As US-China relations worsen, expect supply chain chaos

The trans-Pacific trade lane connecting the world’s most important countries is a pillar of the global economy. But now it’s becoming an epicenter of supply chain, financial and geopolitical risk. 

During the pandemic, ocean container spot rates rocketed upward from approximately $1,000 per 40-foot container to nearly $20,000 last fall before plunging again to $2,720 last week.

Meanwhile, U.S. officials staged visits to Taiwan and took action to further separate the Chinese and American semiconductor sectors. This potent combination of economic, political and military issues will make trans-Pacific business complicated for years to come. 

China’s zero-COVID policies and recent tensions over Taiwan have accelerated this confrontation, which could lead to further decoupling between the U.S. and China. But the fundamental issues will likely persist beyond present crises. 

The American media coverage of President Xi Jinping’s address to the 20th Communist Party Congress in Beijing last week took note of Xi’s pessimistic tone, warning party members to prepare China for confrontation and crisis. Politico’s Phelim Kine called Xi’s view of U.S.-China relations “increasingly bleak.” Bret Stephens played into the rivalry, writing a cynical op-ed in The New York Times sarcastically thanking Xi for running his country so poorly as to make the United States seem good by contrast. 

Counter-signaling Xi’s message of a Chinese “national rejuvenation,” U.S. Secretary of State Antony Blinken was at the same time giving speeches at Stanford University in a tour carefully packaged around a national-strength-through-technology theme. Blinken visited the SLAC National Accelerator Laboratory then spoke at a Hoover Institute event with former Secretary of State Condoleeza Rice, who is now the Hoover Institute director. Most strikingly, Blinken said China was “determined to pursue reunification [with Taiwan] on a much faster timeline” — a statement that made headlines.