Transcription
Hello and welcome back everyone. Thank you so much for joining me. And as always, a special thank you to every single one of you who have become subscribers on Substack, Patreon, YouTube, or who have otherwise supported my work. I appreciate every single one of you.
The US China relations are once again heating up. The Trump administration has announced new export control rules that are designed to block Chinese companies from accessing advanced American technology, especially in the semiconductor sector. Likely, the United States has already forgotten that it desperately needs critical minerals that it imports from China, and that China may choose to limit them in response to Washington's renewed ambitions to add more oil to the trade war fire.
This week, the United States Commerce Department issued a new rule. If a company is listed on the US entity list, all of its subsidiaries are now automatically blacklisted as well. That means US companies must now apply for a license to do business with any part of that group. And, uh, in most cases, it might be safe to assume those licenses will be denied.
Until now, this was a loophole. You could technically sell to the subsidiary of a blacklisted Chinese company like Huawei, for example, if that subsidiary was not named specifically on the US entity list. This allowed firms to use shell companies or complex ownership structures to bypass restrictions. Now the door is shut.
The change might sound technical and boring, but it's actually a huge development. It is yet another escalation in the US China trade war, and I would argue a big one. Thousands of subsidiaries will now be impacted. The United States effectively adjusted its entire export system by making the simple update to an existing set of export rules. And this isn't just about policy, of course. This is about power. That's what this is about.
The United States is trying to close off every route by which China might acquire advanced semiconductor technologies from the United States. From surveillance systems to missile guidance and everything in between, the concern in Washington is very clear: Don't let US tech fuel the modernization of China, as if China can handle it on their own.
But the joke actually might be on Washington. If and when China decides to tighten its export controls of rare earth minerals again, because it's already tried to do it before negotiations this summer, Washington may actually have to back off because it doesn't have the leeway. It needs imports of critical minerals from China. Perhaps it is not then too surprising that Pete Hegseth, the Secretary of War, just ordered to prepare for a possible military confrontation, for a possible military conflict with China by ramping up production of missiles.
Beijing isn't taking this lightly either. China's commerce ministry called the new updated rule "extremely malicious" and accused the United States of abusing the concept of national security. This is a very interesting accusation. Once again, China argues that Washington is using trade tools for political gain. Of course, it is. While claiming that anything and everything is justified, uh, in terms of a national security concern, but in reality, Washington is making just another attempt to contain China, its peer competitor.
And let's not forget the broader geopolitical context. This move comes just one month before President Trump is scheduled to meet with Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation Summit in South Korea. It will be their first face-to-face meeting since 2019, and tensions are running high, as we can tell.
In fact, the two leaders are also clashing over TikTok. Trump announced that he and Xi had agreed on a deal allowing TikTok to continue operating in the United States. Under the terms of last year's legislation by ByteDance, the Chinese parent company was required by law in the United States to divest the app to avoid a nationwide ban. Well, Trump said that this new deal would see major US investors step in, and the process is "well on its way." But Beijing's version of the story is very different. Believe it or not, Chinese state media only mentioned ongoing consultations, no confirmation, no final deal yet. China's ambassador to the United States said that any resolution must comply with Chinese law and market rules.
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Well, TikTok and so that suggests that Beijing is keeping a veto in its back pocket, possibly. So we have two conflicting narratives here. It is typical. It happened before. It will probably happen again. Trump portrays himself as the final decision-maker in this process, claiming that the deal is approved and close to being signed, while China, on the other hand, frames it as a private commercial negotiation, one that still depends on regulatory approval from Beijing. And with the divestment deadline now actually being extended to December, many analysts say that this is more about political optics and posturing than actual outcomes.
Now back to the broader export controls. Experts are watching closely to see how strictly the new rules will be enforced. While the Trump administration is cracking down on some companies, it is also freezing actions against other companies. For example, Chinese memory chip maker Changxin Memory was expected to be added to the entity list, to the blocked entity list, but the Commerce Department reportedly held off to avoid derailing US-China trade talks and the upcoming, uh, Xi Jinping-Trump meeting.
The United States wants to slow China's access to cutting-edge chips, but it is afraid that China might act in kind and actually proceed by limiting exports of what the United States needs the most: critical minerals. China wants to develop domestic alternatives and reduce reliance on foreign suppliers. And both sides are preparing for a long-term confrontation: technological, economic, and possibly even strategic.
This week, it has become clear that the competition for technological supremacy between the United States and China has entered a new phase. The question now is whether diplomacy can keep pace with disruption and whether these rising tensions can be managed before they spiral out of control.
Let me know what you think about the ongoing US China trade war and the tensions. I would love to hear your thoughts. And also, let me know in the comments what do you expect from the upcoming Trump-Xi Jinping meeting in South Korea. I would love to hear from you.
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