China, U.S. Escalate Trade-Restrictions War

“I see the graphite restrictions as a necessary reaction from Beijing’s perspective, and a carefully designed warning shot, given the use of graphite in EV batteries [relevant for Europe’s green transition, for example],” McElwee wrote. “But it remains to be seen how China will implement them, and I am skeptical they will end up as a major escalation in that regard.”

‘Protectionist Footsie’
Scott Lincicome, the vice president of general economics at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, told VOA that despite frequent talk in the U.S. about “decoupling” from China or “de-risking” by reducing reliance on Beijing for certain goods, trade between the two countries is likely to remain robust.

“It’s a lot of sound and fury, signifying little,” Lincicome said of the announcements this week.

“Undoubtedly, the United States and China are playing protectionist footsie, in specific technologies: semiconductors, electric vehicles, rare earth minerals and that kind of stuff,” Lincicome said. “But that has to be understood in the broader context of a trade and investment relationship, which quite frankly is still going pretty darn strong.”

Trade policies focused on national security issues will continue to grab headlines, he said, but will remain a small fraction of total trade.

“There’s going to be this one group of products that gets all the attention, both in terms of policy and rhetoric,” Lincicome said. “But there’s going to be a whole host of stuff that is just private individuals and companies, and in China, some state-owned companies, doing commerce, quietly and hopefully without much attention.”

Chips and Batteries
The Biden administration has signaled seriousness about its desire to prevent China from purchasing some of the most advanced semiconductors and semiconductor-manufacturing equipment on the market.

Because both are made with processes subject to U.S. export restrictions, the U.S. can require even third-country manufacturers that make them — using licensed intellectual property — to refuse to export them to China.

The rules issued this week were designed to close loopholes that allowed certain kinds of restricted chips to get through the blockade. In June, for example, the news organization Reuters reported that chips specifically barred from export to China remained available on the open market in the Chinese city of Shenzen.

For its part, China has been flexing its economic muscle by leveraging its dominance in the extraction and processing of rare earth metals and other raw materials necessary for the manufacture of modern electronics and rechargeable batteries.

Graphite, a form of carbon, is used in an array of manufacturing processes and comes in many forms. Under its new rules, China will require special export permits for some forms of graphite, primarily those used in the creation of batteries.

One notable difference in the most recent exchange of trade restrictions is that while the U.S. is explicitly targeting China with its semiconductor export ban, China’s graphite restrictions — like similar recent restrictions it placed on the export of metals gallium and germanium — apply regardless of the country purchasing them.

Rob Garver is a freelance writer. This article is published courtesy of the Voice of America (VOA).