Navigating Trade War Waters: US Treasury Secretary Yellen's Diplomatic Mission to Beijing

US Treasury Secretary Janet Yellen embarked on a visit to Beijing in an effort to strengthen bilateral relations between the United States and China. This visit is part of the ongoing endeavors by the Biden administration to enhance communication and understanding between the two nations. In recent times, the relationship between the US and China has experienced a turbulent period.

In response to alleged human rights abuses and forced labor against the Uighur minority in China's Xinjiang region, the US government has implemented a ban on imports from the region. This ban was enacted through legislation signed by President Joe Biden, which also includes sanctions against individuals involved. The primary aim of these measures is to combat illegal and inhumane slavery while holding China accountable for alleged persecution campaign.

China also has its complaints about U.S. rights abuses. But these are rarely given exposure in the mainstream media.

US export Controls

Furthermore, the US has imposed export controls on various crucial components related to chip manufacturing, including advanced chips, chip design software, chip manufacturing equipment, and US-built components of manufacturing equipment. This includes a ban on the export of cutting-edge chips to China.

Additionally, the new rules prohibit US citizens, residents, and green-card holders from working in Chinese chip firms. The US government has also added memory chipmaker YMTC and 21 prominent Chinese players in the artificial intelligence chip sector to a trade blacklist maintained by the Commerce Department. As a result of these restrictions, the Chinese semiconductor industry has been significantly impacted, hindering its growth.

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Consequently, American semiconductor companies such as Qualcomm and Broadcom have experienced substantial losses due to the ban, as they heavily rely on the Chinese market for revenue. Concerns have also been raised by the CEO of ASML regarding the negative impact of the export ban on research and development, as well as technological innovation.

Beijing Export Controls

In response to the US actions, Beijing has imposed export controls on two strategic raw materials—gallium and germanium—which are vital to the global chipmaking industry. China now requires buyers of these materials to obtain approval from the Chinese government, increasing the regulatory hurdles. The escalating trade tensions between the US and China have raised concerns about potential disruptions in global supply chains, which could lead to inflationary pressures worldwide.

The trade war between the United States and China is a cause for concern for other countries due to its potential ramifications. It has the potential to trigger a decline in global trade, reduced investment, decreased confidence, and a slowdown in global economic growth.

As the world's two largest economies, any impact on their trade relationship reverberates globally. Neighboring countries like South Korea, Taiwan, Malaysia, and Singapore, which share close economic ties with China, are particularly vulnerable to the consequences of this trade war.

Can Yellen Strengthen Ties

The US Treasury Secretary's visit to Beijing was to strengthen ties between the US and China, marking a significant effort by the Biden administration to improve communication and understanding.

Recent actions such as the US ban on imports from Xinjiang, export controls on critical chip-related components, and Beijing's retaliatory measures on strategic raw materials have strained the economic relationship between the two countries. The repercussions of the ongoing trade war between the US and China extend beyond their borders, impacting global trade, investment, confidence, and economic growth.