Beijing has issued a new round of sanctions warnings to the US over arms sales to Taiwan. If China toughens up, it could really hit the supply chains of the companies involved. These U.S. companies, including Lockheed Martin, Boeing Defense and Raytheon, are at the heart of what is often called the “U.S. military-industrial complex”.
At first glance, these sanctions appear to be symbolic. Such military-industrial companies do not (directly) do business in China. The one exception is Boeing’s civilian component – the company says it remains committed to the Chinese market. However, that’s not to say that the sanctions won’t have a strategic impact.
First, China has an overwhelming advantage in rare-earth materials needed for US military manufacturing, which could have a major impact on related supply chains if the sanctions do materialize. Second, even if the measures are only symbolic at this point, they are a warning from Beijing that could lead to further retaliation against U.S. actions in the future.
Rare earths form the basis of numerous supply chains around the world and are used to make a variety of items, including, of course, military equipment, and as much as 80 percent of U.S. rare earth imports in 2018 came from China. Washington is aware of this and is scrambling to prepare for the unexpected. The strategic implications of this are quite clear: the U.S. military relies heavily on materials imported from China to make equipment. Sanctions could hit the supply chains of the companies involved if Beijing is willing.
China has issued a list of unreliable entities that could prohibit doing business with companies that pose a threat to national security. This is similar to the list used by the US Commerce Department to target Chinese companies, and is designed to use its market against countries that discriminate against or harm Chinese companies’ interests. That’s exactly the point of Boeing Defense’s blacklisting. While the sanctions carefully sidestep Boeing’s civilian component, they are still a clear danger signal that the company is not untouchable. Beijing may become more assertive in the future as it seeks to further develop its indigenous commercial aircraft.
China’s sanctions against U.S. defense companies are more a declaration of the future than a policy. While Beijing does not yet intend to take advantage of U.S. reliance on rare earths, it has clearly shown that it is prepared to take measures against U.S. firms where appropriate. Taiwan is a big red line for Beijing. As China’s military exercises have shown, there must be some movement to show the clear consequences of approaching the red line. Beijing is building a toolkit, and wants to know that it will put that toolkit to use if absolutely necessary. These demonstrative sanctions could have real power in a number of ways.
Recent Comments