John Sitilides: The Chinese will come to the table with America

Author’s Note: You can find our YouTube interview at the bottom of this interview.

America and China: Economy in the Shadow of Geopolitics

Over the past few years, relations between the United States and China have intensified, marked by trade wars, economic uncertainty, and strategic shifts. Behind these political maneuvers lies a systemic transformation of global markets, shaping the economic future for decades to come.

Industrial Transformation: From Open Markets to National Security

Faced with dependence on Chinese resources, the U.S. is shifting its industrial policy toward domestic production. Key sectors, including semiconductors, pharmaceuticals, and defense, are under pressure as reliance on Chinese suppliers presents a strategic risk. Meanwhile, China is bolstering its technological independence, reducing reliance on Western companies while prioritizing domestic manufacturing of critical components.

On this topic, we invited a top expert John Sitilides Geopolitical Strategist, Trilogy Advisors LLC Senior Fellow for National Security, Foreign Policy Research Institute State Department Diplomacy Consultant (2006-2023). He gave an exclusive interview for the digital magazine rEuconnection – REUC.

Journalist: How will the Trump administration address the supply chain crisis, including raw materials, chip production, and the military industry, as well as increased tariffs and China’s export bans? What domestic policies might be implemented to mitigate these disruptions?

John Sitilides: „The issue of rare earth elements and imports from China, is an enormously complex one, but very much figures into the larger tariff strategy and trade negotiations that the Trump administration is hoping to enter into at some point later in 2025.

The issue really is not so much the availability of rare earth elements, despite the name rare earth. They’re actually found all over the world, including now in Ukraine, hopefully, with the US-Ukraine rare earth elements deal, which also, by the way, includes oil and gas, a very underreported aspect of that deal. The problem with rare earths is that it is extraordinarily dangerous and environmentally dirty business, extracting those rare earths from the larger ores in which they are found, and then processing and refining those rare earth elements for use to manufacture magnets, semiconductors and a whole host of other advanced technological products.

So the issue right now is not so much that rare earth elements are not available for the United States to be able to use for its highly advanced technological economy, but that China and Chinese companies have an 80 to 90% stranglehold on global processing and refining of rare earth elements. So this is going to be a very difficult issue if this brinksmanship between Washington and Beijing is prolonged. Right now, there is a short-term and slight immediate impact on the cutoff of these rare earth elements.

But if the standoff persists for a lengthy period of time, we could see a number of US companies, for instance, with the cutoff of antimony, which was announced by China several months ago. This is an important rare earth element for the United States companies to be able to build nuclear weapons, electric vehicle batteries, ammunition, night goggles. Now, there are sources for antimony in other parts of the world, but it’ll be difficult to process and refine those with the kinds of contracts you need to provide some reassurance for those companies that are mining and extracting and processing and refining outside of China to be able to provide these to the United States.

Of course, the longer term hope is that there will be some type of a deal, or at least a negotiating process to get to a deal between Washington and Beijing to alleviate many of the disruptions that we do expect to see in global supply chains involving rare earth elements.“

 Journalist: Besides raw materials, what other sectors in the U.S. are facing a supply chain crisis? And how bad the situation is?

John Sitilides: „We learned during the absurd and looking back, highly reckless and irresponsible global lockdowns of entire societies in response to the pandemic that came out of Wuhan, China, that being dependent on China for medical protective equipment, masks, gloves, protective equipment that we need for hospital personnel, for doctors and nurses and the like, was extraordinarily dangerous for almost the entire world, but especially in Europe and in the United States. So, we are looking to see how we can reassure or nearshore or allyshore, I mean, think of the prefix that you like, for moving those supply chains out of China so that in the event of a future diplomatic crisis, or perhaps the next pandemic to contaminate the world outside of China, that we have more durable and reliable supplies of medical equipment.

We also find that, especially in Europe, less so here in the United States, especially under the current administration, the advanced industrial economies of the world have made themselves dependent willingly and intentionally on Chinese companies for renewable energy in order to achieve really unachievable net zero ambitions by 2035 and 2050 that politicians talk about as a good for societies, but really makes many European markets and to a certain extent the U.S. economy dependent on solar panels and wind turbines from China, given their inordinate control over global supply chains. Now, the United States under the Trump administration for the next three and a half years is going to be revisiting hydrocarbons, oil, gas and coal, as well as nuclear energy, but many European countries, despite the colossal impact, the deleterious impact of the cutoff of Russian oil and pipeline gas to almost all of Europe, and the impoverishment of large pockets of the middle class in many parts of Europe, remains absolutely wedded to continued dependence on China for solar panels and wind turbines in ways that I think is going to produce probably a significant level of political blowback in Europe in the years to come, if there is a constant fear that Europeans are becoming poorer as energy prices continue to skyrocket, increasing the price of almost everything that’s transported on trucks, cars, ships, airplanes, all as a result of this dependence on China for renewable energy exports.“

Journalist: Which U.S. companies will be impacted the most? How will these companies address the crisis from a business perspective and a political standpoint? Will they take action to influence the U.S. government?

John Sitilides: „That remains to be seen. I mean, President Trump’s calling card in all negotiations, not only with adversaries like China, not only with good neighbours and allies like the European Union and NATO countries and Canada and Mexico, but even with business executives, is to keep everyone uncertain about what his next steps will be. This way, they remain dependent on his decision making. I do think that President Trump is less concerned about the individual concerns of business executives and the like, asking them to be patient, to wait out what he thinks is going to be a winning strategy.

He’s being confronted by journalists in almost every interview right now here in the United States, asking how long this uncertainty will continue to bring us roller coaster market impacts in our stock market, our bond market and the like, to what extent this is going to affect inflation, interest rates, even everyday Americans’ concerns about whether or not they should spend freely now, whether they may have to tighten their belts because we may go into a minor recession the second half of 2025. But President Trump and his public pronouncements seems very, very confident that this is going to be a winning strategy, not in and of itself, but in combination with, again, first of all, a tariff regime, especially to protect the American economy against China and China’s industrial policy subsidies, intellectual property theft, forced technology transfers, and its many violations of the World Trade Organization to become the world’s second largest economy. But also, in conjunction with congressional legislation that President Trump hopes to sign, maybe by July, to bring about deep tax cuts for the American worker, for the American citizen, and for American corporations, that is going to be joined by sweeping deregulation by the executive branch to really unleash the American capitalist market so that we have a freer enterprise, we have more entrepreneurialism by everyday citizens, and the ability of large companies to be able to move forward in a number of projects without the kind of bureaucratic red tape that has hamstrung so much of the American economy over the last several decades.

Tariffs, tax cuts, deregulation, and one more component, and that is cheap energy. President Trump wants to encourage American oil and natural gas producers to increase production, to lower prices for energy, which affects almost every aspect of supply chains in the American economy, and to be able to be a more reliable provider of crude oil and liquefied natural gas, especially LNG, for our European allies and partners, as well as those in East Asia. And you put all four of those components together, tariffs, tax cuts, deregulation, and cheap, affordable energy, and President Trump believes, as he says very publicly, that you have the ingredients for a quote-unquote golden age for the American economy and all of those partners that want to work closely with the U.S.“

Journalist: So, there is no any kind of signs that the U.S. government will take some kind of relief for those companies right now?

John Sitilides: „Well, there are certain sort of baby steps, I would say. For instance, President Trump is very much concerned with the health and well-being of the automobile sector, and so there have been specific sort of compromises there on tariffs, because we don’t want to see auto parts. Almost no U.S. car is completely assembled—not assembled, but has almost all U.S. parts. The automobile is as representative of the global supply chain interdependence as any product, and so even if they’re assembled here in the United States, so many parts are assembled in Mexico, in Asia, and in Europe.

And so the idea that many of these parts are now slapped with a 25 percent tariff is injurious enough, again, if there’s prolonged tariff standoff and no trade negotiations. But at the same time, we have very significant tariffs on steel and aluminum imports, because President Trump wants to rebuild the American domestic steel and aluminum manufacturing industries. But what President Trump has already done, as of several days ago, is to eliminate what we call stacked tariffs.

So if there is an auto part import that is made of steel or aluminum, only one of the tariffs will adhere, not all of them, so that we don’t have double and triple tariffs on specific parts because they’re made of specific components and materials. So that is a temporary relief for the auto industry. Again, President Trump is looking to see where he can provide the kind of relief possible on those industries that are most sensitively exposed to, say, especially Chinese restrictions and the like.

But again, the larger message to the American business community is be patient. The Chinese will come to the table, and we’re going to work out a deal that is very advantageous to the U.S. economy, to U.S. business, and to the U.S. consumer. But I don’t know, I can’t speak for corporate executives who have the patience to wait that out.

They don’t have the political stamina to wait that out that President Trump does. And they also have to be accountable to their shareholders who want to see that the capitalization of the companies is not going to move in a downward direction because of prolonged standoffs between Washington and Beijing.“

 Journalist: Are there any other sectors also impacted by the tax war, but not well known to the public? Meanwhile, those sectors might have big influence in the future international relations?

John Sitilides: „Well, very much so. I mean, we’ve already talked about rare earth elements. We’ve talked about medical protective and health equipment and the like. We haven’t really talked much about pharmaceuticals.

And the fact is right now, India is the number one exporter to the United States of pharmaceutical products, but most of their precursor chemicals that Indian companies need to manufacture pharmaceuticals in India come from China. So we need to find a way to provide for new sources of precursor chemicals, not only for legal pharmaceuticals that are medically necessary for several hundred million Americans, but also to ensure that the fentanyl industry out of China that channels working with the Mexican cartels through the border to kill 100,000 Americans every year is also curtailed. And I would say one more area that really has not gotten much attention even here in the United States, and that is how much of the United States defense industry is dependent on Chinese rare earth elements and the manufacture of small components, ball bearings, magnets, semiconductors for many of the parts that are then used to assemble the Ohio-class nuclear submarine, Minuteman intercontinental ballistic missiles, the Patriot anti-missile battery, major American defense systems that are dependent on hundreds, if not thousands, of Chinese subcontractors that contract that to America’s leading defense contractors.

I think we find ourselves in a very, very dangerous posture in the event of a diplomatic crisis or a possible escalation of tensions over Taiwan or Philippines or the Chinese aggression against Japan, we may see a cutoff of some of the most important elements of America’s own defence industry to be able to defend American interests and those of our allies in East Asia in the event of a conflict with China. So we find ourselves in a very dangerous situation, a very foolish situation that has been facilitated by Republicans and Democrats over the last 20 to 25 years here in Washington. And now I think President Trump is determined to reorient the direction of those supply chains so our defense industry is no longer dependent on the goodwill of the Communist Party of China.“

Journalist: Trump decision makes some kind of shaking of the stock market. And what does the experts say about this new wave of that decision of Trump administration?

John Sitilides: „There’s not a bad decision by the Trump administration. I think the Trump administration is trying to do is to right the wrongs of Republicans and Democrats, presidents, senators, and members of Congress of the last quarter century that thought it was a good idea to outsource so much of American industry, manufacturing, the defense sector, the pharmaceutical sector, rare earth processing and refining, renewable energy, electric vehicles.

All of this is now being dominated by Beijing, right in front of our eyes. And I will say one more thing. I don’t think there’s any real expert in terms of predicting or forecasting where any of this goes.

No one has any idea, not President Trump, not General Secretary Xi Jinping in Beijing, none of the so-called stock market or financial market experts. It’s a major guessing game. And there are major debates happening in New York, in Shanghai, in Beijing, in Washington, in Brussels.

But only time will tell. And this is really going to be more a matter, I think, of political will between Washington and Beijing. And I think President Trump’s bet right now is that the Chinese economy is going to be far more severely impacted in the short term, that even if Xi Jinping has to save face, the Chinese Communist Party recognizes it really has no choice in the end but to negotiate with President Trump.

Whether that’s accurate or not, only time will tell. We don’t know yet. And neither do any of the so-called experts.“

You can find this interview on our YouTube channel:

Editor note: Please find the official website of John Sitilides here.