The US Chip Blockade against China Is Creating Unplanned Consequences, by Mihai Macovei

Without fail, when governments interfere in private market, things don’t turn out as planned. From Mihai Macovei at mises.org:

The US trade and tech wars against China continued under President Joe Biden, who escalated export controls related to technology. The US wants to cut China’s access to advanced semiconductors and the equipment used to manufacture them in order to prevent their use for military purposes. The restrictions follow the CHIPS and Science Act, passed in August 2022 which showers $52 billion in subsidies on the US chip industry and grants over $200 billion in additional research and development (R&D) and science funding.

The alleged purpose of the US protectionist moves is to strengthen “national security” as revealed by the recent strategy, which singles out China as the main challenger to the world order upheld by the US. President Biden warned that the US faces a “decisive decade” in its rivalry with China in order to preserve a long-term competitive edge. Yet, a deeper analysis shows that the US policy is rather meant to contain China’s overall technological and economic progress. It also reveals the US government intentions to depart further from free-market solutions to bolster its economy, which reduces economic welfare and stokes the risk of military confrontation down the road.

US Dominates the Global Semiconductor Value Chains

Alarmist views that the US semiconductor industry is in need of subsidies and trade protection are not supported by facts. The US has remained the global semiconductor market leader, with almost 50 percent of annual sales since the late 1990s, despite a gradual decline in its share of chips manufacturing (graph 1). Most important, manufacturing represents less than one fifth of the semiconductor production chain and the US dominates the top end of the overall supply chain.

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