Add Another Challenge for the Next President
The United States has historically had a “challenging” supply chain. It has, for at least decades, depended on supplies from counties that are either not stable or not friendly or neither.
While we have worked to try to REDUCE that dependency, we are very far from eliminating it.
Yesterday the President ratcheted up the curbs on technology to China by prohibiting the sale of certain types of chips and chip making equipment to China and adding a hundred more companies to the do-not-sell-to list. The U.S. called it a routine update.
China, not one to back down from a fight, announced today a ban on the sale of gallium, germanium, antimony and super-hard minerals to the United States IMMEDIATELY on the grounds that they have dual military and civilian users (which is certainly true). Graphite exports, while not banned, would be subject to stricter review.
Oh, yeah, I am sure this has nothing to do with the next president’s plans to increase tariffs on Chinese-made products “on day one”. Well, they beat you to it.
China produces nearly all the world’s supply of critical minerals needed to make semiconductors. And weapons systems.
China created the framework last year to control the export of gallium and germanium and now they added antimony, which is used in weapons.
In October, China began requiring exporters of rare earth metals to disclose step by step, how the minerals would be used in Western supply chains.
The existing bans have required the U.S. to buy “semi-processed” minerals from countries like Japan, but if they are now going to require a step by step disclosure of the use of raw materials that countries like Japan use to refine and then sell to us, that could be a problem.
The ban on selling us super-hard minerals could be a problem for the military since they are used in things like artillery shells and armor piercing bullets.
While there is work to open a mine just for tungsten (this doesn’t solve other problems) in Nevada, it will be several years before it is operational. And more years before production volume and refining processes are in place.
This cat and mouse game has already caused the price of raw antimony to double in the last three months.
In the long term this will backfire on China as it will force us to find other sources, but in the meantime it will cause price increases (AKA inflation) and product shortages (remember the car shortages during the pandemic?).
China is also working to stop buying U.S. chips, calling the supply chain “no longer safe and reliable”. China is a huge consumer of chips, so if they stop buying ones we make, that will have a profit impact on U.S. chip makers – who are busy building new chip fabs thanks to the Chips Act.
In part, this is a game of brinksmanship between Xi and the next U.S. president, both of whom fancy themselves as being the best at that, so how all of this plays out is unclear, but it is clear that the game is on.
Potentially, who gets hurt is U.S. consumers – just in time for the next administration to take office. Reducing the market to China of chip sales and reducing the worldwide supply of minerals will cause inflation, reduced U.S. business profits and job cuts.
Hopefully this doesn’t turn into a full blown trade war, but it might.
How this applies to security? Don’t be surprised if hacking goes up as this little war heats up.
Next move? Stay tuned!
Credit: MSN
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