Export Controls Are Endangering the Fragile U.S.-China Truce

Business|Export Controls Are Endangering the Fragile U.S.-China Truce

After stepping back this month from an escalating and dangerous war of tariffs, the United States and China are now threatening to undermine their uneasy truce.

On May 12, the countries announced after weekend meetings in Geneva that they would suspend most of their recently imposed tariffs. Since then, however, both governments have shown that they are still prepared to wield controls over critical exports as weapons against one another, with moves that are potentially even more damaging to trade and global supply chains.

China has restricted its exports of rare earth magnets, which are crucial for cars, semiconductors, aircraft and many other applications. Close to 90 percent of the world’s rare earth metals, including magnets, are produced in China.

And the United States on May 13 banned the latest semiconductors from Huawei, a Chinese electronics giant. Then on Wednesday, President Trump suspended the shipment of American semiconductors and some aerospace equipment needed for China’s commercial aircraft, the C919, a signature project in China’s push toward economic self-reliance.

The increasing use of export controls by both countries amounts to supply chain warfare, interrupting the flow of key components that the other country must have to operate huge industries that employ large numbers of workers.

Last week, Ford Motor temporarily closed a factory in Chicago that makes Ford Explorer sport utility vehicles after one of its suppliers ran out of the magnets. In most new cars, the magnets are used in dozens of electric motors that operate brake and steering systems, fuel injectors and even power seats.