America and China: Enemies Who Cannot Afford a Divorce

 

America and China are pointing economic guns at each other—forgetting that pulling the trigger could blow holes through both economies. In plain terms, America has the chips. China has the rare earths. If this economic war explodes, there may be no clean winner—only expensive casualties.

America and China keep talking about each other like two angry neighbors standing across a fence with baseball bats.

“You need us.”

“No. You need us.”

“We can crush you.”

“Try it.”

It sounds tough. It looks tough on television. Politicians can pound podiums. Officials can announce tariffs. Beijing can restrict minerals. Washington can restrict chips. Everybody gets to look patriotic for the cameras.

Then Monday morning arrives.

Factories open.

Ships leave ports.

Farmers need customers.

Technology companies need components.

Chinese manufacturers need advanced technology.

American manufacturers need critical minerals.

Suddenly, the shouting match becomes awkward.

Because beneath all the chest-thumping sits an inconvenient economic truth: America needs China, and China needs America.

I am not saying the two countries are friends. They are strategic rivals. They compete over technology, manufacturing, artificial intelligence, military power, Taiwan, global influence, supply chains and the rules of international trade. Some of those conflicts involve legitimate national-security concerns.

But economic reality does not care about political theater.

And reality has a nasty sense of humor.

America possesses some of the world's most powerful technology, especially in advanced computing and the semiconductor ecosystem. Washington knows exactly how valuable that advantage is. That is why the U.S. Department of Commerce introduced sweeping export controls in October 2022 designed to restrict China's ability to obtain certain advanced computing chips and semiconductor-manufacturing technology. The rules targeted advanced chips, supercomputing capabilities and equipment needed to manufacture cutting-edge semiconductors. Bureau of Industry and Security

That is economic power.

Washington can essentially tell Beijing, “You want some of the world's most sophisticated computing technology? Not so fast.”

But China can reach into another pocket.

Rare earths.

And then Washington stops smiling.

According to the International Energy Agency, China accounted for about 60% of global mined production of magnet rare earths in 2024. That figure alone is impressive. But mining is not even the scariest part of the story. China accounted for about 91% of global refined magnet rare-earth output and an astonishing 94% of sintered permanent-magnet production. IEA

Read those numbers again.

91%.

94%.

That is not some tiny corner of the global economy selling chopsticks and plastic toys. These materials and magnets matter to electric vehicles, wind turbines, electronics, industrial equipment and other advanced technologies.

So the economic gunfight becomes almost comical. America reaches for the semiconductor holster.

China reaches for the rare-earth holster.

Both stare at each other.

Nobody laughs.

I call this mutually assured disruption.

During the Cold War, the terrifying phrase was “mutually assured destruction.” Nuclear powers understood that launching the missiles could invite missiles flying back in the opposite direction. Economic warfare is obviously not nuclear warfare, and I would never pretend that the human consequences are comparable. But the strategic logic offers a useful analogy: when both sides can inflict serious damage, pulling the trigger becomes considerably less attractive.

America can hurt China.

China can hurt America.

Congratulations. Everybody wins the ability to lose.

We have already watched a version of this movie.

In 2018, the United States imposed tariffs on a broad range of Chinese imports. China retaliated against American products, including agricultural goods. Then American farmers discovered something politicians sometimes forget: your enemy can also be your customer.

And customers have weapons too.

They can stop buying.

The U.S. Department of Agriculture later estimated that retaliatory tariffs reduced American agricultural exports by an annualized $13.2 billion from mid-2018 through the end of 2019. Soybeans took the biggest beating, accounting for nearly 71% of those annualized losses, or roughly $9.4 billion. Iowa suffered estimated annualized agricultural trade losses of $1.46 billion, while Illinois lost about $1.41 billion.

That is where trade-war slogans meet dirt.

A soybean farmer does not deposit patriotism at the bank.

He deposits money.

China had been a gigantic buyer. In 2017, China represented 65% of global soybean imports. American soybean exports to China were worth $12.3 billion that year and represented 63% of all U.S. agricultural exports to China.

Then came the economic fistfight.

China slapped a 25% tariff on American soybeans in July 2018. In January 2018, China bought about $2.5 billion worth of U.S. soybeans. By July, purchases had fallen to roughly $140 million. By November, they had fallen to $0.

Zero.

That is what an economic punch looks like.

But here comes the punchline.

China could not simply wave a magic wand and replace every American soybean.

During the first half of China's 2018–2019 soybean marketing year, Chinese imports of American soybeans dropped by nearly 22 million metric tons, or 89%, compared with the same period a year earlier. China bought more from Brazil and Canada. Yet those additional purchases still failed to replace everything China had lost from the United States. China's total soybean imports during that period ended up nearly 9 million metric tons, or 20%, lower.

Beautiful.

America hurt.

China adjusted.

China hurt America.

America adjusted.

Everyone paid somebody.

And politicians called it winning.

Rare earths tell an equally revealing story. The problem is not new. In 2012, the United States, Japan and the European Union challenged Chinese restrictions involving rare earths, tungsten and molybdenum at the World Trade Organization (WTO). The dispute involved export duties, quotas, licensing requirements and other restrictions. In 2014, WTO rulings found key Chinese restrictions inconsistent with China's obligations. China subsequently removed the measures that had been found inconsistent.

Why did major industrial economies care enough to fight China at the WTO?

Because these obscure-sounding materials sit quietly inside the modern industrial machine.

Nobody wakes up in Baltimore screaming, “Where is my neodymium?”

But people want cars, iPhones, electronics, power systems, defense technology and advanced machinery. Somewhere behind many modern products sits a complicated supply chain involving minerals, magnets, chips, specialized machinery, software, intellectual property and manufacturing capacity.

That is the dirty little secret of globalization.

Countries can hate each other's governments while their factories remain practically married. And the marriage between America and China is ugly, suspicious and argumentative, but it is still enormous.

U.S. Census Bureau figures show that in 2025 America exported about $106.0 billion in goods to China while importing about $308.7 billion from China. That is roughly $414.6 billion in 2-way goods trade in a single year. Even during the first 7 months of 2026, U.S. exports to China totaled about $65.2 billion while imports totaled about $156.4 billion.

Those numbers expose the comedy better than any speech I could write.

Imagine two businessmen screaming, “I want nothing to do with you!”

Then one writes the other a billion-dollar check.

“Still hate you!”

“Same here.”

“Shipment arrives Tuesday?”

“Tuesday.”

That is the U.S.-China economic relationship.

Of course, America should diversify critical supply chains. Depending heavily on a strategic rival for materials essential to national defense and advanced manufacturing is dangerous. China, likewise, has obvious reasons to reduce its dependence on American and allied technology. No serious country should voluntarily place its economic throat completely inside another country's hand.

But diversification is different from fantasy.

The fantasy says America can economically crush China without feeling serious pain itself.

The opposite fantasy says China can economically cripple America and walk away smiling.

History says otherwise.

Supply chains are not light switches. A government cannot spend 30 years building an interconnected global production system and then yell “divorce!” on Friday afternoon and expect a clean separation by Monday morning.

Factories must be built.

Mines must be developed.

Minerals must be processed.

Engineers must be trained.

Customers must be found.

Capital must be invested.

Contracts must be rewritten.

Infrastructure must be constructed.

Technology must be developed.

And somebody must pay.

That somebody eventually includes ordinary people.

The bill arrives disguised as higher prices, lost exports, disrupted production, government subsidies, weaker profits or fewer economic opportunities.

So when I hear Washington and Beijing talk as though economic warfare is a painless game of national toughness, I reach for the popcorn.

America says, “We have the chips.”

China says, “We have the minerals.”

America says, “We have the world's largest high-income consumer market.”

China says, “We have enormous manufacturing capacity.”

America says, “We can find other suppliers.”

China says, “We can develop our own technology.”

Fine.

Do it.

Both countries should reduce dangerous dependencies where national security genuinely demands it. But neither side should confuse resilience with economic suicide.

Because the real contest is not about proving who can hurt whom.

We already know the answer.

Both can.

The smarter question is how much pain each country is willing to inflict upon itself just to make the other country bleed.

That is why I reject the childish picture of America and China as economic enemies who can simply destroy each other and ride triumphantly into the sunset. Their relationship is much uglier and much more interesting. They are competitors tied together by supply chains, consumers, technology, commodities, capital and industrial necessity.

They can weaken those ties.

They can diversify them.

They can weaponize them.

They can even spend decades trying to replace them.

But today, neither side can pretend the other is economically irrelevant.

America needs China, and China needs America.

That may offend nationalists in Washington. It may offend nationalists in Beijing. Too bad. Economics does not salute flags.

And if America and China insist on behaving like two men fighting inside the same lifeboat, each punching holes under the other's seat, eventually they may discover the oldest lesson on the water:

It does not matter whose side of the boat has the hole.

Everybody gets wet.

 

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