Beijing’s and Washington’s Efforts to Disadvantage Each Other Have Put Each at Odds With Their Own Business Communities
Udumbara
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While Washington and Beijing pursue policies to disadvantage the other, each has faced a battle—a little civil war of sorts—with elements in their respective business communities.
On the American side, Washington has tried to disadvantage Chinese technology by denying it access to advanced semiconductors, but its producers—most notably Nvidia and AMD—have always sought the Chinese sales they would otherwise enjoy.
On the Chinese side, Beijing has maneuvered to deny the United States access to rare-earth elements vital to its technological progress, while a phalanx of Chinese mining and refining companies has maneuvered to keep up their sales in North America. Internal fights of this sort seem destined to go on for as long as Beijing and Washington are at odds—in other words, for a long time.
The Washington–Nvidia challenge has received the most attention. The difficulties began when the Biden administration banned the sale of advanced computer chips and chipmaking equipment to Chinese-based operations. This is no small thing. Advanced chips are essential to many newer technologies, especially artificial intelligence (AI).
Initially, Chinese producers such as Yonjumag, Anhui Hanhai New Material, Zhaobao Magnet, and X-Mag began immediately to position themselves to lose as little as possible of American sales should Beijing go ahead with the export restrictions.
The companies have sought both technological fixes and workarounds. The original licensing, for instance, emphasized the so-called heavy rare-earth elements, dysprosium and terbium. These allow magnets to work at the high temperatures of modern automobile engines, some appliances, and jet engines, among other things.
Some companies substituted holmium, which was less constrained by the original strictures but which regulators now insist on licensing. Other companies developed techniques of milling the banned elements so fine that they can serve the technology’s needs in amounts that do not need licensing. These arrangements do not work as well as a full use of the elements, but something is better than nothing.
Some companies sought to take advantage of the fact that the strictures apply to the elements but not to motors that already contain them. These companies would export the motors and allow buyers to disassemble them to access the needed elements.
Some of the intensity of these small civil wars has ebbed of late. Last October, Trump and Chinese leader Xi Jinping met face-to-face in South Korea and reached an agreement. Trump would reduce the level of U.S. tariffs on Chinese goods by some 10 percentage points in return for Xi’s promise not to implement a rare-earth export ban for at least a year.
Last month, Trump—perhaps as a goodwill gesture to Beijing, perhaps yielding to pressure from chipmakers Nvidia and AMD, perhaps in response to both—allowed sales of H200 chips to approved customers in China on the condition that these companies pay a 25 percent export tax on all revenue from those sales.
This easing of tensions is likely temporary in every sense of the word. The conflict between Washington and Beijing will doubtless reemerge as 2026 unfolds. Accordingly, the conflicts between these governments and the companies involved will also return. These conflicts will make headlines throughout the coming year.
