The U.S. is dangerously dependent on China trade, weakening America in any conflict over Taiwan

beijingwalker · Mar 23, 2023

The U.S. is dangerously dependent on China trade, weakening America in any conflict over Taiwan

Published: March 22, 2023 at 5:58 p.m. ET

China is able to cut off key exports to the United States — including medicine and military technology.

Beijing’s increasingly aggressive rhetoric toward the United States is concerning. For the first time, Chinese president Xi Jinping has directly criticized Washington. He’s now encouraging Chinese companies to join the “fight” against U.S. policies that have “contained and suppressed” the People’s Republic.

Clearly, relations between the two countries have deteriorated. If Beijing is laying the groundwork for an invasion of Taiwan, the possibility of military conflict has also increased.

If war were to come in the Pacific, the U.S. would be at a disturbing disadvantage due to its heavy dependence on China for a wide swath of necessities, from antibiotics to military hardware.
Obviously, war should be a last resort — and a conflict not initiated by the United States. But in a worst-case scenario, what might happen?

For starters, some intelligence estimates foresee China invading Taiwan within the next 18 months. In fact, CIA Director William Burns believes Xi is preparing China’s military to invade Taiwan by 2027.

China currently controls about 90% of the global supply of inputs needed to manufacture generic antibiotics.

If China invades Taiwan, it’s likely that the United States would respond with immediate sanctions while also assisting in Taiwan’s defense. Should that happen, China could respond in a number of ways designed to cripple America’s economy.

The greatest liability would be China’s ability to cut off key exports to the United States. This is particularly evident in the pharmaceutical arena. China currently controls about 90% of the global supply of inputs needed to manufacture generic antibiotics. Even the generic medicines used in America’s intensive care units, emergency rooms and ambulances are made with chemical compounds and ingredients sourced almost exclusively from China.

Beijing is well aware of its stranglehold over America’s pharmaceutical supplies. In March 2020, China’s official news outlet threatened that, in the event of a conflict, Beijing would use “strategic control” over medical products to “ban exports to the United States.”

The threat is not only to medications. The Australian Strategic Policy Institute (ASPI) has compiled a “Critical Technology Tracker” that illustrates China’s hold over the world’s most important technologies. ASPI estimates that China’s global lead now extends to 37 of the 44 most-advanced technologies, including defense, robotics, energy, and biotechnology. Most worrying is that China far outpaces the U.S. in research on nanoscale technologies and superconductors.

These shortfalls in both life-saving medicines and high-tech equipment would be even more concerning in wartime. The U.S. military would hit a wall in a conflict with China, because China dominates the global production of rare earth metals, including the element antimony, which is used in everything from armor-piercing bullets to night-vision goggles. China’s chemical industry also has become essential to America’s war-fighting equipment since the Pentagon relies on China for a key ingredient in Hellfire missile propellant.

All of this puts the U.S. at a serious disadvantage. But these troubles run even deeper, since U.S. investors are unwittingly funding China’s military growth.

Entities tied to China’s military are publicly traded on stock exchanges and through Exchange Traded Funds (ETFs) and other investment products. For example, CSSC Holdings Ltd. 600150, -0.72% — China’s largest builder of military ships — is listed in several major investment indices, including MSCI Emerging Markets, MSCI ACWI, FTSE Emerging, and FTSE All-World.

Congress can work to halt such funding by passing legislation that would close the loopholes in U.S. sanctions policy that currently allow money to flow to China’s state-owned entities. Yet America’s import-dependence on China remains particularly disturbing.

Congress should launch a moonshot effort to incentivize the rebuilding of domestic production for essential medicines, rare earth metals, electronics, and military equipment. Otherwise, the U.S. could be held captive to the whims of a major adversary.

Even if there is no immediate war between the U.S. and China, it’s unwise to cede economic freedom and national security to Beijing’s leverage. Taking action now could prevent future military action while also decreasing the potential for resource-driven conflict.