America Needs China To Fight China

China’s extensive depot of rare earth minerals is crucial for the U.S. production of semiconductors and military missile systems.

Written by Alyssa Varas

What’s going on: China has imposed export restrictions on gallium and germanium, two minerals deemed crucial by the U.S. for the production of semiconductors, missile systems, and solar cells. Effective August 1, this move is seen as a flex of muscle before impending economic negotiations between the two powerhouse nations. It comes after Washington blocked exports to China of equipment used in the creation of high-tech semiconductors in October.

Why it matters: Greg Hayes, CEO of weapons manufacturer Raytheon, underscored the complexities of U.S.-China economic ties, stating that complete separation is "impossible" due to American reliance on Chinese suppliers. Hayes noted that thousands of Raytheon's suppliers are based in China. One of the materials affected by the forthcoming Chinese export restrictions is critical to the production of the Patriot missile-defense system, a product of Raytheon Technologies.

"Think about the $500 billion of trade that goes from China to the US every year. More than 95 percent of rare earth materials or metals come from, or are processed in, China. There is no alternative…. If we had to pull out of China, it would take us many many years to re-establish that capability either domestically or in other friendly countries" Hayes said.

Big picture: Both countries are leveraging trade regulations as they compete for technological supremacy. It’s not just America though—Europe is concerned too. Germany, the largest European importer of these metals, has responded to China's export controls by emphasizing the danger of Europe's reliance on China for essential raw materials. In light of these challenges, the German government has announced plans to subsidize efforts to decrease this dependency on China.

Interdependency: It’s no secret that America and China are tied at the hip, both militarily and commercially, as trade between the two rivals continues to reach all-time highs. Because this makes decoupling—or completely separating—hard, Western manufacturers and leaders are focusing on de-risking, or finding alternative sources for whatever components they can. While economic interdependency may make war with China unlikely, President Xi Jinping has shown a willingness to sacrifice economic stability for ideological progress.

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