We’re All Losers In A Trade War
What’s left vulnerable if the United States and China fall into an all out trade war? Mostly cell phones, TV’s, and our national defense and security. This trade war has been a disaster for small and independent business. Tariffs have caused costs to increase for US business and in turn has begun to raise costs for retailers and consumers.
While large businesses have been able to blunt the blow, smaller businesses have not. Our supply-chains are intertwined — material sourcing, manufacturing, freight, and fulfillment are difficult processes for anyone to set up. Most of the time, once all the money has been put up and products begin to flow, it’s met with a do not disturb mentality. That’s understandable. When you run an independent business $100K + is a big deal, especially if those costs are upfront.
It turns out trade wars are difficult and result in many consequences. While the pain of tariffs are beginning to be felt by small businesses that shock is quickly moving upstream. Up until now it’s targeted our wallets but it may soon move on to our satellites and fifth generation stealth fighter jets.
The US was reliant on China for a staggering 4/5th of it’s rare earth mineral imports. In 2018 alone that number increased 17%. Rare earths are what make our technology work and China produces 71% of them globally — and they know it which is why it’s one of their most powerful tools in the event of a full-scale trade war. The US cannot foster more high-end manufacturing if it doesn’t have reliable access to rare earths. Unfortunately, we’ve taken a bit of a tumble and placed ourselves in this predicament.
The US used to be the main producer of rare earths before they got caught up in regulations against thorium, a nuclear fuel. US mining companies actually extract enough rare earths to meet 85% of demand but it’s all discarded due to it not being economically viable. For this reason, our technology and defense sectors have become reliant on Chinese exports for 20 minerals, 17 of which are rare earths.
Trade partnerships will always require renegotiations. Times change, technology shifts, and economies grow and contract. Trade wars on the other hand are largely avoidable and only serve to hurt our small businesses as we inflict pain on external economies. There have been a lot of casualties of this trade war already and more US businesses are sure to close. What we need to consider is the degree of pain we’re willing to go through knowing our small businesses, tech, and defense sectors are exposed.
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