China turns the tables: Painful sanctions against the USA

Skydio drone demonstration during the visit of Kathleen Hicks, U.S. Deputy Secretary of Defense, Washington, 12.12.2023. Source: U.S. Deputy Secretary of Defense Kathleen H. Hicks, Public domain, via Wikimedia Commons

Berlin, Germany (Weltexpress). The largest drone manufacturer in the USA, main supplier to the Pentagon and Ukraine, is in a supply chain crisis due to Chinese sanctions. Other suppliers are unable to fill the gap. Politicians are calling for security policy consequences, but “friend-shoring” remains a daydream.

Over the course of this year, China has slowly and deliberately tightened the sanctions screw against US drone manufacturers, but without going so far as to come into conflict with the regulations of the World Trade Organization (WTO). Now, however, Beijing has used a plausible pretext to put the largest American drone manufacturer Skydio in existential distress by completely boycotting important components, such as small, lightweight but extremely powerful batteries. At the same time, this action has once again brought the geopolitical significance of supply chains into focus.

The measures introduced in retaliation for Skydio’s delivery of drones to Taiwan have significant consequences for the US company and its customers worldwide. This is because the US company supplies its drones to the Ukrainian armed forces, among others, who are urgently dependent on the American technology built into the drones in their fight against Russian troops.

Geopolitical tensions and the “economic war” over drones

US politicians and hysterical media are now excitedly accusing the Chinese of doing what the Americans have long been doing on a much larger scale against China and many other countries around the world. For example, Washington has imposed a worldwide boycott on the supply of high-quality computer chips and the technology used to manufacture them to China. At the same time, Washington is threatening every company, regardless of whether it is based in a US vassal state or a sovereign country, with severe penalties and exclusion from the US market in the event of non-compliance.

Now the Americans have to taste their own bitter sanctions medicine for the first time. However, as they continue to feel like masters of the universe, they find the behavior of the Chinese towards the US masters outrageous and are fuming with rage.

In this difficult situation, Adam Bry, head of Skydio, has asked senior US government officials in the White House for help in the hope that Washington and its EU and NATO allies could help resolve the “battery supply disruption”. The head of Skydio even claimed that Beijing was trying to “eliminate the leading American drone company.” In an opinion piece in the English-language Chinese newspaper Global Times this aspect is gleefully described as “the farce of a thief shouting ‘stop thief'”, which “reveals the multiple facets of the US double standard”!

It is also interesting to note another brief comment in this Global Times article, namely that China is now also sanctioning other US companies in the military-industrial complex. It says: “Based on the relevant provisions of China’s Anti-Foreign Sanctions Law, Beijing has taken countermeasures against Skydio and other US military-industrial companies and their executives.”

Meanwhile, US industry representatives increasingly fear that China will use its absolute dominance of a huge number of key components in global supply chains in the future to retaliate against Western attempts at economic and political blackmail. Others are beating the anti-Chinese propaganda drum, claiming that sanctions such as those now being imposed on Skydio prove that China is deliberately restricting access to key components in order to slow down Western technological development and consolidate its own market position.

Given the central role that drones now play in both the civilian and military sectors, China is using the sanctions lever to exert pressure on the West on security issues and destabilize strategically important drone technology. In this context, Skydio CEO Bry is already speaking in military terms of an “attack” on Western supply chains, as the company is now being forced to ration batteries and look for alternative sources of supply, which may not be ready for use until the spring of next year, if at all.

Skydio is not an isolated case. In other technology sectors too, company bosses such as Adam Bry, with the support of Washington, are trying to undermine Chinese competitive advantages with government measures. With the help of tariffs against Chinese products, overpriced and technically inferior US products are to be made competitive on the US domestic market. Although this would help US companies on the US domestic market, nothing would change on the much larger export markets around the world. This is because US products would continue to be overpriced or technically inferior, or both, compared to Chinese products.

For the Ukrainian armed forces, which rely on US drones in the US proxy war against Russian troops, the restricted battery supply has serious consequences. The sanctions could limit the deployment time and range of the drones and thus further weaken Ukraine’s anyway dwindling combat power in an already critical phase. Reduced drone availability could significantly hamper operations in Ukraine and limit the area of coverage and strategic depth of operations.

Friend-shoring is not a solution

At the same time, the Chinese sanctions against Skydio will drive the US/NATO discussion about the urgent need to build independent and resilient supply chains for security-related technologies further towards irrational wishful thinking. This includes the dream of a low-cost, competitive and rapidly implementable “friend-shoring” strategy aimed at shifting production of critical components to allied countries. This strategy has already become a crucial part of US defense policy, and those in the militarized EU are striving for the same goal.

However, its implementation will cost taxpayers a great deal of money, and a competitive result is in the stars, because a new industry is being established here that cannot survive without constant subsidies.

Significant investment and government incentives (subsidies) would be required to initiate the transition to a “friend-shoring” strategy. The time factor also plays a role. Skydio has reportedly already taken the first steps to diversify its supply chains, but a full transition could take up to five years.

At the same time, major logistical challenges would have to be overcome for the changeover. All this in order to ultimately manufacture products that cannot be competitive on the global market simply because of the higher wage price level in the West, as they would have to compete against low-priced, high-quality or even higher-quality Chinese products.

The steps necessary for “friend-shoring” would therefore require considerable resources in terms of money, machinery and materials for years to come. Above all, however, there would be a shortage of high-quality skilled workers who would have to be poached from other productive sectors. This reallocation of scarce resources in favor of the political priorities of the US/NATO warmongers, who are still dominant in the West, would not be feasible in the long term. This is because it would take place against a backdrop of increasing financial and economic problems and growing social and societal instability in the countries of the collective West and would have to prevail over many years against growing popular discontent.

The only chance of success for the “friend-shoring” strategy that I can see would be the total abolition of the democratic remnants in the states of the collective West.

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