As a riposte to American restrictions on chip technologies, Beijing is cutting off the supply of key raw materials that American tech firms rely on, and advising Chinese companies to refrain from purchasing American chips. This action signifies a deepening of the tech cold war between the world’s two largest economies, with both sides using their respective strengths to undermine the other.
American tech companies are heavily reliant on several raw materials, such as rare earth elements, that China dominates the global supply of. The Asian giant’s decision to tighten controls on these exports is therefore a calculated move to hit the U.S. where it hurts. Meanwhile, the advice to Chinese companies against buying American chips is another strategic play. It is intended to weaken the U.S. chip industry’s sales while promoting the growth of domestic chip manufacturers.
The U.S., for its part, has been restricting the export of advanced semiconductor technologies to China, under the guise of national security. This has severely impacted Chinese tech giants like Huawei, which are heavily reliant on these technologies. The U.S. government’s argument is that these technologies could be used to enhance China’s military capabilities, a claim that Beijing vehemently denies.
This escalating tech war is a reflection of the growing economic and strategic rivalry between the U.S. and China. It is also an indication of the increasing weaponisation of trade, with both countries using economic levers to achieve geopolitical objectives. The danger, however, is that these actions could lead to a decoupling of the world’s two largest economies, with serious implications for global economic growth and stability.
Given the interconnectedness of the global economy, the standoff between the U.S. and China is not just a bilateral issue. It has potential ramifications for other countries and industries that are caught in the crossfire. These nations might be forced to choose sides, leading to a fracturing of global supply chains and a slowdown in technological innovation.
The current tech and trade war between the U.S. and China is likely to further escalate, with neither side showing signs of backing down. The world is watching as these two economic behemoths square off, with the outcome likely to define the contours of the global economy and tech industry for years to come.
