I don’t need to tell you that the world is becoming a vibrant hornet’s nest with several open fronts. Some explode directly, such as conflict between the US, Israel and Iranand others endure, buried and palpitating, in the form of diplomatic tensions and tariffs. The United States has been and is the dominant world power economically (in terms of nominal GDP) and militarily, but China is moving inexorably to break its hegemony on all fronts.
Trump has the main mission of “Make America Great Again” and in the military it involves adopting a more proactive role: we have seen in Venezuela and in Iran but also on a small scale with the boarding of ships. Given this scenario, China is in an uncomfortable position (buys 90% of all the oil Iran exports) that attempts to resolve with maximum diplomatic pressure but without military action. There is a broad business relationship at stake. If it did, the United States would have a lot of problems.
Because the relationship between the United States and China is paradoxical: they are geopolitical rivals but at the same time they have a symbiosis economically and industrially. And if the United States wanted to strengthen its military, China would be essential, as evidence this internal report commissioned by the Department of Defense itself.
Why is it important. Because we are probably in the greatest moment of military tension between both powers since the Cold War and the United States has been declaring China since “pacing challenge“(for Pete Hegseth, it’s already “pacing threat“): in different defense documents: The pace of the Asian giant is a challenge that threatens the supremacy of the United States.
Despite this, its dependence on the military supply chain has not decreased, quite the contrary. If China decided, either in retaliation or on its own initiative, to disrupt its supply chain, the operational capability of the US military would be seriously compromised.
Context. The fall of the USSR in the late 1980s was followed by a reduction in defense spending in the 90s, at which time the industry moved in search of economic efficiency in the form of contractor mergers and supplier outsourcing. To where? Towards Asia, something that its base industry also did.
Meanwhile, on the other side of the world, China was establishing itself as a global supplier of electronics, semiconductors and critical raw materials. A concrete example that you can see at a glance in this graph: the rapid rise of China in rare earth production and the fall of the United States.
Chinese suppliers to the US military. NUMBERS MATTER: DEFENSE ACQUISITION, US PRODUCTION CAPACITY, AND DETERRING CHINA
In figures. Govini’s internal report from 2024 leaves some numerical data that supports the serious dependence of the US military on China:
- 41% of the semiconductors in its weapons systems and infrastructure depend on Chinese suppliers.
- Chinese suppliers in defense supply chains have quadrupled between 2005 and 2020.
- US dependence on China in electronics increased by 600% between 2014 and 2022.
Graphic that relates American weapons to their Chinese producers. NUMBERS MATTER: DEFENSE ACQUISITION, US PRODUCTION CAPACITY, AND DETERRING CHINA
China is the world’s factory. A no-brainer: semiconductors are everywhere, from cell phones to missiles or drones. And China makes more chips than anyone else and also dominates in assembly, although lags behind in advanced chips. Yes indeed, is among your priorities. The United States has attempted to repatriate chip production with its Chips lawbut its consequences will be seen in the medium and long term, not in the coming months. At the moment, its first green shoots are the plant TSMC in Arizona.
China is the “mine” of the world. We mentioned it above because it is the clearest example: in rare earths, China is the absolute queen of the industry from start to finish: from deposits to processing. And it’s not just rare earths: it’s also gallium, germanium, graphite, antimonyhe cobalt or the tungsten.
Be careful, this does not necessarily mean that it dominates because of the deposits it owns, but because it has set up a powerful refining industry that allows it to control the processing link, so that other countries turn to China for this operation. They are industries that require high investment and low margins, which makes them unattractive for private companies without state support to enter the sector. China knows this and uses it as a currency of pressure in the form of restrictions and locks.
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