The administration of U.S. President Joe Biden escalated the United States’ trade war with China last week, prohibiting exports of advanced semiconductors, equipment used to make computer chips and components needed for building super computers, as well as participation by U.S. corporations and individuals in China’s chipmaking industry. The global semiconductor supply chain was already under stress from the disruptions caused by the coronavirus pandemic and the existing trade restrictions between the U.S. and China. These latest moves raise the stakes, further threatening the ability of consumers to acquire the electronics needed to power the global economy.
Because of the ubiquity of chips in everything from computers and smartphones to cars and household appliances, Washington’s restrictions have implications beyond the semiconductor market. And they are just the latest challenge to the global economy, the fragility of which is becoming only more apparent by the day.
We are a far cry from the “Golden Age” of economic globalization that marked the 1990s and early 2000s. With the Cold War over, Eastern European countries, Russia and then China began fully integrating into the global trade system. This culminated in China gaining World Trade Organization membership in 2001. During this time, much was written about the interconnected nature of the world, which was seemingly becoming borderless. The nation-state was viewed as obsolete, as private firms and financiers, with the occasional assistance of central bankers, became the new governors of the global system.