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🔋That's Mine
Canada recently blocked Chinese investment into lithium mining companies - a move in line with the US continuing to stoke the US-China trade war.
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The US and Canada have been rapidly distancing itself from China in recent months. China has a stranglehold on the battery/rare-earth supply chain and now we are seeing restrictive policies coming out of the government including export controls and forced divestment of capital. Other than the more direct resource security reason I mentioned, concerns over China’s potential geopolitical conflict with Taiwan, concern about China’s rising share of global trade/influence, and political/ideological differences could be contributing factors to change in heart toward China in recent years.
China became a part of the World Trade Organization in 2001 and since then has blossomed into the world’s largest trading nation. In 2018 under Trump, the trade-war with China began with tariffs on imported goods with the goal to reduce the trade deficit and bring industry back to the US in addition to a concern about intellectual property theft. Under Biden, the tariffs remain and there has been an expansion in export controls in the US and Canada.
Most recently, Canada moved to forbid Chinese investors from developing lithium projects in the country [1,2]. This comes as these western nations have artificially drove lithium demand to the moon with EV targets, lacked domestic investment in certain key natural resources, and are now concerned with China’s dominance in the production and refining of battery materials. Canada is a country more willing to invest in mining and natural resources that the US, however they too are concerned with the geopolitical strategy behind the supply chain of battery materials. It is unlikely in my eyes that Canada would make such a play without US approval or guidance, considering the security threat the US has made for itself (supply chain review mentions national security importance and the word security appears 131 times) and also the incentive for a friend-shoring of battery metals. This potentially pushes China and Australia closer as Canadian lithium is getting cut off.
Prior to that, the US has placed huge export controls on US semiconductors and semiconductor technology.
Furthermore, the US has recently been seizing solar panels from China due citing humanitarian concerns. Realistically, this is quite in line with the export controls and trade war that has been going on regardless of the demand for solar. Ironically, the US has little domestic production of polysilicon so this hurts their climate change goals.
The trade war with China is a bi-partisan movement and reduces cooperation with China. Regardless of whether the country stole any intellectual property, policies like this are net negative for people as trade initiates productive efficiencies in the market and tends to lower prices for consumers. Some people argue that competition is beneficial even if cooperation is not possible. I would argue that good competition is good, however the competition between US/China now is a bad competition. It is one of a waning US power desperately trying to maintain its position as global leader. Reminiscent of the petrodollar agreement and attempts to this day to defend that system, the US not concerned with how to grow and be a better nation itself by focusing on producing more and following its free-market roots of trade and cooperation. Instead, it would rather defend its current hegemony and stop other nations from chipping away at their global status.
The reduction in cooperation by these nations is aligned with the trend of de-globalization, meaning the world is becoming less intertwined with more focus on individual nations than trade. This is a net inflationary force in the world as supply chains that were once secure have to be duplicated, labor costs in developed nations are higher, and especially if any conflicts + ensuing capital destruction occurs. Regardless of the reasons and justifications for the trade war, less cooperation and more bad competition mean higher prices and a worse environment for the businesses and consumers trying to navigate their way through the world being hindered by government conflicts. Furthermore, with a looming demographic and political issues, China could use the provocation as reason to retaliate somehow or work further against the interests of the US [3 (great podcast)]. Until next week,
-Grayson
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