Economic war with China is a doomed proposition

By Eve Ottenberg / CounterPunch

It is always better to do business with people than to fight with them. But this common-sense principle seems to have disappeared from the brains—if they have any—of the leaders of the US Congress and the White House. During his presidency, Donald Trump, the “tariff guy,” imposed tariffs on washing machines, aluminum, steel, solar panels, and other goods, totaling $380 billion in trade with China, the US’s third-largest trading partner. That’s an $80 billion tax increase. Not to be outdone in this game of stupidity, Joe Biden, the “copycat,” added his tariffs. They hit batteries, steel, aluminum, semiconductors, solar cells, electric vehicles, critical minerals, and much more.

As the campaign season got underway, candidates argued over who could be tougher on China economically. Hopefully, Kamala Harris, “advised by Black Rock,” would avoid these idiotic phrases. They do nothing but offend Beijing. And you don’t want to offend Beijing. It’s America’s second-largest creditor, and when Washington’s leaders make hostile, Sinophobic comments, Beijing dumps US Treasuries. Other countries follow suit. And this is while Treasury Secretary Janet Yellen has her hands full finding buyers for US debt. She doesn’t need China, Saudi Arabia, and who knows who else dumping billions of dollars in US Treasuries.

And that’s just the financial and fiscal stuff. Just as bad, if not worse, are the economic bans on trade imposed by the last two administrations. Biden banned microchip shipments to China. Well, that quickly came back with a vengeance. China has been boosting a local microchip industry, and it’s just made a major breakthrough: Huawei’s Mate 60 smartphone features a seven-nanometer chipset. The manufacturer, SMIC, “achieved seven nanometers in two years, up from the traditional 14 nanometers, without relying on foreign technology,” the Foreign Policy Research Institute reported on June 28. That puts China on track to become self-sufficient in semiconductors, which “will change the global microchip supply chain and raise geopolitical security concerns…” Nothing like sanctions and tariffs to make America third-rate again.

And these sanctions are backfiring in many ways. Consider again Biden’s sanctions against China on semiconductors. In July 2023, Beijing struck back, announcing export controls on two rare-earth minerals, gallium and germanium, that are essential to American satellites, semiconductors, and solar cells. Given that China has 60% of the world’s supply of rare-earth minerals, with the remaining 40% in questionable locations, Beijing’s move alarmed American tech CEOs, who feared it would herald further exports.

In fact, Nvidia and Intel bosses pleaded with Biden’s blunderers to ease sanctions on China on semiconductors. But it was too late, according to Shaun Rein, founder of China Market Research Group. The idiotic sanctions have already cost American companies billions. “Chinese semiconductor companies have emerged. China will no longer trust US policy, so they will buy domestically. Biden has shot the US in the leg.” More recently, Beijing announced “export limits on antimony and related elements due to national security concerns,” the Sirius Report tweeted on August 15. “Antimony is used in military applications such as munitions, infrared missiles, nuclear weapons, and photovoltaic equipment, etc.” Washington sanctions Beijing and is sanctioned in return. A brilliant move by a nation, namely the United States, that is totally dependent on foreign supplies of parts, minerals and just about everything else you can think of.

Given the interdependence of the Chinese and American economies, this protracted attempt by the White House to decouple them is like a surgeon using a chainsaw instead of a scalpel: It’s disastrous. Take soybeans. The United States is the world’s largest soybean producer, and China is the largest soybean consumer. But the United States lost the Chinese market because of the stupid US trade war, which helped push China to buy soybeans from Latin America. In the high-end commercial segment, consider the US ban on Chinese software in self-driving cars. Developing such vehicles relies on global cooperation, Sputnik reported on August 6, “because the sector has a relatively large ecosystem and high research and development costs.” But the Biden team aims to propose a rule that would ban “Chinese software in vehicles in the United States with Level 3 and higher automation and effectively ban testing of self-driving cars produced by Chinese companies on American roads.” And that’s not all.

Vehicles equipped with “a wireless communication system developed by China” would be banned from U.S. highways, and their manufacturers would be required to prove that “none of their connected vehicles or advanced autonomous vehicle software was developed in a ‘foreign entity of concern,’ such as China.” This proposed ban fits perfectly with Biden’s trade policy. Indeed, less than three months ago, the great minds in the White House decided to impose more tariffs on Chinese electric vehicles.

So these Washington geniuses insist on their dangerous tariffs (which cost Americans a fortune), their sanctions and other bans that get us nowhere. Remember the phrase “the ruble will be smashed to pieces”? Well, it wasn’t. The Russian economy is doing great, as is the Russian economy, which is now ranked the fourth richest economy in the world. Sanctions and the theft of foreign financial assets are not working. All they do is convince foreign money managers to flee American banks – and the dollar, which ultimately hurts Americans. But hey, since when do the Washington sachems factor the suffering of Americans into their calculations? Let’s never forget Barack Obama’s financial policies, which “kicked out the landlords.”

Unfortunately, this American idiocy toward China is not going to stop anytime soon. Trump’s former national security adviser Robert O’Brien pontificated last June that if reelected, Trump should cut all economic ties with China. For good measure, O’Brien added in a June 18 Foreign Affairs article that Trump should start testing nuclear weapons and consider deploying ALL navies to Asia. “As China seeks to undermine American economic and military power, Washington should reciprocate… should in fact seek to decouple its economy from China,” O’Brien wrote. According to the June 19 Taipei Times, O’Brien claims to be in “regular contact” with Trump and “O’Brien gave a copy (of the Foreign Affairs article) to Trump campaign adviser Susan Wiles.” She allegedly showed it to Trump, but his campaign denied this. It was a wise decision: escalating military and economic hostilities with another country, namely China, is not a winning campaign platform.

Specifically, O’Brien insisted that “Trump’s proposed 60 percent tariffs on China should be just a first step, followed by tighter export controls on ‘any technology that might be useful to China…’” Because that has worked very well of late. Those export controls, aka sanctions, have boosted China’s homegrown tech industries, thrown Beijing and Moscow into an economic, political, and military grip, and made it very risky for U.S. industries, including arms producers, to rely on global supply chains.

I’m not complaining: if Lockheed Martin can’t get the parts or software it needs from China just because of the Einsteins in Washington, that means fewer bombs and weapons in the world and fewer bodies in places like Eastern Europe, the Middle East, the Far East, and Africa. But these stupid policies don’t just hurt weapons production. They hurt all sorts of industries that ordinary people depend on. Like it or not, the world is economically interconnected, and it’s the height of madness to burn these global bridges without even a plan to revive local industries. And there is no plan, because those industries aren’t growing, for the simple reason that our oligarchs aren’t interested.

American business leaders love the low wages in Bangladesh, Burma, Vietnam, Mexico, and, of course, China. They have no intention of spending money to bring new industries to the United States whose workers could unionize, or are already unionized, and thus threaten the wealth on which their aristocratic privilege rests. Until the political bigwigs start talking about how we are going to reindustrialize here in America, all this insulting of Beijing is worse than hot air: it is economic suicide.

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