Biden administration trying to straightjacket its successor into carrying on its 'chip war'

Shortly after US Commerce Secretary Gina Raimondo complained to the media that the United States' attempt to curb China's catch-up in the advanced semiconductor sector through export restrictions was "a fool's errand", the Joe Biden administration initiated an investigation on Monday under Section 301 of the Trade Act of 1974 with the aim of stymieing China's development of its lower- and middle-end chip industry.

A statement from the White House said that the investigation will examine China's "targeting of foundational semiconductors (also known as legacy or mature node chips) for dominance" and the impact on the US economy, as well as making an initial assessment of the impact of "China's acts, policies, and practices on the production of silicon carbide substrates or other wafers used as inputs into semiconductor fabrication".

US Trade Representative Katherine Tai claimed that "The investigation underscores the Biden-Harris Administration's commitment to standing up for American workers and businesses, increasing the resilience of critical supply chains, and supporting the unparalleled investment being made in this industry."

That's simply absurd as the investigation will necessarily harm the interests of those parties that the Biden administration claims it aims to protect, since Tai said that the investigation will extend to determining the extent that they are incorporated as components in downstream products for critical industries such as defense, medical devices, aerospace, telecommunications, automobiles, and power generation and the electrical grid.

And despite the US' export restrictions, the transactions in chip-related items between China and the US still amount to billions of dollars each year, as Raimondo admitted. That means those trading US companies will necessarily be affected by the latest politicized moves of the US.

In a statement released on Monday, the Office of the US Trade Representative shamelessly accused China's efforts to "achieve indigenization and self-sufficiency" in the semiconductor industry as "extensive anticompetitive and nonmarket means" that "threaten detrimental impacts" on the US.

In actuality, they are responses to the "chip war" the US launched against the country. The latest move encompasses almost all the backbone industries of the Chinese economy, leaving the Chinese side no choice but to steeply upgrade its countermeasures to defend its development interests.

China launched its first US-targeted third-party-included export restrictions on the end-use or end-purpose of some China-sourced key minerals earlier this month after the US put 136 Chinese entities in the advanced chip industry on its Entity List.

China's strong countermeasures prompted Washington to retaliate by levying punitive tariffs on Chinese exports of tungsten products and polysilicon to the US, among other things. They may have also served to precipitate the US' latest move that represents a significant escalation and expanding of the US' "chip war" against China, extending it from the high-end chip niche to an across-the-board scale.

Biden's national security advisor, Jake Sullivan, told the media on Sunday that he is skeptical that the Donald Trump administration could make any sort of "grand bargain" with China to resolve all the sore spots in the US-China relationship.

By laying its trump card on the table shortly before leaving office, the Biden administration is trying to make sure of that. Despite the irrational self-harming nature of the moves, the incoming administration will face tremendous pressure to adhere to them, given the "political correctness" on China in Washington.

That explains the true purpose of the Biden administration's latest move targeting China's complete semiconductor industry.

But since the USTR has requested consultations with the Chinese government in relation to the investigation, it would appear that the new administration will have an opening to strike a deal.

Since Beijing seems sure to respond to the US' latest move, both sides will be hoping to hold the advantage when it gets down to the nitty-gritty of give-and-take.