PoP: US & China - Connecting the Dots

Connecting the Dots Across Recent US & China Developments

TOPIC: US & CHINA - CONNECTING THE DOTS

With the foundational agenda pieces laid out – US (Trump) and China (Xi) – this week we take a quick look at some recent developments and connect the dots to help put everything into context.

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TECHNOLOGY

In the last week alone we’ve had several notable announcements in the US/China Tech-sphere that merit an update.

On the US side, the Trump team is actively looking to increase Semiconductor export restrictions on China – most notably on Semiconductor Capital Equipment (SemiCap), as well as leading-edge GPUs (i.e., Nvidia chips). This foots with our views from our prior two pieces that the US’s area of relative leverage over China is Semiconductors, specifically SemiCap and Nvidia GPUs – which are essential base layer inputs for leading-age AI where China is domestically deficient.

It’s also likely not a coincidence that the Trump team announced these escalations right around Nvidia’s earnings – sending a message to the team there to abide or else… Nvidia is based in the US, but has significant sales into China and the surrounding countries (e.g., Singapore) – which are likely being used for smuggling type operations for highly-sought-after GPUs for key Chinese companies (e.g., DeepSeek, Huawei).

On the China side, they followed this announcement with some Power posturing of their own – most notably, a new hypersonic missile unveiling coupled with the cutting of critical Taiwanese undersea cables. These events are all interconnected, and all tie back to Technology, notably AI, and Power at the core. As we’ve laid out, essentially all of the leading-edge Semiconductors are produced in Taiwan (inclusive of Nvidia GPUs). In not-so-many-words, China is essentially signaling – if we cannot have access to the leading-edge technologies, then no one can.

Overall, we expect this tit-for-tat to continue into the Spring, as each side Power postures to increase its relative leverage at the negotiating table ahead of the threatened April tariff and export control implementation dates.

ENERGY

On the Energy front, the most significant development in the last week has been around the (attempted) Russia/Ukraine de-escalation. Similar to our China/US pieces, we’ll go into more detail in another piece on Europe and the relative balance of power there. But suffice to say, given the importance of Energy to the Russian economy, Energy is a key underlying theme of the conflict itself – exemplified by the Russian oil sanctions as well as the ‘sabotage’ of the Nord Stream pipeline.

Even before inauguration day, Trump and co have been working hard to broker Peace in the Russia/Ukraine conflict – negotiating directly with Putin and team. The mid-February talks between the US and Russia in Saudi Arabia certainly were about more than just this conflict – also including generally ‘normalizing’ relations between the two countries after almost 3 years of essentially no contact.

Needless to say, this ‘relationship-mending’ – viewed by some as a reverse Nixon (i.e., now attempting to bring Russia closer to the US, to pull them away from China) – was also met with a direct call between Xi (China) and Putin (Russia) to affirm their “no limits” partnership and a continuation of the DragonBear. Power posturing via the Pillars is in full swing.

While the signing of the mineral deal (precursor to ceasefire) seemingly did not go as planned, we still would not be surprised to see an eventual ceasefire type deal reached with Russia/Ukraine – unless Europe decides to noticeably step up its funding and military efforts (part of Trump’s agenda as well). However, we would be equally unsurprised by a near-simultaneous escalation in the South China Sea (April?) – portended by the aforementioned Chinese cutting of Taiwanese undersea cables. Ideally this all stays contained to posturing for a broader Power deal...

MONEY

On the Money front, the most notable development was Trump’s America First Investment Policy. The Policy is essentially as it sounds – Western Money should be focused on building in the US (notably for critical Technologies and Energy) and is increasingly restricted from investing in China (mainly for Military applications, directly downstream of Technology and Energy).

The overall focus is on increasing Production capabilities (notably of mission-critical industries, like Semiconductors) within the US, and better harnessing Western Money to do so. We see a clear pendulum shift of Production investment over Consumption, Domestic investment over International, and Private-directed investment over Public – more on all of this in an upcoming restructuring of the Money piece.

In addition, the America First Trade Policy tasks the Secretary of State (Rubio) and Secretary of Commerce (Lutnick) – both China “hawks” – with revamping the aforementioned US export controls and AI diffusion policies (which once again center around Semiconductors and China).

It’s quite clear the Trump administration is keenly focused on the Pillars of Power, and is ‘attacking’ the problem from multiple angles – notably at the Money base layer.

CONFLUENCE

Overall, all of the above developments fit ‘neatly’ into both our foundational US/China pieces as well as our Pillars of Power Framework.

We are not surprised to see an attempted de-escalation in Russia/Ukraine, as the Trump administration recognizes China as the underlying “puppet master” of the ‘East’ and core opponent in this Power match. Hence, Trump and co would like to redirect all Energy to rebuild domestically and refocus any outward ‘containment’ efforts toward China.

There’s a reason why we started with the two core Global Power players…

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