“America Has Lost the Trade War with China”


That’s what Charles Hugh Smith believes.  He adds, “The real pain has yet to begin“.

Whether we like to admit it or not–mostly not–the American economy is entirely dependent on manufacturing in China. America’s short-sighted obsession with increasing profits to fund buybacks and golden parachutes for corporate insiders and vast fortunes for financiers has led to a dangerous dependency that has handed China tremendous leverage, which China is now starting to make use of. (And why not? Wouldn’t the U.S. start using the same leverage if it could?)

A long-time U.S. correspondent who prefers to remain anonymous for obvious reasons recently shared his experiences with parts shortages and price increases from previously reliable suppliers in China. Here is his account of the disruptive shift in the supply chain of essential parts from China to the U.S.

China is laying siege to the USA by slowing down production and delivery of goods. It doesn’t take much to hang up US production, just one missing item can do it. So much stuff is sourced through China they can affect all supply chains. Semiconductors are just the canary–because the chains are so long and complex, and specialized materials are required, etc. But it is happening everywhere.

I have a little manufacturing company and I am seeing this in supply lines. I sent an order to China for printed circuit boards (US prices are astronomical because of various factors). They don’t get back for a week, then they quote, then I send money, then they sit on it, then I call and they say they are having problems with some process… etc. But all the suppliers are like this, it is not an isolated incident. They are sandbagging.

So just as in laying siege, the attackers have the food outside the castle and wait for the people inside to starve.

As prices rise the Chinese manufacturers take bigger profits so the slowdown effects on that end are mitigated. For products they do not have a monopoly on, like PC boards, they slow down. for things like LCD displays and NFeB magnets, the items become unavailable (try buying magnets on Amazon).

I have to say this is a brilliant idea on China’s part, and no one on this side has realized the situation yet. This plan is straight out of Sun-Tzu. implications? inflation and shortages will continue for a long time… maybe forever. The only long-term solution is repatriation of manufacturing to the US. But it is going to cause some serious hurt, vastly more than the sanctioning of Chinese tech companies.

i just sent a request for quote for some radio chips I use to Alibaba. they are $1 each and there are many vendors. I sent notes to 2 vendors i used before and after 4 or 5 days got a ping back that my requests were cancelled. i wound up getting the parts–for 2x the price– from Hong Kong, which at the moment seems to be something of a channel to the mainland. But I expect they will close that leak pretty soon.

. . .

And now the chickens are coming home to roost. Essential parts and feedstocks become unavailable for all sorts of flimsy excuses, prices double, triple, then double again, and since we’ve allowed our entire economy to become dependent on a handful of sources for these essentials because that dependency maximized profits, then there are no alternatives.

There’s more at the link.

I keep an eye on developments like that whenever I can, and overall I’d say they bear out the picture painted by Mr. Smith’s correspondent.  For example, a local air-conditioning contractor was hired to install new air-conditioning systems in a nearby high school.  They ordered more than 150 units, to be installed on the roof of the buildings in a complex pattern and networked together.  The units were supposed to be delivered during the first week in June . . . but they didn’t arrive.  The manufacturers in China first pleaded COVID-19 as an excuse, then blamed shippers for delays in getting the goods across the Pacific Ocean.  They finally arrived last week – and they’re supposed to be installed and running by the time school reopens in three weeks’ time!

A friend who works for that contractor says they’re going to be running almost 24/7 at breakneck speed to get the job done.  Meanwhile, if any of their other customers have an A/C emergency, they probably won’t be able to help them – they’ll have to refer them to other companies for support.  That, in turn, may damage their long-term relationship with those customers.  So, supply problems from China have turned into an albatross around their neck, disrupting almost every aspect of their normal operations.

I’m noticing similar delays in getting parts and components in other industries.  For example, certain car parts are now so hard to get – particularly computer chips – that I know some folks whose vehicles will be out of action for literally months until their servicing dealers can get replacements.  Meanwhile, they’re having to rely on co-workers to hitch a ride, or even hire cars medium- to long-term if their jobs rely on their having their own transport.  Similarly, if you work with firearms, you’ll have noticed that many accessories such as red dot sights and telescopic sights – almost all made in China in the low- to medium-budget price ranges – are sometimes in short supply, possibly forcing you to buy a different model from what you wanted.  Other injection-molded plastic components like stocks and handguards may be subject to long delays, or just vanish from vendor Web sites altogether until one day they reappear without explanation.  I’ve taken to keeping a few critical items in reserve, even though I don’t need them at once, just so that if I do, I don’t have to wait.

Reading Mr. Smith’s views in the light of last Saturday’s discussion of China’s grand strategy to displace the USA’s influence, it’s not hard to see many points of convergence.



  1. I work in the pharmaceutical industry. One of my coworkers is working on a project in CO qualifying new equipment. The disposable plastic pipets and sample cups used to sample are in short supply or not available. These items can't be reused or cleaned. Nickel and dime items. Guess where they come from. "For the want of a nail the country was lost." Thanks Big Business and the FEDS you just screwed yourselves and everybody else.

  2. The peril of outsourcing is coming home to roost… And the chip sets come out of Japan, where the plant burned down… Gee, what a coinkidink…

  3. I'd be open to considering efforts to penalize people/businesses that sold their manufacturing plants to China since 1970. I thought from the start that that sort of stupidity was one of the reasons for having a government that exerted control of exports.

  4. I've got a commercial grade espresso machine that broke down Saturday week ago. The good news is that these items are made in Italy and you can actually get spare parts for them, though things have slowed due to the impact of COVID.

    Domestic espresso machines, some as much as $3k AUD are another matter entirely. You just can't get parts for them. If your machine breaks then you've just lost your money. Want to buy another one just for coffee? Granted, the domestic machines are also not helped by everything being soldered together and the corresponding increase in labor required to unsolder and fix even if you could get parts.

    It was an interesting conversation I had with the guy as he diagnosed my machine on-site. (Another issue everywhere is people can't get the staff they need. In-shop repairs used to be a two week wait but are now a month.)

  5. There was no trade war. American business would rather the country be destroyed and people stop having babies than give in on wages.

    They did. Sow, Reap.

  6. Agree with the article, except for the end (and headline). We are losing the trade war, but that's due to our leaders being paid off. They have computer chips, we have food. Slow down food exports to China, and they'd back down (complain, but back down).

  7. I try to remain optimistic day-to-day, but I think we are auguring in fast. We've certainly lost political influence, monetary clout and moral relevance. And why not? What hubris, to think in the 70s and 80s that the American Empire would perpetuate itself because it was American! Yes, we might have partnered some business to emerging China, but we sold off our skilled labor and their manufacturing work because lower short-term costs made for better shareholder (or owner) dividends… in the short-term. Now we can't produce anything, we've given over our defense and intel systems, and we've "educated" a generation of fools who think communism is just fine. It's not 1776 … how do we recover from this as a culture? I don't see it happening.

  8. While this is definitely an issue, especially for single source items, they can't push it to far or their competition will make the parts.
    For years now, China has been losing manufacturing to South and South East Asia, the arc from India to Malaysia, as wages have gone up in China and many in the West continue to push for lower cost products.
    China can make life a pain for us, but unless the can stop their competition, ultimately they will lose IF our companies and politicians are willing to stand up…

  9. "I have a little manufacturing company…"

    Well that gives you immense leverage. "Printed circuit boards" Oooh sounds so techy. How many decades have they been around?

    "(US prices are astronomical because of various factors)" That is rather simplistic. Astronomical in what monetary sense compared to what you aren't getting from China, where you pay cash in advance and then wait? What other companies not in China did he quote?

    Our problem won't be chips it will be the regulatory environment that will drive up fuel costs, prevent new non "green" electric power plant construction, and state and federal incentivization (including negative incentives) to buy electirc vehicles. Guess where the key ingredients to the batteries are coming from.

  10. Old proverb: Amateurs talk about tactics, professionals study logistics.

    A continent-sized country runs on logistics, damn complicated logistics at that; ain't nobody anywhere near the top been thinking about "logistics" for over 40 years.

    We're doomed. Stop taking Spanish classes, you'll need Mandarin.

  11. Frederick –

    I agree wholeheartedly – screw China.


    Where will our repair parts, new electrical transorfmers, and all the very critical stuff our society runs on come from? For the past 40 years our business leaders have chased "cheapest deals" for making their products, and that path led to China.

    Our government saw absolutely nothing wrong with that, and in fact has encouraged it through the tax structure. It doesn't really matter if 60% of the brands of shampoo come from China, but if 3/4 of our medications, 80% of our electrical transformers, 30+% of our vehicle repair parts come from China, that's a very, very serious national security issue.

    Not that anyone in Congress or the White House for the past 40+ years has given a rat's patooty about that.

    We need a national "post Pearl Harbor" effort to regain what we've not just traded away, but GIFTED to China and other countries. To do that will cost more money, and American consumers always want cheapest cost, and pain as we shift from China-bought to American made.

    Yes, China absolutely needs the U.S. as a market; America does NOT need China as a supplier. Or, for that matter, a "paid partner" in the development of new and different strains of bacteria and viruses.

    At the moment China cannot simply cut off the American market completely, they desperately need our money; without it their economy collapses. Hard. Which is why they're committing "leverage" right now, to keep us in line – slow down deliveries just enough to cause a little pain, as a reminder that if shipments of product X go to zero America is in deep doo-doo so American better play nice.

    There are many countries with which the U.S. can co-exist economically, there are none to which we should entrust our complete future.

  12. My goodness, who created all that stuff, it sure wasn't the Chinese. The interior trim light of my car and the right front fender are hardly "very, very serious national security issue". No we don't need a national "post Pearl Harbor" with the government directing the economy.

    " to keep us in line"

    Seems like that is the American left doing that, not China.

    "Not that anyone in Congress or the White House for the past 40+ years has given a rat's patooty about that. "

    Trump, who is he.

  13. Should have used AAON an American manufacturer, oh wait, subject to our goober mint reg's and guidelines so they will cost a lot more but probably would not have got the goober mint project at a higher price. local local local.

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