Chips ahoy! US and China locked in self-destructive battle of trade restrictions

The chip wars between the US and China continue apace amid warnings that both sides may be harming their own economy as much as the other, and tech companies are increasingly concerned about doing business within constantly shifting restrictions. Last week it was reported that China's chip imports had dropped by nearly 20 …

[Anonymous Coward]

Myopic strategy

Politicians and conflict pundits don't generally operate based on common sense - they tend to focus too much on prestige items and face and ignore anything else. What we know from the COVID experience is when deprived of the broad swath of Chinese manufacturing - everything from nuts and bolts all the way up to but but not including the highest tech - everything stops.

"A Chinese drone for hobbyists plays a crucial role in the Russia-Ukraine war", NPR DJI is selling massive numbers of drones to both sides in the Ukraine war. The US buys Chinese drones and sends them to Ukraine. Drones are going to be a hugely important feature in any future wars, yet China's manufacturing capacity for drone must be a few orders of magnitude higher than that of the rest of the world put together. And not only the drones, but also ALL the low to mid grade parts that go in them.

The US has limited number of high end drones, but once those get used up, has a very low manufacturing capacity to replace them. And not just drones, but also run of the mill munitions - several years of worth of US backup munition stockpiles have already been used up in 1.5 years in Ukraine.

Moreover, in order to expand manufacturing, you have to build plant, but its no surprise that many of the vital parts for building plant are now manufactured in China.

So, leaving aside the arguments over EXPORT constraints on goods to China - the elephant in the room is being totally ignored.

[Youngone]

Re: Myopic strategy

The people who run America can't control China and they hate that.

[Zolko]

Re: Myopic strategy

More specifically, since the trade-routes between Russia and China (and also India) are land-based, the US Navy can't do anything about it, their huge aircraft carrier armada is useless. Same for Swift: Russia – and the BRICS in general – have become immune from US interference.

That is what's driving the neocons crazy.

[Duncan Macdonald]

Military spending

There are too many US politicians that depend on "lobbying contributions" (aka bribes) from the defense industry. The US spends more on "defense" than the next 12 countries put together. If there US had no perceived conflict then the "defense" spending would drop which would make the executives and shareholders of the defense industry unhappy.

Russia's military power is a small shadow of what the USSR had at its peak and apart from its nukes has no real way to threaten the US. China is so far from the US (7000 miles coast to coast) that the logistics of one of them attacking the other is hopeless. China's navy is so small compared to the US navy that even it trying to invade Taiwan would be difficult and any more distant objectives would be impossible.

If the US reduced its military expenditure to what was actually needed for defense it could probably save over $400 billion per year - but the politicians would no longer get their bribes and the US unemployment would jump as the military would have fewer people and the defense industry would shed jobs.

China has so far made only token responses to the US trying to cripple its high tech industry - my belief is that China is playing the long game - expecting the US economy to collapse under the weight of its debts sometime in the coming decades (to see why - look at the US Debt Clock ( https://www.usdebtclock.org/ ) - the unfunded liabilities are currently over $192 trillion and rising by more than $1 million every 4 seconds and there is a lot of other bad news there).

[Anonymous Coward]

Re: Military spending

There's another long view in play: US dependency on the dollar being a reserve currency because all fossil fuel purchases are made in USD. That's the blackmail by which the US keep the consequences of their unfunded liabilities at bay, and China is calmly undermining this since the world bank gave its currency also reserve status.

Before the war with Ukraine, China bought energy from Russia in Yuan (CNY), and most assistance to other countries also happen in Yuan. This is likely to expand, and unlike Iraq the country is a bit too big to bomb back to the Stone Age without dire consequences.

From what I've seen so far I have the impression that some have indeed picked this up, but as they need enemies for political reasons they're not going to collaborate which is IMHO a mistake and will accelerate this trend.

I give the dollar at most another decade. If a Republican wins their next election you can halve that time.

[fg_swe]

Dollar

I am now hearing for decades that the dollar implosion is imminent. At the same time, the Russian ruble actually did implode, the Belarus ruble adds a zero every three years or so. Other countries have severe problems of their own, including China's finance bubbles and rapid aging. Japan can´t make enough kids, either. Europe is a brittle bunch of idealists who will call in Uncle Sam instead of standing together. The Euro currency is a crazy subsidy/transfer system with a credit bubble of its own.

Africa only knows how to make children like rabbits.

India makes only minimal progress.

Arabs still mentally live in 800 A.D.

So with all the crazy stuff(denying the concept of mother and father, for example) ongoing in America, I fail to see the demise of the dollar. The Marxist-Americans will be exhaled like a bad joint and the rest of America is probably just fine.

[fg_swe]

Debt/GDP Ratio

US debt must always be seen in comparison with Gross Domestic Product.

https://worldpopulationreview.com/country-rankings/countries-by-national-debt

Japan, Greece, Italy and most other nations are worse off on this quotient. Arguably, Japans meteoric rise 1960..1990 was due to massive credit expansion. The cost of this expansion is that many young Japanese men and women consider it financially impossible to have children. Credit was the bonfire where Japan burned its future.

Regarding children, Europe is not much better than Japan. Same with Russia. They build missiles and superyachts instead of raising children.

[robot66]

Re: Debt/GDP Ratio

GDP estimates seem to include a lot of things that do not add to the confidence of being able to handle the debt. I think the GDP includes our over priced medical system for example, how can such services inside the US apply to debt resolution?

[StrangerHereMyself]

Hint

The hint the U.S. is trying to get across is for semiconductor companies to manufacture their wares OUTSIDE of China, it doesn't really matter where.

I've come to the conclusion that most companies are merely lazy, as China is cheap and can deliver relatively quickly. Whereas building a factory in a Third World nation like India or Cambodia is much more challenging, often requiring investment in basic infrastructure like roads and ports.

Also, they should hurry up since the Great Decoupling is looming larger every day.

[Julz]

Harming

The economy is only a problem if the only thing you measure by is money. There are other considerations.

[Norman123]

Caution: Mad MEN at work

I will show them! I am going to raise prices, create inflation and lead myself to economic potential disaster, lose profits, create havoc in my own and world's supply chains, increase the cost of my defence, create general dissatisfaction to show I am TOUGH and hope to achieve a minor victory in my pissing contest over there which not many even know where it is or why it matters. Did I do that? Oops. Let's mend fences....

Oh, sorry. We didn't mean it! Let's start over. OK, but how we can trust you? That guy is a dictator! Oops! He didn't mean it. Let's start over again!, OK! But how we can trust you?....And the tiring kindergarten games repeating itself, while we lose friends, credibility, profits, and keep piling up spending with no income....looking as progressively becoming morons....

[Yet Another Anonymous coward]

Re: Caution: Mad MEN at work

We should go further. If ASML are prevented from selling machines to foreigners then the Netherlanders will become secure in their chip supply *

* assuming the suppliers of wafers, chemicals and light sources don't apply the same logic.

[fg_swe]

NATO

Netherland operates as part of NATO+JP+SK+ANZAC. That's north of 700 million people.