
China will probably dominate renewable energy technologies, especially the solar power industry, into the foreseeable future.
asserted
China → dominate → future
It may also dominate the electric vehicle industry.
uncertain
It → dominate → industry
This might hurt in Brussels and Washington, but it’s not worth a war.
uncertain
it → hurt → Brussels
China, on the other hand, will have to accept that its mercantilistic economic strategy is not tenable for the rest of the world.
asserted
strategy → have → world
This might seem doable.
uncertain
This → seem → ?
And yet the odds that the world economy will remain at peace seem slim.
asserted
economy → remain → peace
One might recall the Axis powers’ efforts to seize territories as the League of Nations curtailed their access to raw materials in the early stages of the second world war.
uncertain
League → recall → war
Or FDR’s blocking of sales of American scrap steel and oil to Japan, which likely contributed to Tokyo’s decision to attack Pearl Harbor.
asserted
which → contribute → Harbor
Today, American fighter jets, submarines and missiles use rare earth magnets.
asserted
jets → use → magnets
What would happen if China blocked access to these materials?
asserted
China → happen → materials
It’s not that long ago that trade was proposed as perhaps the most powerful tool to deliver world peace, building positive-sum interdependence among nations.
asserted
trade → ’ → nations
…and 3 more, not listed.
The Aporia
