With the Xi-Trump meeting looming and the Iran situation changing every hour, how are China and the US trying to secure their respective interests?
This week, Trivium China Podcast host Andrew Polk and Head of Supply Chain Research Cory Combs break down key dynamics – from:
The evolving impacts of the Iran war and China’s responses
China’s latest supply chain and anti-foreign coercion policies
The US’s ongoing mass-diversification push amid Chinese export controls
US-China strategy as the leadership meeting approaches
And more!
With both Andrew and Cory having just returned from ~6 weeks of travel, they take stock in a wide-ranging conversation – with many questions, but also a few proposed answers.
Transcript
Andrew Polk: Hi, everybody, and welcome to the latest Trivium China Podcast, a proud member of the Sinica Podcast Network. I’m your host, Trivium Co-Founder Andrew Polk, and today I am joined, once again, by Trivium’s Head of Supply Chain and Critical Minerals Research, Cory Combs. Cory, how are you doing, man?
Cory Combs: Doing well, thank you. Good to be back.
Andrew: Yeah, good to have you back on. For listeners, we took a couple of unexpected weeks off. I was traveling and then on vacation and sort of unfortunately couldn’t get all the logistics together for keeping the pod going through all my movements. So, apologies for that, but you got a couple weeks off from us, I guess three weeks, and now we are glad to be back doing this again. So, Cory, glad to have you on to sort of restart here in the spring of 2026. Appreciate it, man.
Cory: Cheers.
Andrew: We are going to talk about a sort of range of things today. Kind of the biggest policy moves out of three, four weeks have been a couple of developments in terms of lawfare, by which I mean China’s ability to use its legal and regulatory system to sort of fight back against U.S. legal and regulatory moves and Western regulatory moves generally. So, we’ll talk about these lawfare regs. They specifically are, one is focused on supply chain security and another is really focused on sort of extraterritorial jurisdiction, the ability to sort of pressure companies that are complying with U.S. and other Western sanctions, and to try to kind of have a counterbalance against those.
So, we’ll get into all that. Then while we’re talking about supply chain issues, we will talk about the latest on Iran in terms of how the war in Iran impacts China with the ongoing disruptions out of the Middle East. We, of course, have talked a little bit about the Iranian situation and how it impacts China, but Cory hasn’t had a chance to really give his advice full spiel on that. So, we’ll get into that. And then we will finally touch on the upcoming Trump-Xi meeting. Cory’s got some thoughts on that he’d like to share. And then we’ll also touch on some pieces on China’s latest developments and efforts on industrial upgrading. A lot of this, so as listeners may know, I was traveling throughout the world. I was in Europe and Spain, and then was in Beijing for a week and then Bali for a week, and then took the long way back to D.C. before being on holiday for a week.
And Cory similarly was kind of around the world, was in Hawaii at a track two type thing, and then some time off in Japan, and was able to hang out in Beijing and Shanghai, and then was just in D.C. last week. So, we’ve kind of both been around. I guess we can use that as a good jumping off point in terms of the customary vibe check. After your whirlwind tour of various parts of the U.S. and Asia, how’s your vibe, Cory?
Cory: Good energized. So, the trip went on a little bit longer than anticipated originally, and partly that was to join some additional activities in shanghai, and then D.C. was a pretty sudden trip as well. We can talk about that in detail if interested but was in D.C. to talk, guess what, supply chains in Iran, but also to join a terrific conference there as well. And getting back, I was definitely pretty exhausted coming back, but it’s only been a few days and pretty energized by it. It’s good to be able to touch base on the ground, see the material realities of a lot of policies that have been going on for a few years now, and especially post-15th Five-year plan, back every couple of months, obviously.
But this has been a particularly significant time of change, and you can feel it on the ground, I think. And then being back in D.C., of course, it’s always good to see, in some ways, how quickly things change and other ways how much nothing changes. So, it’s good to touch base pretty regularly. So, it was a lot to catch up on this trip.
Andrew: Yeah, well, good. Well, I’m glad that you have been to all those places and gathered a intel and had a lot of conversations and are able to share it with me and with our listeners now. Excited to get into this. In terms of my vibe, I also am kind of discombobulated a bit having been everywhere. My last week was down in Tennessee at Dollywood with my family. And so, yeah, we were doing the spring break thing, chilling at Dollywood Theme Park. I can’t recommend it enough. Great spot, like nice middle ground between some of the smaller theme parks versus a Disney. It’s like big, price is right. Anyway, everybody go check out Dollywood in Tennessee. That’s a freebie for those Dollywood folks. So that’s my vibe.
Cory: This is not a sponsored podcast.
Andrew: Yeah, exactly. Maybe we should get a sponsorship. But anyway, I’m relaxed coming off of spring break and glad to be back in the podcast seat here. So, we will dive into it. Of course, though, we also have to do the housekeeping quickly as well. So, a quick reminder to everybody out there, we’re not just a podcast here. Trivium China is a strategic advisory firm that helps businesses and investors navigate the China policy landscape, which includes policy towards China out of D.C., London, Brussels, and other Western capitals. So, if you need any help on that front or on the domestic policy front, please reach out to us at hq@triviumchina.com.
We’d love to have a conversation about how we can support your business or your fund. Otherwise, if you’re interested in receiving more Trivium content, check out our website. Again, that’s triviumchina.com, where we have a bunch of different subscription products, both free and paid. You’ll definitely find the China policy intel option you need on our website. And then finally, please do tell your friends and colleagues about Trivium, both about the podcast and about the company, generally helps us to grow our listenership, grow our business, so we can keep bringing this content to you all.
All right. Well, with that, Cory, let’s jump into it. We’re going to start with these two big docs that came out. So, one came out on March 31st. One came out on April 13th. So, we are recording here on April 22nd. So, the docs have been out, you know, one of them has been out for three weeks. One of them has been out for a little like a week and a half, both related to China’s ongoing efforts to develop its legal toolkit to fight back against Western sanctions, Western “ economic coercion,” and to bolster China’s legal avenues for its own economic coercion and its own sanctions and lawfare toolkit.
So, why don’t you just start by walking us through what these two documents were, what’s in them generally, and then we can talk about sort of why they’re important and what the implications are.
Cory: Yeah, absolutely. We’ll start with doc, let’s start with 834. The State Council is behind both of these documents. The first one’s a doc 834, and the full title is Provisions on Security of Industrial and Supply Chains. This is a State Council of order. So, just again, for those who don’t follow policy too closely, this is a technical term, a very big deal in terms of the kind of level of importance of policy document. And the regulations broadly concern, first of all, they’re tied to the national security law.
And so, this is basically making very clear upfront that this is not just a kind of routine industrial policy document. It is a big capital I important industrial policy document. And broadly what it focuses on is making sure that the state has a very active role in ensuring the security of industrial supply chains. And so, basically, what this comes down to is putting much more onus on local governments and central ministries as well to understand, optimize, and secure the supply chains necessary for China’s industrial upgrading.
Broadly, in principle, this covers all of China’s industrial chains. But looking at a couple of specific things, I’m thinking of Article 7, for example, specifically calls for the strengthening of supply chains “in key areas.” What are those key areas, right? And specifically, it calls for promotion to maintain, and I’m quoting this, “stable and continuous operation of the production and circulation of raw materials, technologies, equipment, products, etc., in key areas.” What we interpret that to mean is, basically, there has been, for decades, Beijing has been very, very forward in a way that the U.S. currently wishes it had been in terms of ensuring raw material supplies.
So, you see this historically in the investments in rare earth elements that people will now talk about how that’s been a decades old process. That started very, very early on. You can trace the roots of that supply chain security effort back to the Sino-Soviet split. I mean, this goes really far back. And then industrial development side, that goes more to the ADs, Deng Xiaoping area, etc. But always there’s been this through line of this is financially not that attractive, but it’s strategically important.
We need to make sure we have these things for military and industrial purposes. So, that has been a pretty consistent through line. And we see it more recently in the modern kind of incarnation, where, for example, and I think I’ve talked about this on the pod before, China is the world’s dominant battery maker, obviously, but also the dominant processor of lithium, which is the key input to most batteries.
But China depends on Australia, U.S. treaty ally, and in Chile for imports of raw spodumene and brine, the things you get lithium out of to process. So, what we saw a few years ago was the state started to push SOEs and other companies to start processing what’s called lepidolite, which is a very commercially unattractive mineral that also contains lithium. Why? Not because it was commercially attractive, but because they thought it was necessary to decrease foreign dependence. This is another example of the state playing a role on the raw material side. So, that’s just going to show this through line, but also more recent action.
And more recently, though, we’ve seen significant disruptions. Obviously, the most notable or at least top of mind right now come from Iran. We’ve published about the helium disruption — post bombing of facility in Qatar. And then also we have sulfuric acid has been really critical. We’ll probably talk about that more in a minute. But these are kind of the midstream things that China needs these to make other things. And then you have the technology side. We’ve seen recently there’s been a conversation, which we’ve been anticipating for quite a while now, that Beijing might become more proactive in trying to limit or curb the export of technologies that give China a leading position in certain industries.
And so, it was batteries. And now we’re looking at there’s been talks in Beijing, not yet finalized, nothing’s happened yet, but talks about potentially curbing the export of certain solar equipment and technologies. And so, we start to see this more expansive picture of what Beijing is viewing as its role in ensuring industrial security amid this grand 15-5-year plan upgrading effort. Many, many components. What this plan does, oh, sorry, not this plan, this set of regulations, this Dock 834, is basically putting Beijing and the ministries and even pressuring local governments as well, municipalities on down the chain, to have a central role in securing all of this.
It is very high level. It is very expansive. And no, this does not mean we’re going, and I just want to be very clear, if that sounded too kind of command economy style, what it means is ensuring the security thereof. Not planning every link and node thereof, but ensuring the security thereof. So that’s where we’re at. We’ll see, I imagine, a lot more granular, detailed policies following out of this. But it’s very clear that Beijing views the world as a risky place and the state as having to take action to secure the ability to upgrade.
Andrew: Yeah, great. Thanks for that explanation. Super helpful. We want to get onto the second document as well. But before we do, I’ve got a bunch of questions already for you just in terms of sort of some of the rationale behind that first document, which first of all, I believe, correct me if I’m wrong, there was a sort of government-linked WeChat account, I think, that kind of came out and said that this is partially sort of related to the disruptions from Iran. I believe that’s where that came from.
So, first of all, for listeners who don’t know, the state council level document, a sort of an umbrella framework. It’s a statement of intent. It’s kind of laying out, this is what we’re trying to achieve. It’s not granular, detailed policy formulation that comes later with the specific ministries in charge of different aspects of this. So, this is highly important, as you said, but it’s very much a signaling mechanism — this is where we’re going. Still, that said, this isn’t the kind of thing that comes out in six weeks or a month. It takes time to put something like this together. But it does seem, like I said, the state was specifically linking this to the Iran situation. So how much of this is China kind of continuing its years-long effort to secure supply chains and all those things versus sort of a reaction to some of the more immediate supply disruptions that we see from the war in Iran. Do you have a sense of that?
Cory: Great. I think it really is a case of both. I mean, the other side of this, I mean, what does it mean to secure supply chains? One of the major pieces here is that the State Council asserts Beijing’s right to push back on any foreign efforts to disrupt China’s supply chains, to put out information that could influence markets in an unhelpful way, right? So, there’s a broad counter-influence operation side of this as well. And so, you can argue that a lot of the supply chain, a lot of the specific articles are in this regulation also amount to an anti-sanctions or anti-foreign influence toolkit.
So, there is the ability, for example, to the regs, sort of the ability to authorize investigations and countermeasures against foreign actions that disrupt normal market operations or impose discriminatory restrictions or anything else that causes “substantial harm” to China’s supply chain. So, you can imagine a hundred triggers for that, many of which start with the U.S. did something, something. And certainly the Iran situation has only accelerated. I think Iran is a prototypical example of the kind of thing that calls for Beijing to be very ahead of the current.
While a lot of the U.S. actions, that’s the tech controls, etc., are probably the more original drivers of a lot of this thinking. But it’s very much a both situation. I imagine regs have been discussed for a lot longer than Iran’s been going on, certainly. But certainly Iran was also relevant here.
Andrew: Okay, well, you sort of anticipated my second question on this, which is also internally, we’ve been kind of flagging this for clients because you said there’s this kind of heavy national security element. There’s this very clear and strong anti-coercion, anti-foreign interference sort of element to this. So that’s one thing when it comes to “government actions” from the U.S. But it’s also the concern, I think, among some of our colleagues is that this can also be more clearly weaponized against individual companies, right? So, the classic example is Micron being in the hot seat for lobbying the U.S. government to put one of its Chinese competitors on a sanctions list. And then, lo and behold, when tensions heat up, Micron gets an investigation in China.
That seems like it’s the perfect kind of use case for something like this, right? For an American or other company who’s trying to influence Western policy against its Chinese competitors, could something like this be used in a weaponized way to go after a company like that? What are your thoughts?
Cory: Yes, I certainly think it could be. On the flip side, I don’t know if this is optimistic or pessimistic, but I think Beijing probably already has plenty of tools to go after companies without this regulation. I don’t think this regulation fundamentally opens new doors. But…
Andrew: Fair. Sorry. Well, before you go on, fair. But I mean, I talked about this a little bit on the pod, my last pod, two or three weeks ago, which in my trip to Beijing, it really felt like this was a separate issue. That officials, their attitude has always been, we have an export-oriented market, get over it. But they kind of didn’t say the quiet part out loud. But in March, especially around the China Development Forum, they were saying the quiet part out loud. They’re saying it more in written documents. They’re saying, “This is what we’re doing. Quit complaining. Our companies are more competitive than yours. That’s why we have so many exports. And we are going to continue to rely on exports.”
And so, part of it, I guess, yes, they have these tools, but making it explicit is still some kind of signal to me.
Cory: Oh, it’s certainly a signal. I completely agree there. I mean, there’s specific pieces on, for example, if Beijing announces, if it formally confirms that a particular government is maligning or harming China’s supply chain or industrial security, Beijing reserves the right to straight up force them not to comply. And that can result in not just fines, not just investigations, but entry and exit bans. They can cut off export and import capabilities. There’s a whole range of very specific and very damaging counter motions that Beijing can take. And it’s a very clear threat to companies — do not support efforts that will inhibit China’s supply or industrial trade security. So, absolutely, there’s a signal there for companies. Don’t comply. Don’t help these efforts.
Andrew: Well, and I’ve said this one a million times, but this just takes us one step closer to what, in my mind, is the inevitable circumstance where some Western company or Chinese company, maybe, gets put in the impossible position where they’re being told by multiple governments, most likely China and the U.S., to comply with two completely incompatible sets of regulations, one of which says, “Don’t do business in or with Chinese companies under XYZ circumstances.”
And the other of which says, “You absolutely must do business and not break off business with Chinese companies under XYZ circumstances.” Or something along those lines. Like, in your mind, is this a step closer to that eventuality?
Cory: Absolutely. And document 835, the second of the two that we’ve put on the table…
Andrew: Perfect segue.
Cory: … is…
Andrew: Go for it.
Cory: That’s exactly what it is. I mean, it’s explicit.
Andrew: Yeah. Walk us through it.
Cory: Yeah. The decree here of the, again, State Council, it’s the Regulations on Anti-Improper Extraterritorial Jurisdiction of Foreign Countries. That’s the full title, right? It’s explicit. Any word that there’s...
Andrew: Love it. Sounds better in Chinese.
Cory: It really does. It really does. That improper is actually a useful word there. There’s certain types of extraterrestrial jurisdiction. It’s basically, again, it’s about optionality. I’ll get to that in a second. But basically, the set of regulations under this decree of the State Council is saying that there are actions that other governments take that say they have jurisdiction over some Chinese interest. If Beijing disagrees, you cannot comply or you will be subject to Chinese sanctions. That is explicitly the purpose of this. To make sure that countries can’t comply with extraterritorial jurisdiction that affects China if China disagrees with it. That’s basically the point.
Andrew: Well, any other thoughts on that second doc, that April 13th document? I mean, you just went through the basics, but other thoughts on what else is in there or other implications we should be thinking of?
Cory: Yeah. I mean, oftentimes we think about these kinds of policies in terms of what’s the biggest impact it could have. And, of course, that’s the most important top line question. But underneath, what’s the logic of the policy, I think is the second most important question. And in this case, I think what’s really interesting to me is the degree to which China, I would argue more so than some of the previous documents around like the Anti-Foreign Sanctions Law, this document is very heavy, in my view, on ensuring optionality. Basically, it provides Beijing multiple off ramps and on ramps to deciding when and where a particular action is harmful to China, when it’s going to crack down on companies complying, and to what extent.
And so, for example, there’s a call for, I just want to make sure I get the detail exactly right here, I believe it’s a working committee. I want to make sure it’s indeed a committee — Oh, a national working mechanism. There we go. A national working mechanism to assess whether a foreign extraterritorial jurisdiction claim is or is not improper, to assess and they have to announce whether a particular effort is something they can command companies not to comply with. And then at that point, there’s actually a process by which companies, if they’re told by the Chinese authorities — you cannot comply with this foreign regulation — if they’re told they cannot comply, those companies are allowed to go.
There’s an explicit mechanism that says you can go to Beijing and explain why you absolutely have to comply and why Beijing should make an exception for you. The document itself, the regs themselves, provide Beijing the option to say, “Go ahead, you are approved to continue to comply with this thing that we don’t like,” or “No, you can’t.” There’s an actual review process there. And I think that’s another level of, it’s not just optionality of whether or not Beijing chooses to investigate.
There’s another level there that says, maybe, I’m trying to think of good case studies off the fly, I think there’s a thousand in the tech case, obviously, but you could send a signal such as we’re announcing that this is an improper exterritorial jurisdiction claim. Company says, “We have to go,” and they’re like, “Okay, we’ll let you for now.” And then starts direct diplomacy with that country or direct negotiations with that country.
This is really interesting in a couple of levels of the most important of which is what’s weird about, to me, maybe it’s not weird to the international lawyers who are used to this, but what’s interesting to me from a policy standpoint is, what this policy does is basically, at the end of the day, you’re using companies as your leverage. The way you hit back against the other country whose actions you don’t agree with is by saying you’ll punish their companies. Now it’s creating a carve-out that says, “But sometimes we won’t punish the company if we feel like not punishing the company to give ourselves leeway to negotiate, to go through other fora,” right? If it thinks it’s possible.
That said, again, so I think there’s an optionality there in terms of if that company in particular is too important to some Chinese operation or investment, or whatever it is, Beijing has the choice of raising a ruckus without screwing that particular company, but it can always fall back on using that company as the point of leverage saying, “We will harm this company if you don’t do what we want.” So, it’s an interesting kind of optionality there.
Andrew: Yeah, that is interesting. I will say like companies hate this kind of stuff.
Cory: Oh yeah. Oh, it’s bad for companies. Like there’s no…
Andrew: Well, I mean, it’s certainly bad, but it’s also just the uncertainty and like kind of not knowing where you’re going to land a lot of times. If something’s off limits, you can find ways to sort of either find a workaround or an alternative or whatever. It’s when you’re not sure whether or not the law is going to be applied or how it’s going to be applied that makes it difficult. I think, you know, a lot of our clients, companies who we work with, a lot of them are people who work on these issues, have been doing China stuff for a long time.
And a lot of times they kind of say exactly what you said earlier, which is like, it doesn’t really matter what the regulation says. They’re going to find a way to ding us if they want to. Although I will say it is interesting that they have this mechanism laid out. And my sense is actually that the regulators are trying to be more adherent to at least the letter of the law…
Cory: I agree.
Andrew: … and the letter of the regulation when it comes to this stuff to say to companies like, “Hey, if your home country does something we don’t like, we are going to use your leverage and we’re going to try to fight back against that regulation. But we’re going to try to do so in a way that’s within the parameters of something that is reasonably predictable and has a legal process.” And again, cold comfort to a lot of companies, but that seems at least like a step forward. I don’t know.
Cory: Absolutely. And I think, you know, I don’t want to overstate how much of a trade-off this is, but there are tensions in China’s own strategy. One is, as it’s trying to upgrade its economy and kind of transition to this new era of economic model, it needs to protect its ability to operate the way it wants to operate in terms of exports, in terms of its domestic subsidies and everything else not being borrowed from various markets, you know, it needs in terms of to achieve its objectives. Again, I’m not making a moral argument here, just a practical one.
And so, it needs the ability, or it views itself as needing its ability to push back on these foreign policies. At the same time, it made very explicit that it needs foreign engagement. It needs foreign companies support, not just as total amount of FDI, but the term strategic partners has come up multiple times. China needs strategic partners, foreign companies. And those are the types of companies who can come in, can invest, not only in terms of just pure kind of renminbi value, but in terms of technology, in terms of capital, in terms of operational and organizational knowledge.
Like, how do you actually make something efficient? How do you build out a biotech industry? That’s difficult. And that’s not just a matter of throwing money at it. And so, there’s this interesting, and again, I don’t want to overstate how much the weights are definitely unequal here, but the ability to push back on countries largely revolves around what I would, you know, in a technical sense, call optionality for Beijing, but from a practical standpoint is weaponized uncertainty for companies, while also trying to make sure that China is an attractive enough partner to attract strategic partners, such as it needs. So, there’s an interesting kind of tension there.
Andrew: Yes, actually, speaking of tensions, I want to circle back to the supply chain stuff. I want to move on to some other things on the supply chain kind of outside of China from your conversations around the globe. But before we do that, the one other question I had to ask you about that first document, the March 31st document from the State Council that was specifically on securing supply chains, was you mentioned there is some language in there around potentially restricting certain exports to maintain supply chain security within China.
And I had a question from somebody who was asking about like, why if they have such a export heavy model, would they be talking about restricting certain exports? So, that’s also a potential tension, but I’m interested in what your thoughts on that would be.
Cory: Currently, I see no signal that Beijing would be interested, for any real reason, to restrict a significant value, you know, in terms of total value of exports. We’re not talking about cutting off batteries to the world. I mean, that would be catastrophic for Beijing’s own interests. What we’re talking about really are generally speaking two things. There might be some edge cases I’ll think in a second. But the main two things — one is very simply as a punitive measure. So, one of the measures, there’s a series of measures that State Council claims the right to take against actors who interfere with and whatever the way they deem interference with industrial supply chains.
One is fines one is restrictions on the ability to move people or data or goods and services. So, that’s the trade component. So, that would be very specifically If you screw up, you’re not allowed to sell out of China. That’s a huge hit, right? So that’s a punitive measure. We haven’t seen that happen, but that’s a claimed authority. Now, the other is really in terms of, and this is much bigger than document 834. This is going back years. There is a standardized catalog of technologies that are prohibited or restricted for exports.
And specifically, what that does is, and so for example, what’s on there? The very best cathode technology. The stuff that is barely even commercial, but is the theoretical cutting edge. Two is rare-earth processing technologies, which were restricted from export in 2021. This goes back before the whole export control battle broke out. And a large part of what that is to make sure that certain technologies that are particular pillars of Chinese value creation don’t just get sold off to the highest bidder.
That’s what that is. That’s the export of technologies, typically, and some equipment, which are usually very specific tech. So, those are the main two ways in which we see actual restrictions. Other things would be much more niche. Or I guess the third piece is in case of emergency. And so, with the Iran war, there are certain impacts, let’s say. China has restricted the export of certain petrochemical products to make sure that domestic industry has enough.
And again, back to this whole point of China’s top priority, Beijing’s, the central government’s top priority, is making sure that the rest of China’s industry has whatever it needs. And if it needs petrochemicals, it will make damn sure that domestic industry gets those petrochemicals before the highest bidder outside. That’s not how it works with U.S. oil and gas. That goes to the highest bidder. That’s not what Beijing is allowing. Sulfuric acid, that is really the top processing input alongside hydrofluoric acid. or sulfuric acid and hydrofluoric acid, the two mains.
You do not get to process copper. You don’t get to process really molybdenum, manganese, any of your battery materials, nickel. You don’t process any of that stuff without sulfuric acid. So, what is Beijing doing? Saying that as of May 1st, we’re going to make sure we have all that sulfuric acid that we need because it’s being disrupted by flows through Iran, through the Strait of Hormuz. So that’s another example. In case of emergency, Beijing will temporarily lock things off just to secure domestic industry.
Andrew: Well, let’s lean into that topic a little bit more then. Talk to me about what else you’re seeing, if you want to talk more on the sulfuric acid piece, I’m sure listeners would love to know your thoughts there, but what else? I haven’t gotten your full rundown on what you think the supply chain impacts are on China from where we are currently in the Iran war. And I know that the ceasefire is up and down and on and off. And so, you know, who knows kind of how it’s going to resolve.
But just based on the information we have as of today, 6:00 PM, basically April 22nd, just give us your rundown on how China is thinking about where we are and what the impacts are.
Cory: Yeah, the impacts, I mean, it really depends where you’re looking. Broadly, I mean, China has been able to maintain a certain amount of Iranian supply. A lot of that has been relabeled shipments that were hanging out off the coast of Malaysia and Indonesia. We know this. It’s kind of not even an open secret. It’s just kind of reported now. Then you have some of the specifics — urea, critical to the ag industry. You have various other acids. You have sulfuric acid as well.
And so, one of the major pieces here is sulfuric acid’s role in fertilizer. There aren’t many policy areas that Beijing takes more seriously than economic security and energy security. Food security is one of them. It’s like food security in Taiwan, basically, in terms of things that always reign supreme. And sulfuric acid has an input to the fertilizer industry. That is absolutely critical. I think that’s why we’re seeing such a dramatic response in Beijing. There’s other things. Aluminum is being hit. There’s an appreciable, it’s high single digit, low double digits of total supply.
It’s not earth shattering necessarily. It’s certainly going to be expensive. Beijing has not been shutting down its aluminum exports. Why? Because that’s not food security. It’s not broad industrial security. It’s a price hit. It’s really unfortunate. And also, China has a lot of its own production as well. So, there are mitigants, there are lower stakes. But when it comes to certain things like the petrochemicals for industry, Oceania is going without a lot of Chinese petrochemicals, right? Australia, New Zealand being hit very, very hard. Other countries being hit very, very hard because China’s kind of maintaining those refined products for home to a certain extent.
And the acid piece is similarly. I think it’s a case where you see both where Beijing is probably congratulating itself on, one, managing and mitigating its dependence on overseas oil and gas in general. Like certainly it does still have dependencies, but you look at an industrial economy the size of China’s, and it’s staggering the sense which they’re not even more dependent on oil and gas. And specifically, they made sure they’re more dependent on coal and coal chemicals, right? Because that’s what they have. That’s a natural resource availability.
And so, they built around that for decades. And this is an example where it pays off And I just want to emphasize one thing because sometimes this kind of energy and industrial security argument, energy supply chain, industrial supply chain argument can come down to, well, for countries that have oil and gas, it’s okay. The same way that for a country like China that has coal, it’s fine. That’s not true. The issue with oil and gas markets, they sell to the highest bidder.
So, the U.S., for example, has plenty of shale gas. It has oil, but it’s selling to the global market. And so even though the U.S. does not have a supply shortage because it isn’t dependent on Gulf materials, it certainly imports some, but it’s not dependent in the way many countries are, Americans still feel the energy price inflation because the price goes up because everyone’s trying to get it, right? That’s not how coal works in China, right? Because it’s a domestic resource that a government that is very interventionist has basically state-managed the energy dependence.
So, that coupled with a lot of the other supply chain pieces of a lot of the upstream minerals, everything else that can be disrupted, this is the prototypical case of an exogenous shock that China is not responsible for, that affects China, and it is faring better than most countries and certainly better than any other major industrial economy. That said, certainly it has chinks in the armor, gaps in the walls, however you want to put it, and sulfuric acid is just one of them. Urea is another one, et cetera, et cetera.
Andrew: And so you’ve alluded to this already or your thoughts on this, but how do you think Chinese leaders are thinking about the situation? The word we used, I think, before was justified in kind of their approach in terms of resource security, stockpiling, all that stuff. And if so, might their calculus be changing as this thing drags on? We’ve already seen them become much more proactive in the negotiations hosted by Pakistan between Iran and the U.S. we’re hearing that China is very involved in getting the Iranians to the table.
And Xi Jinping, just a couple of days ago, kind of officially said, “All right, boys, it’s time to open the Strait of Hormuz.”
Cory: The straits should be open.
Andrew: Yeah.
Cory: I love the use of passive voice in a lot of Chinese… it’s great.
Andrew: Yeah, yeah, yeah. I don’t know. Talk to me about all of that. How’s Beijing feeling and how might its calculus be changing as we wear on?
Cory: Yeah, I mean, on the material side, I think it’s, on one side, you have to kind of note how comparatively resilient China is because of all the efforts taken by Beijing. And I would note there’s this distinction, sometimes we talk about stockpiling, the great thing about dominating tip to tail a lot of production lines is that you don’t have to stockpile if you’re producing everything domestically. If you pull the resource out of the ground domestically and process it domestically and use it domestically, you don’t have to stockpile that much.
You do have to stockpile, obviously, the things that you don’t have access to, like the acids. So, there’s that element of it. On the flip side, it still hurts. We cannot kind of use that point to underestimate or to understate the impacts on the economy. Certainly, this is still painful. And Beijing, I think like everyone has an active interest in freeing up supply of food and being able to make better use. I mean, currently you have low utilization of the refineries, you have a massive hit to export value, just because they’re having to keep things domestically for security purposes. This does hurt.
And Beijing, both for material and geopolitical reasons, has an interest in this ending. Now, there’s the whole geopolitical side as well. Can China come in and bolster its credibility as a peacemaker? All that stuff that is really less in my wheelhouse, and others have much more intelligent things to say than I do on that. But I think all those things point in the same direction. Beijing can weather the storm, but it would prefer not to have to.
Andrew: Yeah, I think that’s well said. Okay, well, let’s talk a little bit more about the supply chain response. We’ve talked a lot on this podcast about the Western response to Chinese moves on the rare earths piece. I’m sure folks in Washington and other capitals are looking at the latest supply chain document out in March in the anti-improper lawfare document from mid-April and thinking about how China might weaponize those and how Western countries and companies should be reacting.
Give us some highlights from your conversations over the past few weeks on where you think things are in terms of the Western response in terms of its own supply chain securitization vis-a-vis China.
Cory: Well, there’s a bunch of different things to touch on now. I think one actually that might just be the most interesting starting point, and tell me if this works for you, is looking at the progress that the U.S. and others have versus have not made in just general supply chain diversification. This is relevant in a couple of ways. One is it’s, broadly, it’s the response to China’s own export controls on the U.S., and that obviously affect the rest of the world, largely its collateral damage. It’s also become the centerpiece of Western industrial policy, really.
And it’s largely pulling from the Chinese playbook in terms of how you pull it off, which has some issues when you have a policy that works very well in the Chinese context and then apply it to a non-Chinese context. But it also has different issues when it’s a multilateral effort opposed to a unilateral effort. It also has issues when it’s a multilateral effort between a U.S. that has exhibited certain behaviors that do not support necessarily an amount of trust needed for certain investments. So, I’ll be less coy about that in a minute. I’m trying to be diplomatic, but I’ll be blunt here in a minute.
Andrew: Yeah, I can tell you’re choosing your words very carefully here.
Cory: Yeah. For those unaware, which I think is very few people, but just in case, Iran hit at a time when the U.S. is still frantically trying to shore up its own supply chains. A dozen different supply chains, critical minerals, everything from tungsten to rare earths, magnesium, all kinds of other stuff. Everything’s been hit by Chinese export controls and more. A lot of its efforts to do that revolve around, one, obviously the immediacy of trying to shore up supplies that have been decreased and made more expensive.
Supply has gone down and prices have gone up, I guess Chinese export controls. But the other is to try to lessen Beijing’s leverage. To the extent that you can diversify, China has less leverage. And so, you are less beholden to the impacts of your certain policy decisions or the consequences thereof. So, that’s been ongoing. The thing is the Trump administration has come around to the understanding that you cannot do this alone. This cannot be American investment in American companies using American resources for American security. It does not work that way.
The U.S. does not have the material on the ground. It doesn’t have the processing capabilities. It doesn’t have enough money even. And it doesn’t have the technical talent or technology in many cases to do this stuff alone. It just doesn’t. It could in a decade, maybe, maybe 15 years, but that’s too long to wait for the strategic objectives right now, which are fix the supply issue, decrease China’s leverage. That’s what you want. You can’t wait 15 years, 10 years, whatever it is. So, it’s come around to the idea of we have to work together.
And you see this demonstrated in three main initiatives. And these are not the first time that the U.S. has tried to rally the troops, so to speak, of international partners around supply chains. The Biden administration had the Critical Members Partnership, which was announced with a bang and never heard from again, partly because the impetus just wasn’t there. Now the impetus is clearly built effectively. And we see that we have three core programs or mechanisms. One is Pax Silica, which is an effort to work with a very specific set of allies and partners around basically semiconductor production chains from silicon all the way down to chips, right?
That’s what Pax Silica is supposed to be about. It’s a very niche operation run by a very specific office that is basically, I don’t want to say a one-man show, but it’s understood that this is the brainchild of a particular individual who is just going at it. Then you have these much broader initiatives. You have Project Vault, which effectively, it’s many things, but at the end of the day, it’s basically a US effort to build US-controlled stockpiles, strategic reserves that it can maintain critical supplies and release that need. Basically, trying to stockpile things that have already been disrupted, include gallium germanium, also include a bunch of other metals and other stuff like that.
And I’ll get to the difficulties of that. The third piece is FORGE, which is an acronym for or backronym in this case, but basically it’s a forum trying to get together dozens and dozens of countries to agree to work together on supply chain diversification. Secretary Rubio, Secretary of State, also National Security Advisor, had pulled together a whole bunch of countries. I think 50-some showed up, which is impressive, basically saying, “We,” i.e. non-Chinese countries, “need to band together to counter the threat that is China. China has cut off all of these resources. It has put the world in danger in terms of supply chains, industrial security, etc., And we have to solve the problem together.”
Now, that sounds great from the US perspective, I suppose, but for most other countries, what I imagine, I’m going to say this is my view, what I imagine is heard is the country that is co-equally responsible for the mess we’re in is now saying, “It’s all the other guys fault. Please work with me. You can trust me.” Now that it’s not just an optics and political game. It’s very practical. One of the questions is, did the U.S. understand the implications of its own actions when it took certain strategic decisions that inevitably led to Chinese retaliation? We didn’t know exactly what form the Chinese retaliation would take, but we were pretty confident it would do exactly what it said it would, which is hit back in a material way.
If you take certain actions undermining Chinese interests, they were hit back materially, probably through export controls and other things that you’ve talked about before. Som from a partnership standpoint, you have to ask, is the U.S. calculating that using us, the rest of the world, as collateral damage, is worth it for its strategic objectives to take those actions? Or did it not understand the strategic context and actual trade-offs that were relevant to its own decisions? Because either way, you probably want a very clear answer to how the U.S. is strategizing and taking actions before you tie yourself to it.
And this comes especially a salient point when it comes to stockpiles. Do you trust that any country, ally or otherwise, is going to release reserves when it suits your needs or only when it suits its own, especially when the context is basically, and I think I’ve said a version of this before, the context is basically the top priorities for stockpiling are the things that are already disrupted? Which means, by definition, there’s not excess supply in the system. Everyone’s using as much as they can get because supply is so short.
Andrew: So you’re adding further supply pressure.
Cory: Exactly. And specifically, you’re asking countries to either supply their own industry right now when they need it or send it to a foreign stockpile. that’s a heck of a trade-off, right? And that’s a decision I would have and I have a lot of confidence and trust in. And to have that trust, I think there’s a fair ways to go before there is that trust. So, this is not me trying to naysay or be a doomsayer or whatever it is. I’m saying that there are very practical strategic considerations behind whether or not the actors that the U.S. needs to work with will work with it. On the flip side, and I’ll wrap up here because I’m monologuing, but there actually has been quite a bit of progress on the commercial side in terms of particular companies investing in new projects.
That is good. It is worth singling out for recognition that specifically a lot of companies, I’m thinking of a few, and I’m trying not to endorse a company here, but there are several companies that have recognized the need for working with international partners.
Andrew: We already gave Dollywood a shout-out.
Cory: That’s true.
Andrew: So, feel free to go for it. We’ll see if we can get some sponsors from this podcast.
Cory: Oh, man. But no, this is truly my analytical hat on. I had the privilege to speak, to be on a panel with the CEO of USA Rare Earth, Barbara Humpton, last weekend in D.C. And what struck me about that conversation was seeing the full length of the logic in terms of, yes, building up U.S. supply chains, but I think there’s been a big shift in the industry’s understanding of the necessity of working with other countries. So, you see the acquisition of a UK metals company, you see working with a French government now, not just the U.S. government. This is a company that is getting support from the U.S. government, working with the French government, is going to be working with other governments. That’s something that the U.S. government itself is having trouble coordinating in my view, or at least has not.
Maybe it’s making progress behind closed doors, but we haven’t seen that much of it yet. But companies are navigating that. That’s what Lynas did, what’s part of what made Lynas so successful. And then you have the tungsten side. We have Sangdong coming online in South Korea. That’s a North American company working in South Korea. And so, I think there’s a role where the companies are making more progress in terms of really internationalizing the problem in a way that’s productive.
But again, there’s a key issue here, which is that what makes China’s supply chain security so strong is not just that it digs the stuff out of the ground. It’s also not just that it processes things. That’s the bottleneck of the West. It’s that it has the offtake too. It has guaranteed offtake from all the domestic suppliers. All the stuff that’s coming online by U.S. aligned or Western actors, who is it going to be sold to? So, much of it will go to DOD and the military and other militaries.
Great.
What about the rest, right? The cost implications are huge. These supplies will cost more than any Chinese supply. So, to the extent that China trickles out, whatever it allows to go through, that will be purchased first. So, are you going to be a company, a downstream company, maybe you make a battery or something in the U.S., are you going to sign yourself up for a long-term contract with massive amounts of offtake of something that costs two, three, four times what the Chinese supply cost? The government will do that. The Japanese magnet makers might do that with government support.
Not many other entities are doing that. And also, the downstream industry is just not robust enough in most of these cases to really support the level of investment in the upstream. So that is an ongoing issue that the U.S. really has to figure out and its partners as well. Until the economic case is clearer, you have a bit of a chicken and egg problem. Companies are waiting for more supply to become cheaper. The suppliers need more customers to have that revenue security, revenue guarantee, those long-term contracts.
It can’t all be government support. So, we’re seeing movement on the private side. We still have a bit of a chicken and egg problem there. And government support is theoretically a solution. They’re moving toward it. But there are still these very practical geopolitical differences and trust gaps that I think are holding progress back.
Andrew: Yeah, well, we’ll keep tabs on it. I’ll throw this out as a somewhat organic plug for listeners. Cory is tracking basically any commercial deal that is happening anywhere in the world on the critical minerals front and helping clients wrap their minds around where the supply and demand dynamics are changing, which new projects are viable, which are not. We’re helping a bunch of clients with this. So, if this is, in any way, of interest to you, reach out to us. That email again is hq@triviumchina.com or you can email me at ap@triviumchina.com. We’d love to talk to you about this stuff because it’s hugely important. It’s massively consequential both for China’s economy, for the U.S. economy, for the global economy, and for the companies that are involved. You’re doing some really cool work on that.
So, I just had to make a plug for it generally because of your good work. And also, you know, if we can make money doing it, of course, that doesn’t hurt.
Cory: Well, I’ll say, it’s an interesting context in the podcast, because as you can imagine, I mean, a lot of this stuff, there’s a lot of speculation in the market. And so, part of the conversations I’m having, which are obviously not something we’re broadcasting all the outcomes of right now. But we get questions like, for example, “Where exactly is Indian phosphide coming from? And how do we plug our specific gap?” And then you have these huge questions. What is the role of Southeast Asia?
That’s a huge question, right? So, from the very big picture to the very minutia, we are kind of across all those things. And so, it’s hard to fit all that into a podcast format. If you’re listening to this and like, “I have questions that I’d like to discuss, but I’m not sure it’s at the right level,” We’re probably there. It’s just a little hard to fit into the podcast format. So go ahead and get in touch and we’ll see if we can have a conversation.
Andrew: Yeah. Awesome, man. I love it. Well, speaking of the critical minerals piece of this and rare earths, that obviously is one key element of U.S.-China back and forth, negotiations, tensions, deal-making, etc. We got this Trump-Xi Jinping meeting coming up in about, what? Three and a half weeks. I know you had some thoughts on sort of the stakes of that meeting as they currently stand and just how people should be thinking about that. So why don’t you walk us through your current thinking on all of those dynamics?
Cory: Yeah, there’s a few pieces here. The first is this level of meeting is always important, right? There’s no questioning that. But I do think there’s a unique degree of importance to this particular meeting. There is so much commercially, diplomatically, multilaterally, I think that is just weighting. I think there’s a lot of waiting on the signal. What comes out of this? There’s a lot of questions around, for example, will the first meeting between Xi and Trump come with an agreement to postpone the October 9th controls even further, right?
That’s a good question, and that would be a great outcome. But I really think, more fundamentally, the first question is, I don’t want to be flippant and say it’ll be a success as long as they don’t get in a fistfight, but the real floor for me is, do they agree to meet again? That to me is the real major outcome. Like, hopefully we can do more than that. That is a very low bar, right? But if they agree to meet again, what I think that does is send the signal to both bureaucracies and more to the point to the rest of the world that maybe we’ve reached a floor and maybe we can start to move back to more constructive engagement. Now, why does this matter?
It matters because it changes the nature of the geopolitical risk that everyone’s facing. It changes the expectations of the government’s perception of risk, right? And so, if things go south or they’re not meeting again, what happens to supply chain risk? It goes way up again, and suddenly you’ll probably see a lot more funding for various projects. And on the flip side, if you have a bit more sanguine view coming out of the meeting, basically saying, “Hey, we’re going to meet again, we’re going to make things work, we’re going to figure it out,” the irony is that I wonder if the decreased sense of risk around Chinese supply chains will actually disincentivize a little bit more some of the willingness to pay more for non-Chinese supply.
So, there’s this other dynamic that the governments are very well aware of this. They’re also thinking through, how do we both give general commerce the sign that, hey, we’re good to go, do business, make deals, things can be good, but also not undercut the sense of risk that is driving this diversification effort? And there are, I don’t want to say polar opposite interests, but there are certainly tensions there. So, that’s an interesting piece. More broadly, I mean, that’s just within my little wheelhouse of supply chain stuff.
But more broadly, I’ve just been shocked by, I’ll speak very abstractly here, but how many different things are just waiting on this meeting, waiting to see how both leaders respond. It’s staggering. Now, the last piece I want to note that I think is very promising, I think it’s a good sign on the Chinese side, is I think Beijing, there’s about a dozen reasons I believe this, but I’ll give one reason why I believe this, I believe Beijing has a much clearer sense of U.S. policy where it is and is not intending to harm China. I think previously a lot of U.S. actions were taken as very deliberate, malicious actions where, in many cases, I think genuinely there was a the misunderstanding of the impacts.
I think sometimes, I mean, some of the tech control is very obviously aggressive toward China. BAS is not clear that that was really the White House’s intent. And so when we’re asked what could derail the Trump-Xi meeting, one of the first things that comes to mind is new tariffs, new things that affect Chinese trade heavily. And so, you see in this context, the emergence of the post- IEEPA tariff authority recovery efforts, basically new Section 301s, Section 232s, that basically the White House is trying to reproduce what it had claimed under the IEEPA tariff authority.
And so, there are two scenarios. One is Beijing sees all these new investigations, 232s, 301s and others, and says, “Oh great, the US is attacking your interests again. Let’s hit back.” That’s scenario A. Scenario B is like, they actually understand that this is not a US escalatory effort. This is an effort by the US or by the White House to basically maintain the playing field of what it was and just replicate an authority that it just lost. And I think that became very clear during my trip that that is the interpretation.
And so, Beijing had to send some signal back of its displeasure with the 301 and 232 investigations. But it did so in a way that basically doesn’t materially affect the U.S. I think that was very intentionally done. I think that is a signal from Beijing that they understand the U.S. side was not being escalatory in this particular case. So, China will not be escalatory in this particular case. We’re going to keep things level. That I think is promising in terms of interpretation.
Andrew: So that’s interesting. First, I want to follow up on that. But first, I wanted to press you, when you said a lot of things are waiting on this meeting, did you specifically mean on the U.S. government side, like actions are I know you can’t be too specific, but basically everyone in the government sort of waiting for this meeting to happen before they can proceed on other China focused policy out of the U.S. side? Is that generally what you’re saying?
Cory: Yeah, I think there’s a lot of engagement between commerce and government as well. Commerce is not the department, but the commercial world and industry. And I think it’s not clear what the boundaries are. For example, can you have American companies licensing Chinese technologies in the non-tech spaces? Those conversations are basically on hold, basically, until, you know, practically, among many other things, exchanges, visa issues, all that stuff is basically waiting, yeah.
Andrew: Okay, cool. Well, sorry, I had to deviate there for a second. Do a little excursion, as Trump would say.
Cory: Oh, God. No excursions, Andrew.
Andrew: But I wanted to pick up on the piece you were just talking about, the IEEPA thing, I mean, my sense has always been like, yeah, Beijing understands that if the USTR uses these 301s to get back to the IEEPA level, of course, that’s not an escalation. But if you’re Beijing, you still want to press that advantage. You might not react out of a huff or whatever or feel like, oh, we absolutely have to be retaliatory. But if I was Beijing or I was in Beijing, I would do the exact same thing and say, “Nope, those have gone away. If you raise them again, then it doesn’t matter. That’s still a new provocation and we’re going to hit back.” Why not press that advantage? Even if you’re thinking about it slightly differently, I don’t know, what do you think?
Cory: There is a world in which that could happen and I think that’s a more dangerous world.
Andrew: Yeah. I mean, I would at least try to press. I think they feel like they have an advantage with the IEEPA tariffs being shut down. Although the follow-up as well that I wanted to ask you is I also don’t really think that Beijing cares all that much about tariffs anymore. I kind of feel like...
Cory: Yeah, I think at this point, it’s more of the principle. It’s about the principle.
Andrew: No, no. But what I’m saying is, in a way, that could be even bigger reason to retaliate. Because actually, we don’t give a crap about your tariffs. We realized we can live with them. It’s not a big deal. And so, in fact, even though we’ve moved on and what we really care about is the supply chain security, we’re going to play hardball on this thing that doesn’t really matter anymore. Because now we can either extract concessions or focus political will on this issue that we don’t really care about, right?
Cory: Yeah.
Andrew: I mean, I don’t know.
Cory: There is that. I think the trade-off, and this is where we start to get more speculative, but I think the trade-off is if you think the response would be a cancellation of the Xi-Trump meeting, if you really want that meeting to happen, you don’t do that. No one who says they understand Beijing’s thinking about this does, like we don’t know exactly what Xi and his advisors are thinking about the meeting per se at this level detail. But I would imagine that number one risk of that kind of hardball approach is that Trump out of, probably out of pettiness, just backs out of the meeting.
And if you think that has more potential harms or takes opportunities off the table that you wanted to pursue, is it worth it to play hardball? What concessions could you get that are better than you could get out of negotiating directly with Trump, especially if you think that Trump, at some level, wants to cut a deal with Xi? Could you get more concessions out of that meeting than you could out of the hardball? I think that’s probably one of the questions at hand. Obviously, I’m not in Zhongnanhai, but I would imagine conversations, at some point, that was one of the pieces of that conversation, I imagine.
Andrew: Okay, well then, as long as we’re being speculative, one more speculative question.
Cory: Sure.
Andrew: I mean, I think Beijing wants the meeting to happen for sure. They want some stability, they want the rules of the road. But I could foresee a circumstance where they were willing to push and let the meeting fall apart. I guess the question is, being speculative, who do you think needs the meeting more right now?
Cory: Yeah, I think Trump needs it more in the short term. And this is where my question becomes, what is Beijing’s long term objective, like not long term objective in terms of economy, we know all that, but what does it want to get out of this meeting and the relationship with Trump that will benefit China’s long term interests? Is it, if we’d open, would welcome your speculation on this point, I think Beijing’s actions clearly indicate one, they want the meeting, right? Two, that implies they can get something good out of it. They wouldn’t care otherwise.
So, my question is what exact… I’m sure listeners are bursting with like, well, it’s obviously this. There’s a thousand possible answers. We’re not ignorant of those answers or those possible answers. I’m not sure which it is though. I’m very curious, what do you think?
Andrew: Well, I mean, I’ll channel Sean Stein, our good friend and president of the US China Business Council who regularly says, and I totally agree with him, they want stability. They want stability first, second and third. So, a lot of this is just about kind of having an ongoing dialogue, generally being on the same page that we’re trying to agree on something, working towards some longer term negotiation. I don’t know that there’s like a specific thing at this point, frankly, that they’re trying to extract. I think they’ve got the tariff levels down to something they can deal with.
I’m sure they would love a rollback of tech export controls, semiconductor export controls, but I think that’s like an understatement to say it’s a reach goal. I think it’s not something they’re actually thinking they’ll get, but like they’d love it if it happened to, Of course, we’ve talked, you know, maybe some adjustment on language on Taiwan. Again, I think it’s not something that they’re going to push that hard for or in any way expect, but they’ll take, of course, whatever they can get.
I think it’s as much about the meeting and stability and kind of a general set of principles as anything. And so, in that way, it’s almost back to the Biden-esque Xi Jinping meetings, which was the meeting is the deliverable in a way. But I could also argue because of that, there’s not that much they’re going to get from it. So, if they really get a thumb in their eye, they would be willing to walk away. I don’t know.
Cory: Stability to what end is always the question. I mean, if really like we want to...
Andrew: I think it’s buying time.
Cory: It’s buying time. Yeah.
Andrew: Right. We’ve gone over this many times in this pod. They think time’s on their side. They think they can close a semiconductor gap more quickly than the U.S. can close the rare earth gap.
Cory: I think it’s right.
Andrew: Yeah, I agree. Stop poking us. Let us buy some time. Let us see if we can get the tech piece before you get the supply chain and rare earth piece. And then we’ll be even more. Or we, this is what I think they’re thinking, then China will be even more in the advantage, but we’ll see. Of course, we’re being speculative, but I think we’re trying to channel how we think both sides are thinking about it. Listen, we’re already pretty far on, so let me give you one last chance of any final thoughts on any of this, if there’s anything you want to leave listeners with.
And then we’ll just unfortunately have to hold the industrial upgrading piece. I know you had some thoughts on that, but let’s keep that. Keep the listeners coming back. We’ll do another pod with you again soon and make sure to get those thoughts out there. But anything, any last kind of final thoughts for everybody?
Cory: Yeah, I think, I mean, the other piece of this is, it’s not just a U.S.-China story. I mean, the whole world is watching and waiting to see what happens. I mean, the world broadly, I mean, so many U.S. allies have been directly affected by the impacts of the closure of the Strait of Hormuz. And so, as China has, on one hand, withheld certain petrochemical supplies, that directly damages huge swaths of industry, even among American allies, that it presumably cares about. And the flip side, China’s also trying to help hasten the end of it.
So, there’s that dynamic. And then when it comes to Xi Trump, I mean, stability between U.S.-China is presumably good for the U.S. and China, but it’s really, really important for the rest of the world too. So, those dynamics too. I mean, I wonder how Beijing, and to what extent, I think generally speaking, I observe more consideration for the rest of the world from Beijing than I do from D.C. as a general matter of course. And I think in this case as well. And I have to wonder, not to add to speculation upon speculation, but how they’re viewing the outcome of this kind of period of U.S.-China relations, how does it make China look to the rest of the world?
Certainly, we’ve gone through all the kind of, honestly, some of the stale rhetoric of China looking like the responsible actor and everything. But in more practical terms, what type and what extent of a risk is China to you? You, whichever country. I think that is a question that has to be at the core of Beijing’s strategy beyond looking at the U.S. That’s a question that will reshape whether or not the U.S. is able to build global supply chains that cut out China, whether it’s able to build out the EV ecosystem that cuts out China someday. That basically is a function of the degree to which everyone else agrees with the U.S. assessment of the type and degree of risk that China is. And China has a huge role to play in that. So, I wonder the extent to which it’s thinking about that and how that plays out.
Andrew: Well, there’s a lot there. It’s a meaty one to end it on, but thoughts all well taken. And of course, as always, we’ll be unpacking that question among many of these other questions that we’ve already just spent an hour going through, some more speculative than others. But Cory, this was a great conversation, great podcast to get back in the rhythm. So, thanks so much for joining me today. I appreciate your time.
Cory: Absolute pleasure. Thanks so much.
Andrew: And thanks everybody for listening. We’ll see you next time. Bye, everybody.
