How China Could Strike Back At Trump's Tariffs

America's failure to scale up production of ammunition for Ukraine should be a warning to policymakers. In February 2024, the US produced just 30,000 155mm shells a month, or three days of Ukrainian consumption. The Pentagon says it hopes to raise this number to 70,000, or a week's worth, by early 2025.

The United States can't gear up to produce artillery shells, a century-old technology. Multiply the artillery shell bottleneck by ten or a hundred to envision the impact of selective Chinese export bans.

Some analysts have expressed concern about America's imports of pharmaceuticals from China, especially antibiotics. A trade war in medicine is unlikely, though, because China is also a major importer of American pharmaceuticals , for example cancer drugs.

Attention has focused on a possible Chinese boycott of rare earth exports to the US, as well as its new export licensing regime for gallium, germanium and graphite, minerals used in semiconductors. More worrying would be a selective cutoff of key industrial components targeting vulnerable industries.

“The vulnerability of supply chains for critical infrastructure is acute and self-inflicted. The US and its allies have allowed themselves to become captive to Chinese cartels that control production of electronic components, high-powered magnets, printed circuit boards, computers, drones, rare earth metals, wind turbines, solar cells, cellular phones and lithium batteries... In fact, nearly every element of the technology-based digital smart grid is dependent on Chinese-made components,” Brien Sheahan , a former top US regulatory official, wrote in April 2023.

The US defense industry has also outsourced production to China. In a June 19, 2023 interview with the Financial Times, Raytheon CEO Greg Hayes said his company had“several thousand suppliers in China and decoupling is impossible. We can de-risk but not decouple,” adding that he believed this to be the case“for everybody” in US manufacturing.

Hayes added,“Think about the $500bn of trade that goes from China to the US every year. More than 95 percent of rare earth materials or metals come from, or are processed in, China. There is no alternative. If we had to pull out of China, it would take us many, many years to re-establish that capability either domestically or in other friendly countries.”

Raytheon makes Tomahawk cruise missiles, Maverick air-to-surface missiles, Javelin anti-tank missiles and other mainstays of the American arsenal.

Adjusted for inflation (the Producer Price Index for private capital equipment), US orders for manufacturing equipment haven't grown in 20 years. A brief recovery after the 2008 recession led to stagnation during the past ten years.

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The US also has critical shortages of skilled manufacturing labor. When manufacturing activity (using the Federal Reserve's index) peaked in 2007, only 85,000 factory jobs went unfilled. Today there are 500,000 unfilled factory jobs. Manufacturers and their trade associations say that the biggest constraint on their activity is a shortage of qualified labor.

Graphic: Asia Times

To start up a production line, you need machinists. The United States has only 270,000 machinists, compared to 470,000 in 2000.

Graphic: Asia Times

Flex manufacturing (highly automated production using robots and computer controls) could solve the problem, but the United States is behind the curve. America has only 285 industrial robots installed per 10,000 workers, compared to 392 in China and 1,012 in South Korea .

The United States could create crash training programs for industrial workers, use the Defense Department budget to fund critical production and mobilize the full resources of American industry to tackle these problems. But a quarter-century of industrial outsourcing, workforce shrinkage and underinvestment in capital equipment can't be undone in a matter of weeks or months.

Follow David P Goldman on X at @davidpgoldman

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