China chooses war

China's escalation of the trade war suggests that a shooting war over Taiwan is likely.

Commercial Summary: China is taking actions that suggest it is preparing its supply chains and export sectors for war over Taiwan. This will shake the global economy to its foundations, as the USA tries to replicate the Russia sanctions against China. The implications are discussed below. They include major instability in Europe as the welfare state becomes unaffordable, forcing the question of immigrants and their contributions to the economy to the fore.

China has taken several measures escalating the trade war against the USA. These include:

1. It stopped or heavily reduced the import of soybeans from the USA.

2. It imposed sanctions on US-linked units of a South Korean shipping company.

3. It expanded export controls on semiconductors and rare earth minerals.

These are obviously not China’s first retaliatory actions. It has been fighting back against Trump, then Biden, and now Trump again since 2017. What appears different to us now is the intensified restrictions on rare earth minerals, combined with the growing insistence of China on total technological autonomy, including in semiconductors. China had ordered domestic firms to abandon all Nvidia chips back in September. In April, it added tens of American defence, logistics, and aerospace companies to its Export Control List.

War preparations: economic

The overall theme seems to be twofold:

1. End all dependence on the USA. China has already banned US lumber, sorghum, poultry bone meal, and poultry (some are comprehensive bans, some are limited to specific companies).

2. Prevent America from using Chinese equipment, technology, and resources to rebuild its military capabilities. This is confirmed not just by the rare earth minerals restrictions, but also by the restrictions on the exports of magnets, which are necessary for autos, defence, logistics, and other sectors.

This suggests that China is pre-emptively disentangling its economy from the USA before launching a strike on Taiwan, while also working to slow down American and Western efforts to rebuild their militaries. Even when, rather than complete bans, it is imposing restrictions and licenses, China is building the administrative infrastructure to fully control its exports and prevent their use by the USA’s defence industries, logistics, autos, and shipbuilding in the event of conflict. Given China and its allies expertise in evading sanctions, it intends to close the loopholes in exports of dual use goods to the USA before they even develop.

War preparations: military

Add to that the rapid expansion of China’s roll on-roll off commercial ferry fleet, with modifications to carry tanks and join amphibious operations, with another 70 to be built by the end of 2026. Consider the Shuiqiao-class landing barges which can drop equipment at coastal highways in Taiwan, rather than relying on the small number of suitable beaches for ferries. In addition to general modernisation of its arsenal, China is also hardening airbases near the Taiwan Strait and adding new runways, taxiways, and ramp areas. It is even building a new military city south of Beijing, complete with nuclear-resistant bunkers, ten times larger than the Pentagon. The completion date is unclear, but there are 100 cranes on the site.

A redditor’s impression of the current global alliances. We would suggest that more Muslim states and southeast Asian states are in China’s sphere of influence than stated here, and that Turkey will play its own geopolitical game independently of the West. We would also speculate that Venezuela is extremely vulnerable to the USA.

Further considerations on timing

Three additional points should be considered:

1. The USA is becoming increasingly domestically unstable. The Democrats’ paths to electoral victory are being shredded by Republican efforts to remove illegal aliens from the census, remove race as a factor in district allocations, and redistrict in Republican-controlled states to reduce the number of Democratic seats. This combined effort can lead to Democrats losing a total of 20-40 seats, preventing them from ever taking the House of Representatives and significantly reducing their ability to win the presidency. Democrats will respond to this with violence, as progressive leftists always do. China may calculate that the mid-terms in 2026 will be when the American domestic conflict will escalate.

2. The USA has not yet succeeded in pushing Europe fully into its orbit, as Trump wants, neither in terms of trade or domestic politics, identity, and ideology. Striking before the USA succeeds means that China will be facing a less united West, which is still arguing over trade and domestic affairs. The longer the Ukraine war continues, the more the European pro-Trump right rises, and the more likely it is for the West to eventually unify under Trumpesque leadership.