The U.S. and China Enter a New Phase of Supply Chain Conflict

The trade dispute between the United States and China is rapidly evolving into a battle over control of global supply chains, as both nations increasingly restrict access to critical technologies that underpin numerous industries.

Recently, the U.S. halted certain sales to China involving components and software essential for jet engines and semiconductors. This move responded to China’s limitations on exporting minerals vital to many manufacturing sectors. Both countries have accused each other of acting in bad faith amid rising tensions.

This escalation in supply chain confrontation adds to existing tariffs imposed by each side on the other's imports. Businesses warn that their production processes depend on components sourced from both countries, causing growing uncertainty. U.S. officials are increasingly concerned about other vulnerable points, such as pharmaceuticals and shipping, where China could exert pressure.

The aerospace sector has recently become a focal point in this conflict, serving as both a strategic leverage and a casualty.

Jet engine technology, including navigation systems that guide aircraft, is largely developed by U.S. companies like General Electric. China’s efforts to build domestic competitors to Boeing have required sourcing engine technology from American firms such as GE Aerospace.

However, manufacturing jet engines is impossible without China’s contribution. The country processes rare earth minerals that are essential for specialized coatings and components, enabling engines to perform efficiently under extreme temperatures.

In response to the U.S. imposing tariffs on Chinese goods, China restricted exports of these rare earth minerals in April, intensifying the supply chain standoff.