Timothy W. Martin
China has at least a 70% dependence on the U.S. and its allies for more than 400 items, ranging from luxury goods to raw materials needed for Chinese industries, a new analysis of trade data has found.
Countries could potentially use those products to counter economic pressure from China, but it would require a collective effort on a scale they haven’t previously deployed against the world’s second-largest economy, according to an analysis of 2022 global trade data by Victor D. Cha of the Center for Strategic and International Studies, a Washington-based think tank.
China has faced criticism for attempting to use its trade heft for political retaliation against countries, targeting a range of products and industries—from Norwegian salmon and Australian wine to South Korean group tourism.
Beijing denies using trade as a weapon. It has also accused Washington of being the real offender, pointing to the U.S. curbs on tech exports to China as an example.
Countries such as the U.S. and Australia have found themselves in one-on-one trade fights with China. That risk has prompted efforts such as de-risking and friend-shoring that seek to create alternative supply chains that bypass Beijing.
Another option, Cha argues, is that the U.S. and other like-minded countries could collectively weaponize their own trade with China. Doing so would demonstrate a clear and immediate cost to Beijing, he says.
China has at least a 70% dependence on about 412 items imported from the U.S. and allied countries, at a value of roughly $47 billion annually, according to the analysis. Beijing lacks ready-made homegrown alternatives for many of the items.
Virtually all of China’s imports of silver powder, essential for solar panels, arrive from Japan, the U.S. and South Korea, according to the analysis. Australia, Canada and the U.K. represent about 86% of China’s imports of nickel powder and flakes used for batteries and other electrical components. China imports from the U.S. nearly two-thirds of its grain sorghum used for the traditional Chinese alcohol “baijiu.”
The analysis, set to publish Wednesday in the International Security academic journal, uses data from the United Nations Comtrade database, which tracks official global trade statistics. China’s high-dependency exposure was calculated by bundling together trade activity from the U.S. and more than a dozen allies across a range of categories.
China has retaliated against other countries by curbing imports of products including Norwegian salmon. PHOTO: CHEN YAQIN/ZUMA PRESS
The data show how potentially potent the U.S. and like-minded partners could be if they acted together to dissuade—or even punish—Chinese economic coercion, said Cha, a former U.S. National Security Council director.
“All of our answers are about playing defense, and none of our answers are about playing a little offense,” Cha said. “Two can play this game if you want to.”
Cha, a senior vice president for Asia and the Korea chair at CSIS, said he has shared his concept with government officials who have expressed interest in the research findings. He acknowledged the difficult part will come in execution, getting the commitment from companies and legislators and staving off Chinese attempts to target the weakest links.
“That’s why China always feels it can isolate or bully any country,” he said. “They can assume there is not going to be any collective response.”
Some previous CSIS research has shown that China’s trade restrictions and other punitive measures haven’t shown to be successful tactics for Beijing, as some of the targeted countries ended up drawing closer to the U.S.
Japan has the largest number of high-dependency items for China at 124, followed by the U.S. at 87, Germany at 64, South Korea at 28 and France at 27, according to the analysis. The U.S. represents the country with the largest total value of imports at $11.5 billion, while Australia comes in at No. 2 at $10.6 billion.
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Taking principles from the national-security notion of deterrence, Cha believes an economic coalition should be formed that operates much like Article 5 does for NATO, where an attack on any member is an attack on them all.
Such a group, which Cha suggests could initially include the Group of Seven industrialized nations and Australia, would create tax incentives, assess penalties and establish early-warning systems to remain grouped together. Local legislation would ensure companies adhere to restrictions on Chinese imports. Bigger countries could create a fund that would help stabilize vulnerable nations should Beijing target them as the group takes shape.
Countering China has been a growing focus by Washington and its Western and Asian allies.
In May, President Biden and the other G-7 leaders issued an unusually pointed communiqué that promised to “counter malign practices” by China and “foster resilience to economic coercion.” The G-7, without mentioning China by name, launched an initiative to respond to cases of economic coercion, by sharing information, consultations and coordinated action.
The U.S. and close partners have created new groups focused on sectors such as telecommunications, semiconductors and minerals to counter China. Those efforts largely focus on reducing supply-chain vulnerabilities.
China’s roughly $47 billion exposure from high-dependency items provided by the U.S. and its allies amounts to just a fraction of the country’s annual imports of $2.7 trillion. But the supply-chain risks posed to key sectors for Beijing would provide cause for alarm, as the knock-on effects could lead to greater disruption, Cha said. The key would be to create a multilateral system that could impose ramifications on China.
“There is widespread awareness of the problem, and a willingness to acknowledge that this is a problem,” Cha said, “But I don’t think those countries feel protected.”
Write to Timothy W. Martin at Timothy.Martin@wsj.com
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