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All Arrows Point to Escalation of Tech Wars – U.S. Secretary of Commerce Comments on U.S. Competitiveness and the China Challenge

While the recent meeting between U.S. President Joe Biden and his Chinese counterpart Xi Jinping on the sidelines of the APEC summit in San Francisco last month was seen by some as a step towards alleviating tension between the two global powers, U.S. Secretary of Commerce Gina Raimondo’s latest speech and subsequent comments at the Reagan National Defense Forum in California left no doubt that, at least on the trade front, all arrows very much point to confrontation.

During her remarks on U.S. Competitiveness and the China Challenge, Secretary Raimondo emphasized that China’s “commitment to using non-market trade and investment practices” and “reprioritization away from economic growth toward national security and its assertive military behavior” has forced the United States to defend U.S. business and workers, and to “rethink how we protect our national security interests while also promoting our interests in trade and investment.”

Raimondo defended the United States’ recently imposed “systematic and technology-specific export controls to limit China’s ability to purchase and manufacture certain very advanced computing chips that are used to train large-scale artificial intelligence models, and which power the country’s advanced military and surveillance systems, as well as the manufacturing equipment used to make these cutting edge-chips,” arguing that “[f]or too long, America’s export control strategy was reactive -focused on preventing China from expanding its technological capabilities after it accessed American intellectual property.”  “The new rules,” she added were “strategic, targeted and designed to protect our national security.”

But it was the comments in response to questions by the moderator that gave us a glimpse into what may be coming down the pike.

Jordan Schneider, host of the ChinaTalk Podcast, recounted some of her comments on X, and it appears that in her Q&A, Raimondo showed less restraint than in her carefully crafted speech.

On the U.S.-China dialogue she said:

“This is the biggest threat we’ve ever had, and we need to meet the moment. The world needs us to manage our relationship with China responsibly. To avoid escalation, we’ve got to do all that, but make no mistake about it, China’s not our friend, and we need to be eyes wide open about the extent of that threat. I am ready to win, and I’m ready to do that with all of you, but it’s time to open our aperture and challenge the way we’ve done business in every way if we’re going to meet the threat China poses. And if we’re going to do what needs to be done with this technology.”

When asked if there were other U.S. origin products or types of technologies that the U.S. Government was “looking at in a similar fashion right now” – i.e. would consider imposing export controls on, she said:

“Absolutely, in biotechnology, AI models, AI products, cloud computing, supercomputing. So short answer is yes.”

As followers of ARPN well know, China is no stranger to playing politics with their own trade leverage, and we have seen a tit-for-tat play out in the critical minerals space, where China has taken several steps to tighten the export control ratchet with restrictions on what we might call the Super Criticals – gallium, germanium, graphite — and has already raised the specter of REE restrictions.

Unsurprisingly, China has already voiced criticism of Raimondo’s comments with Chinese Foreign Ministry spokesman Wang Wenbin telling media at a regular press briefing in Beijing earlier this week that “The U.S. should stick to the right perception and work with China to deliver on the common understandings reached in the San Francisco meeting” and “stop seeing China as a hypothetical enemy and saying one thing but doing another.”  Raimondo’s remarks, according to Wang, exposed the “Cold War mentality” on the part of the U.S. and showed its “desire for hegemony.”

Diplomatic efforts to improve ties between the countries in the wake of Raimondo’s remarks may continue – as with Chinese Vice Premier He Lifeng meeting with Richard Haass, a former president of the Council on Foreign Relations earlier this week –  but to the keen observer it appears all but certain at this point that we’ll be seeing a further escalation of the Tech Wars in the coming months, with the export control ratchet playing a central role.

The question is, which critical mineral will find itself in the crosshairs this time.