The Biden administration claims Chinese companies help Russia rebuild its war machine. Our sanction proposal counter is laughable. China’s counterthreat isn’t.
U.S. Takes Aim at Chinese Banks
The Wall Street Journal reports U.S. Takes Aim at Chinese Banks Aiding Russia War Effort
The U.S. is drafting sanctions that threaten to cut some Chinese banks off from the global financial system, arming Washington’s top envoy with diplomatic leverage that officials hope will stop Beijing’s commercial support of Russia’s military production, according to people familiar with the matter.
But as Secretary of State Antony Blinken heads to Beijing on Tuesday, the question is whether even the threat of the U.S. using one of its most potent tools of financial coercion can put a dent in complex and burgeoning trade between Beijing and Moscow that has allowed the Kremlin to rebuild a military badly mauled by more than two years of fighting in Ukraine.
China has heeded Western warnings not to send arms to Russia since the beginning of the war, but since Blinken’s trip to Beijing last year, China’s exports of commercial goods that also have military uses have surged. With China now the primary supplier of circuitry, aircraft parts, machines and machine tools, U.S. officials say Beijing’s aid has allowed Moscow to rebuild its military industrial capacity.
“China can’t have it both ways,” Blinken said in Capri. “It can’t purport to want to have positive friendly relations with countries in Europe, and at the same time be fueling the biggest threat to European security since the end of the Cold War.”
In December, President Biden signed an executive order that gave the Treasury Department authority to sanction banks that aid Russia’s military-industrial complex.
That created bottlenecks in China-Russia trade transactions as major Chinese banks backed out of any roles in facilitating the deals, said Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center think tank and a former employee of Russia’s central bank.
But, she said, those banks have gradually been replaced by more obscure regional Chinese banks with little work in the dollar-denominated economy, and hence less to fear from U.S. sanctions. “Payment chains are slowly being rebuilt,” Prokopenko said. “Both Russians and Chinese are constantly adapting to the new conditions.”
The US Can’t Have It Both Ways
The US has stopped Chinese auto and steel imports. It has sanction phone maker Huawei. It has restricted Chinese access to Nvidia chips.
Why is China supposed to care what the US thinks?
Computer Chip Sanctions Fail
On September 4, 2023, I noted US Sanctions Fail Again, China Now Produces Its Own Advanced Computer Chips
Trump and Biden both tried to cut off China’s supply of advanced microchips. The US wanted to knock Huawei out of the 5G market. Now, instead of China using US chips, it is producing its own chips.
China Bans iPhone Use for Government Officials
On September 7, in response to US actions, I asked China Bans iPhone Use for Government Officials, Just a Start?
And about that chip ban …
On February 18, 2024 I discussed How China Gets Around US Sanctions on Semiconductors
How Russia Makes a Mockery of US Sanctions in One Picture
Unprecedented US and EU sanctions against Russia have had no impact on Russia’s oil exports or revenue. Who’s the beneficiary?
On December 29, 2023 I noted How Russia Makes a Mockery of US Sanctions in One Picture
On September 19, 2023, I commented Lesson of the Day: Sanctions Don’t Work Because They Create New Markets
Why Sanctions Fail
- Someone always has an incentive to break sanctions.
- Sanctions create new markets.
This is how Russia sells oil and how China gets access to equipment and parts.
In the case of chips, the US has forced China into a path to self-sufficiency. Hooray?!
Tariff Men
Trump says he is a “Tariff Man”. He wants 60 percent tariffs on China and a total blockage of Chinese cars.
But Biden is there too, threatening more tariffs on Chinese steel and cars.
And as noted on April 21, The House Passes a TikTok Ban.
So tell me again why China is supposed to give a damn about what the US thinks.
Meanwhile, note that China controls over 90 percent of the rare earth elements needed for microchips, wind turbines, military-grade magnets, EVs, and rocket guidance systems.
The Inflation Reduction Act was supposed to increase permitting in the US. However, Biden Blocks Rare Earth Mining in Alaska
For discussion of the lead chart and supply of rare earth elements the US needs but does not produce, please see Critical Materials Risk Assessment by the US Department of Energy
Massive Trade War Coming Up
The stage is set for a massive global trade war.
Neither Trump nor Biden have a clue as to what damage a global trade war might do. And we are steamrolling right towards one.
This thought is not even on page 20 of the WSJ yet. It’s headed to page one no matter who wins the election.
When trade dies, bullets fly. From Honors econ at Wisconsin 55 years ago. However US is doubling down by bullets flying everywhere.
“The U.S. is drafting sanctions that threaten to cut some Chinese banks off from the global financial system, arming Washington’s top envoy with diplomatic leverage that officials hope will stop Beijing’s commercial support of Russia’s military production, according to people familiar with the matter.”
That was the first line of this article. The BRICS will now redouble there efforts to set up a new Global Financial System and end our ablity to use the one we have now, to punish them. There is always a “work around” Once they have it in place we will become a toothless tiger…. forever.
The “news” channels all edited the story about Blinken’s visit. From undiplomatic reports on the ground, the Chinese essentially told Blinken to just shut up and get back on his plane. They didn’t show him the least respect in early 2021 (when Blinken was first appointed); doubt they are showing him any now.
China’s problem is finding new markets for their exports – markets with PAYING customers. Not customers buying on credit, actual PAYING customers.
Blinken represents a government with (at least) $150 trillion in debts, a worthless lying octogenarian leader who wont be around to consider repayment, and a consumer base that lives on credit cards. Who cares what the deadbeats think?
Russia by itself can’t replace the US consumer. But China needs to diversify anyway.
Since Blinken is a fool, and unable to give the Chinese what they really want even if they did negotiate – what would be the point of talking to him? NOTHING.
Ancient Chinese saying: “don’t waste time negotiating with a slimy salesman who doesn’t have what you need anyway.”
The US military industrial complex is more dependent on China than is Russia’s.
Worse, their military has not been badly mauled but has grown to be 2× the size and 2× the equipment, seriously trained, and battle-hardened.Who can even think of challenging them?
The Duran suggests it isnt about the Ukraine war. It is about China looking to replace payment and trade settlement systems that would hurt the dollar as the reserve currency
I agree. China does not care. There are work arounds on sanctions.
Huawei and many other Chinese companies would not make it in the US. They would lose so much money in lawsuits and class actions suite they would go bankrupt. They facility Bribes, steal intellectual property, etc. Best to stay far away from Hauwei.
Several years ago I was working with person who used to have a job with a company that was attempting to enter the Chinese Market. He said it sort of frightening walking down the middle the street heading to a meeting with a suitcase of $300k USD to bribe some city officials. He said it was what you had to do to get the business. He was just a contractor for this company. LOL
“The stage is set for a massive global trade war.”
Someone said that when goods don’t cross borders, armies do. Setting the stage for World War 3.
The Japanese attack on Pearl Harbor was preceded by FDR’s embargo on US oil exports to Japan.
We are already in WW3. Trade war is war. Sanction is war. Proxy war is war. Cold war is war. WW3 is already in grey zone. Only hot war between superpowers left. I don’t think hot war will happen in US or China or Russia because it can lead to nuclear war.
Those that think inflation is bad now would be flabbergasted should Chinese goods be cut off and manufacturing be conducted in the USA by no doubt unionized workers.
Check this out link to archive.is
Would be good to tell us what this link is instead of just posting a link without explanation.
The link is to a Wall Street Journal story about rundown St. Louis, MO. Among medium and large American cities, it ranks #1 in homicides per 100,000 population.
Mish, there is no COMING TRADE WAR: we are ENGAGED ALREADY and a better way to say it is that the coming INCREASING WARS will simply do MORE damage than any good that the headlines promise.
My guess is that US investors suffered significant losses when they had to dump shares on the Trump/Biden banned lists of Chinese companies. The winners were Chinese and other foreign investors who were able to buy the shares at temporarily depressed prices.
The US gallivants around the globe starting wars and then gets angry and starts scolding nwhen others fight back. The hypocrisy and lack of self awareness is stunning. A combination of arrogance and stupidity.
USA is giddy with the arrogance and stupidity of Putin’s three day war in Ukraine. USA can play this game for another ten or twenty years.
Ukraine is winning! Are you retarded?
Well, for as long as someone buys US Treasuries.
If Dagong says the US is insolvent, how does China keep holding US debt? The Deep State is already teeing up railroad bond claims from most of a century ago (how convenient). China should demand payment for critical materials in yuan or gold.
They don’t have any choice.
Running an export economy means that you export more than you import in terms of physical goods. There fore you *must* take back money (in the form of debt) in return.
China should care bc it still relies on the US consumer. Imagine if there was a blanket halt to importing anything from China.
Not a chance, economic chaos and social disruption. Our politicians, while stupid, aren’t that stupid.
Yes, we have those Pesky Pharmaceuticals.
Americans would suffer and die while chaos would emerge. Start with pharmaceuticals or their precoursors
All trade would cease should China make a move on Taiwan. I know of a company that has 100% of their production produced in mainland China. They are extremely worried and are quietly planning to move production out of China.
Good Lord I find myself agreeing with you.
Attention Jeff Green – Attention!!!!
Tesla has not been immune to the market shift.
Year 2023 sales of Model Y were 3278, which was 291 down on 2022.
In 2024, Model Y sold 25 in January, 145 in February and 74 in March, totaling 244 for the quarter – incredibly, that is less than one-third of Tesla Model Y sales in the single month of June 2023, Tesla NZ’s best sales month (765).
The used car industry believes a NZ-new electric car will lose 40 per cent of its value in its first year. That revised value will drop a further 40 per cent in the second year.
Is a used Tesla the new used Nissan Leaf in NZ? – Driven Car Guide
hahahahaha… Jeff… surely you can see how this ends… what kinda moron buys a car that drops by over half it’s value in two years!!!!!
Sure there will be cult members who are willing to burn up their cash and sacrifice cuz they are ‘saving the planet’ (fossil fuel charged cars….)
But that’s a limited market… the average person will be looking at this MSM news and go completely off these idiot mobiles…
This reduces the market to a sliver thin wedge… resulting in a further crash in resale values hahahaha…
Compounding this will be those who got sucked into buying an EV — and burned with all those extra costs that Mish has laid out in earlier articles + the range anxiety… and dump the junk into the used market.
It’s not too difficult to imagine the EV going the way of the dinosaur… even believers will have a limit on what they are willing to lose on the resale….
Like I said Jeff… get ahead of the curve and sell your EV fleet now … before the resale value goes to ZERO.
hahahahaha… this is hilarious stuff… just as many of us predicted.
Did I mention that as of March the local Lexus dealer had sold zero EVs? ZERO.
big difference I believe is that TRUMP will allow RARE earths to be mined in MERIKA the FASCIST STATE
or we just continue down the TERRORISTS of DC way
either way is DOOMSDAY for 99% called WE THE PEOPLE
The guy who can’t navigate common stairs, nor the idiots who “made money from their home” wouldn’t know how to mine coins from a 3 year old’s piggy bank.
The US is; at a very, very minimum; at least a generation away from competing with Chinese industry at darned near every.single.thing by now. And that assumes some sort of immediate libertarian takeover.
Some senile; nor orange; hack, mindlessly babbling about “allowing” blah-blah means nothing. Argentina is as as advanced as the US in nearly all facets of industry these days. Russia is, literally, mostly ahead. There are a few; fast dwindling; exceptions. But China???? Fagettaboutit. “We’re” as far behind “them” now, as “they” were behind “us” under Mao. And that took them over 2 generations, of vastly more enlightened governance than what we’ll realistically experience, to accomplish.
“We” need to forget about China. That train has long since left. Instead, we need to work on fundamentals, such that we can at least turn the direction of development positive again. As opposed to continuing the accelerating decay which has been utterly all-encompassing in the US, since 1971.
The Great Depression was triggered and exacerbated by:
The Smoot-Hawley Tariff Act of 1930 raised U.S. import duties with the goal of protecting American farmers and other industries from foreign competition. The Smoot-Hawley Tariff Act is now widely blamed for worsening the severity of the Great Depression in the U.S. and around the world.
Nothing to see here. Move along
The Smoot-Hawley Tariff also helped make Germany’s Nazi Party the most popular in two national elections held in July and November of 1932. Many of the German workers who found themselves unemployed had also lost their savings when the German mark collapsed in 1923.
Russian GDP dropped 18% in 2022, that has to sting a little.
Where does that data come from, and how do they get it? How can you believe any data?
Nonsense. Is that number priced in USD or maybe just completely made up? Russia is the only European economy that’s growing.
Your IQ dropped 18% while you were writing this comment, to a new low negative number.
In the real world, a place you likely have never visited, Russian GDP growth is running at +7.3%, that won’t be sustainable for the whole year, but will probably come in at +4%. Russia has the lowest unemployment rates ever recorded, wages ae going up due to labor shortage, and crime is very low because everyone has a job if they want one.
How is your country doing, exactly, compared to that?
Low unemployment because its population is sent to the meat grinder war in Ukraine and the men are too busy getting drunk to reproduce
Low unemployment because Russia switched to a war economy long ago. That’s why GDP is up (using up war goods) and unemployment is down (making lots of throw away war goods).
I don’t think you even know what a “warime economy”
Ukraine doesn’t have to conscript soldiers, their military volunteer rates are setting records. Are you registered for the draft? It’s coming here you know.
I meant Russia, not Ukraine. Ukraine is dragging teenagers off the street to throw at the front.
^ lives in an alternate universe
what’s really pathetic is that you actually probably believe this
Looks like a sure way to boost BRICS.
No, it boosts the Swiss Franc, where a lot of the gold is.
Now that Switzerland is no longer a neutral country, I wouldn’t store a penny there. Asia is where it’s at.
Eventually those trade Wars will turn into hot Wars exactly what the a-holes that run our country want. Fulfilling the wishes of their money Masters
Limited wars – those “aid bills” are to fund US military manufacturers: they like forever wars.
Correct.
If goods do not cross borders then armies will.
I was reading an article a few years ago from an economist. He said we are in a trade war with China….we just don’t know it but they do. LOL
Desperation by the dying empire called the USA.
Did someone say “Democrat money laundering”?
Both parties are complicit in the racket, the Dems don’t have a monopoly on corruption. There really isn’t even a difference in the parties at the national level, only what lies they tell.