china

Choke Points

/ ontheoutside / Leave a comment

Everyone talks about choke points. The Strait of Hormuz was always there and occasionally mentioned as a theoretical issue–until we blundered into it. Now people talk about choke points, but still as something around the edges. Hormuz affects others but not so much us.

However choke points aren’t just geographic. Rare earths were and still remain choke points that the Chinese can use any time they want something from us. Even the military can’t function without them. But that’s just the beginning.

Let’s go back to a chart from our piece on trade:

🏆 Top 10 U.S. Companies by Market Capitalization (2026 estimates)

  1. NVIDIA Corporation – approx. $4.5 trillion (currently world’s largest)
  2. Apple Inc. – ~$4.0 trillion
  3. Alphabet Inc. – ~$3.8 trillion
  4. Microsoft Corporation – ~$3.6 trillion
  5. Amazon.com, Inc. – ~$2.5 trillion
  6. Meta Platforms, Inc. – ~$1.4 trillion
  7. Broadcom Inc. – ~$1.7 trillion
  8. Tesla, Inc. – ~$1.3 trillion
  9. Berkshire Hathaway Inc. – ~$1.0 trillion
  10. JPMorgan Chase & Co. – ~$0.6–0.7 trillion (approximate, rounding into the top decade range)

As noted, the top two companies are 100% dependent on hardware from TSMC in Taiwan. The companies do the design work, and TSMC builds it. For Nvidia that’s everything. For Apple there is some manufacturing in the US, but not the more advanced, product-defining chips. So the two most valuable companies in the US can do nothing without Taiwan. And again that’s just the beginning. It also says that the entire AI infrastructure on which we are basing the future of the country and for which we are investing inconceivable sums of money is close to 100% dependent on hardware from Taiwan. Those Nvidia cards from Taiwan are our supposed key advantage to win the AI race with China!

So Taiwan is a monumental choke point now and for the foreseeable future. It’s not simple for China to use it, but even harder for us to stop them. Xi made very clear to Trump that he was not to get in the way of China’s plans for the future of Taiwan—whatever those might be—and Trump immediately backed off on planned US arms sales. For the record we have also depleted our own munitions in the Iran war. And our behavior toward Cuba is hardly a model of respect for independence of an island 100 miles off the coast.

Where does that leave us? We may continue to strut around as if we still owned the world, but China has the keys. The idea that we can shake down the rest of the world because no one can touch us is patently false. We need an orderly world where we can avoid wars and count on stability of choke points. That doesn’t happen by itself; it requires allies and international norms. Otherwise it’s no longer our world, as we want to think God made it.

The Real Deal on Rare Earths

/ ontheoutside / Leave a comment

The subject of “rare earths” is everywhere—now that Trump has discovered that not everyone he bullies backs down. (Like most bullies he clearly never thought of risks beforehand.)  But it is shocking how much of the discussion is both wrong and wrong-headed.

Let’s start with what’s wrong.  First of all, the set of rare earths includes 17 chemical elements that share some chemical properties, but whose significance is individual not collective.  Particular elements are important in particular ways.  Availability and processing requirements are not the same either.  So if Trump announces that we’re going to get rare earths from, say, Ukraine that may be relevant to an important issue or it may not be.  Similarly when someone announces with fanfare that we’re going to start processing rare earths somewhere outside of China, that may or may not have any importance at all—depending on what it is.

All that sounds like we need a lot of new information that would be hard to track down, but actually that’s not true.  There is an excellent, widely-available report from an unbiased source that goes right down the line on everything you would like to know.  And the answer is that there is nothing we are doing that is going to change China’s leverage any time soon (measured in years of course).  And that’s the news about rare earths. 

Wrong-headed is a different issue.  The important thing to realize is that the rare earth problem is NOT one-of-a-kind.  The rare earth problem is what happens when you don’t plan ahead for what the world is going to look like in the future.  There are two changes that made this problem happen:

  • The technology environment changed, so that suddenly these elements went from exotic to strategic.
  • The political environment changed to one of economic war with everyone, so that the US suddenly has to become economically independent of everyone whose arms it can’t twist. There is a strategic question with China, but we forced this issue by declaring war.

The impact of item one is only going to get worse.  Trump is preoccupied with the past (e.g. the 1950’s) not the future, so all kinds of necessary technologies won’t be here. He has done all he can to kill funding for future-oriented research at NIH and universities.  His climate denial has ceded leadership in all the (many) sustainable energy technologies to China.  His anti-trust policies favor existing large companies over new entrants.  He even told the troops on the aircraft carrier he visited that they should be happy it still used steam pressure to launch planes instead of the newer electronic system on the (single) new Chinese carrier.  We can count on being behind the eight-ball for the foreseeable future, and it’s going to be hard to reassemble the infrastructure to catch up.

On item two we have only begun to appreciate what it means to be at economic war with everyone.  We’re still in an environment where the US has many historical mutually-advantageous relationships with partners.  We benefit as participants in a common enterprise.  All such partners now find they are under attack.  Trump relies upon factors such as NATO membership and US market size to coerce other countries to do his bidding.  Neither form of coercion is permanent, as everyone can see that even Canada is under attack.  Resources and support come into question.  Whether we like it or not, allies are important.  And that’s not just a military matter.  It’s a basis of our economic strength and our standard of living.

Rare earths are no one-of-a-kind deal.  They’re a bellwether for our future.