Although the trade conflict between the United States and China has largely receded from prominent news headlines, this period of relative tranquility is deceptive. While fears of immediate, large-scale tariff wars appear to have subsided, both nations are quietly maneuvering toward an economic confrontation of historic proportions. Rather than establishing the mutual assurances necessary to prevent further hostilities, both Washington and Beijing are prioritizing national security, viewing economic and technological supremacy as essential goals.
The current competition differs significantly from traditional arms races. Instead of focusing solely on military hardware, the two superpowers are concentrating on the resilience of international supply chains. Both are actively seeking ways to protect their own logistical networks while developing the capacity to restrict or throttle the supply chains upon which their rival depends for technological and economic progress.
This strategic approach has roots dating back to the Covid-19 pandemic. During that period, Chinese leader Xi Jinping advocated for strengthening the nation’s production chains to create a deterrent against foreign entities attempting to cut off supply lines. Conversely, the Biden administration introduced a strategy articulated by national security adviser Jake Sullivan, which aimed to protect a “small yard” of sensitive military-related technologies behind a “high fence” of investment and trade controls.
Over the last five years, however, these restrictions have expanded well beyond their initial scope. Exports, investments, and technology transfers have been increasingly limited, slowing China’s broader technological development. This situation has been exacerbated by the Trump administration’s aggressive use of tariffs. In response, China has become increasingly assertive, particularly regarding its dominance over critical minerals. Last year, Beijing restricted exports of rare earths and magnets—essential for both civilian and high-tech military applications—in retaliation against US semiconductor restrictions. The International Energy Agency has noted that a total blockade of these materials by China could cost the US and European economies approximately $1.5 trillion annually.
The confrontation continues to evolve. The US is currently investing hundreds of millions of dollars into domestic mining and processing projects to diminish China’s lead in critical minerals, while simultaneously tightening bans on frontier semiconductors and manufacturing equipment. China has countered by imposing its own export restrictions on solar technology and artificial intelligence chips, while threatening consequences for nations that attempt to reduce their reliance on Chinese mineral inputs.
The current global situation is precarious. Historically, the restriction of raw materials has contributed to major conflicts, such as the events leading to the Second World War. As interdependence is increasingly viewed as a vulnerability rather than a tool for peace, trade has effectively become a theater of war. While some hope for a peaceful entente based on a shared definition of legitimate national security risks, the current trajectory suggests that the world economy remains in a state of high tension, with trade increasingly weaponized in the pursuit of dominance.
One hopes there is a path to a peaceful entente. This would probably require some shared understanding of what constitutes a legitimate national security risk that may warrant actions to block supply chains. Defining the “yard” is essential. Frustrations of standard commerce should not be dealt with on a wartime footing.
This might seem doable. And yet the odds that the world economy will remain at peace seem slim. One might recall the Axis powers’ efforts to seize territories as the League of Nations curtailed their access to raw materials in the early stages of the second world war. Or FDR’s blocking of sales of American scrap steel and oil to Japan, which likely contributed to Tokyo’s decision to attack Pearl Harbor. Today, American fighter jets, submarines and missiles use rare earth magnets. What would happen if China blocked access to these materials?
