Weapons of wealth: How economic assets turned into war machinery

The US and China are increasingly using economic assets as strategic weapons, with the US restricting China's access to advanced technologies and China retaliating by limiting exports of critical minerals. This escalating economic conflict, driven by concerns over technological dominance and national security, is forcing countries like India to develop strategies to secure resources and reduce dependence on either nation. China's dominance in manufacturing and critical minerals processing highlights the need for nations to diversify supply chains and invest in domestic capabilities to mitigate geopolitical risks.

Analysis

The escalating US-China economic conflict is increasingly characterized by the strategic weaponization of economic assets, moving beyond traditional trade disputes into what J.D. Vance, identified in the article as US vice president, termed an 'arms race' for technological supremacy, particularly in AI and semiconductors. The US initiated measures such as placing Huawei on the 'Entity List' in May 2020, restricting its access to advanced chips and US technology, and has since expanded this list to over 140 Chinese entities while tightening controls on semiconductor manufacturing equipment and software. China has responded by leveraging its dominance in critical raw materials, instituting export permit requirements for graphite (October 2023), banning the transfer of rare earth extraction and separation technologies (December 2023), and adding key minerals like antimony, gallium, germanium (December 2023), tungsten, indium, bismuth, tellurium, and molybdenum (February 2025) to export control lists, with further additions in April following US tariff actions. This dynamic, where China holds significant sway over 17 rare earth minerals and key manufacturing sectors (over 30% of global output), underscores a new geopolitical reality where resource and technology control directly impacts national power. This compels nations like India to formulate strategies for resource security, such as participating in the Mineral Security Partnership, investing in domestic processing capabilities for critical minerals sourced internationally, and fostering alternative technologies like green hydrogen to mitigate dependencies.

Key Decisions for Investors

• Investors should re-evaluate portfolio exposure to sectors directly impacted by US-China technology and resource restrictions, notably semiconductors, the EV supply chain, and industries reliant on rare earth minerals and other critical materials where China has implemented export controls on items such as graphite, gallium, germanium, tungsten, and molybdenum, with specific restrictions noted from October 2023 through February 2025.
• It is crucial to identify and assess companies with significant operational or supply chain concentrations in China, considering potential disruptions and increased input costs due to these measures, while also exploring opportunities in firms benefiting from supply chain diversification, onshoring/friend-shoring initiatives, or those developing alternative resources and technologies, particularly in regions like India aiming for strategic autonomy.
• Given the 'moderately negative' sentiment, 'cautious' tone, and 'high' market impact score (0.75) associated with these developments, investors should intensify due diligence on supply chain resilience and geopolitical risk exposure across portfolios, preparing for sustained volatility and further strategic decoupling in key technology and resource sectors as the US-China rivalry continues.