This article was independently developed by The Economy editorial team and draws on original analysis published by East Asia Forum. The content has been substantially rewritten, expanded, and reframed for broader context and relevance. All views expressed are solely those of the author and do not represent the official position of East Asia Forum or its contributors.
This article was independently developed by The Economy editorial team and draws on original analysis published by East Asia Forum. The content has been substantially rewritten, expanded, and reframed for broader context and relevance. All views expressed are solely those of the author and do not represent the official position of East Asia Forum or its contributors.
U.S. Imports Three Years' Worth of Antimony from Thailand and Mexico China's Export Volume Surges, Indicating Clear Transshipment China's Strategic Use of Rare Earths as Diplomatic Leverage Backfires on Domestic Industry
Despite China's implementation of a rare earth export ban, the United States continues to actively import these critical minerals through indirect channels. Recent reports reveal that U.S. companies have been sourcing antimony from Thailand and Mexico, effectively bypassing China's restrictions. This development suggests that China's efforts to control the global supply of essential minerals may be faltering amid escalating technological competition with the U.S.
On July 9, Reuters reported that following China's ban on exporting key minerals to the U.S. in December 2024, American firms have been importing these materials via Thailand and Mexico. China's ban, effective from December 3, 2024, targeted antimony, gallium, and germanium—materials vital for batteries, semiconductors, and military technologies. Nonetheless, U.S. import levels have rebounded to pre-ban figures, with evidence pointing to the involvement of Chinese enterprises in these transactions. Customs and shipping records indicate that at least one Chinese-owned company is engaged in this trade.
Between December and April, U.S. customs data show imports of 3,834 metric tons of antimony oxide from Thailand and Mexico—surpassing the combined total of the previous three years. Notably, neither country is a significant producer of antimony, each possessing only a single smelting facility. This anomaly strongly suggests transshipment activities.
Specifically, Thai Unipet Industries, a subsidiary of China's Youngsun Chemicals, has been a key player. Between December 2024 and May 2025, Unipet shipped at least 3,366 tons of antimony products from Thailand to the U.S.—a 27-fold increase compared to the same period the previous year. The primary recipient was Youngsun & Essen, located in Texas, which had previously sourced directly from Youngsun Chemicals before the export ban.
China's strategy to leverage rare earth and critical mineral exports as a bargaining chip against the U.S. has inadvertently harmed its own industries. Following the announcement of new rare earth restrictions in April 2025, global automotive manufacturers faced component shortages within two months, leading some to halt production lines. While these measures compelled former U.S. President Donald Trump to the negotiation table, they simultaneously exacerbated challenges for Chinese companies already grappling with a sluggish domestic economy.
According to Reuters, as of 2024, exports accounted for 18% to 50% of revenue for China's 11 major listed magnet producers. However, in the two months following the export controls, magnet exports plummeted by 75%. Small and medium-sized manufacturers reduced output by approximately 15% during April and May. Eli Saklatvala, a senior analyst at commodity information provider Argus, noted, "Magnet producers are under pressure from both halted exports and weak domestic demand, facing uncertainty about when recovery will occur and temporarily losing key customer bases."
Conversely, U.S. sanctions targeting China's strategic industries have yielded significant effects. By imposing high port fees on ships built, owned, or operated by Chinese entities and levying steep tariffs on Chinese-made equipment such as gantry cranes, the U.S. has disrupted China's dominance in global shipbuilding.
Data from British maritime research firm Clarkson Research indicate that in the first half of 2025, new orders for Chinese shipbuilders totaled 26.3 million deadweight tons (DWT), a 68% decrease compared to the same period in 2024. Consequently, China's share of global new shipbuilding orders dropped from 75% to 56%. The impact extends beyond ship construction to maintenance and repair services. The market share for China's very large crude carrier (VLCC) repair and maintenance sector, which averaged 70% between 2021 and 2024, fell to approximately 50% in the first half of 2025.
Huawei Faces Production Issues with Next-Gen 5nm AP EUV Equipment Shortage Leads to Yield Around 30% Production to Rely on Improved SMIC 7nm Process
As Huawei prepares to launch its next-generation smartphone, the Mate 80, later this year, industry insiders are projecting that its application processor (AP)—the "brain" of the smartphone—will be produced using a 7-nanometer (nm) process rather than the anticipated 5nm technology. Due to U.S. export restrictions on cutting-edge semiconductor manufacturing equipment like extreme ultraviolet (EUV) lithography machines, Huawei, in collaboration with China’s leading foundry SMIC, has pursued advanced manufacturing capabilities but appears to have encountered setbacks in mass-producing 5nm chips.
According to the semiconductor industry on July 10, the Kirin 9030 chipset, expected to power Huawei’s Mate 80, is likely to be manufactured using SMIC’s 7nm process. Huawei has reportedly improved the design and process to boost the Kirin 9030’s overall performance by about 20% over its predecessor. The Financial Times (FT) reported, “Huawei has built an advanced production line in Shenzhen to manufacture AI semiconductors and APs using the 7nm process,” adding that this was part of its efforts to mass-produce cutting-edge chips domestically.
Due to U.S. restrictions on exports of semiconductor manufacturing equipment, China cannot import essential tools such as EUV systems, crucial for advanced chip fabrication. In response, Huawei has been developing its own chips and seeking alternatives in collaboration with Chinese foundries like SMIC. The company is currently producing AI chips using deep ultraviolet (DUV) lithography, a predecessor to EUV, to achieve sub-7nm processes. However, these chips are generally seen as having lower yield rates and performance compared to competitors. Benchmark scores indicate that the performance of the Kirin 9000s, made with SMIC’s 7nm process, is roughly on par with Qualcomm’s Snapdragon series from three years ago.
Speculation that Huawei’s next-gen AP would be manufactured on a 5nm node began circulating after reports last month that the MateBook Fold had adopted the Kirin X90 chip produced with a 5nm process. However, industry sources later clarified that the Kirin X90 was actually manufactured using SMIC’s 7nm process—the same one used for last year’s Mate70 series and the Kirin 9020 AP.
The Kirin 9030 is also reportedly facing production hurdles with the 5nm process and will instead be produced using the same 7nm process as its predecessor. The main reason appears to be a lack of economic viability due to low yield rates that drive up production costs. An industry expert commented, “Implementing a 5nm process without EUV involves significant yield losses and high costs,” adding, “This incident has exposed how Huawei’s competitive edge may have been overstated.”
In fact, according to Taiwanese media outlets such as China Times and United Daily News, SMIC’s 5nm yield is estimated to be around 20% to 50%. These outlets collectively assess that such yield rates are insufficient to ensure market competitiveness. In the foundry business, a yield rate of over 70% is typically considered the threshold for viable mass production. Huawei CEO Ren Zhengfei also recently acknowledged in an interview with the state-run People’s Daily, “Our standalone chips still lag behind the U.S. by one generation,” noting that the company is attempting to overcome physical limitations through mathematical models, non-Moore’s Law approaches, and cluster computing.
The bigger concern is that the performance gap with global peers could widen further. Major smartphone makers like Samsung, Apple, and Xiaomi are now deploying 3nm APs in their premium product lines. Samsung and Apple are even expected to begin mass production of 2nm APs in the latter half of this year. Huawei, on the other hand, is reportedly working on alternative technologies to replace EUV but has yet to deliver any tangible results.
Huawei is placing high stakes on the successful ramp-up of its 5nm process. Chinese semiconductor equipment firm SiCarrier, known to be working with Huawei on equipment development, showcased several advanced process solutions at Semicon China 2025 in March. The company has reportedly registered patents for DUV-based lithography systems intended to replace EUV in 5nm processes.
Huawei is also intensifying its collaboration with SMIC to optimize the chip fabrication process and maximize performance. According to the South China Morning Post (SCMP), “Two years ago, SiCarrier filed patents related to manufacturing 5nm chips using DUV,” which ties into SMIC’s previous production of Huawei’s APs using a 7nm DUV process.
However, using DUV instead of EUV presents challenges. DUV’s lower resolution leads to lower yield rates. While EUV enables single or dual-exposure lithography during the 5nm manufacturing process, DUV requires four or more exposures, significantly complicating the process. This not only reduces yield stability but also risks degrading overall chip performance.
This article was independently developed by The Economy editorial team and draws on original analysis published by East Asia Forum. The content has been substantially rewritten, expanded, and reframed for broader context and relevance. All views expressed are solely those of the author and do not represent the official position of East Asia Forum or its contributors.
This article is based on ideas originally published by VoxEU – Centre for Economic Policy Research (CEPR) and has been independently rewritten and extended by The Economy editorial team. While inspired by the original analysis, the content presented here reflects a broader interpretation and additional commentary. The views expressed do not necessarily represent those of VoxEU or CEPR.
This article is based on ideas originally published by VoxEU – Centre for Economic Policy Research (CEPR) and has been independently rewritten and extended by The Economy editorial team. While inspired by the original analysis, the content presented here reflects a broader interpretation and additional commentary. The views expressed do not necessarily represent those of VoxEU or CEPR.
This article is based on ideas originally published by VoxEU – Centre for Economic Policy Research (CEPR) and has been independently rewritten and extended by The Economy editorial team. While inspired by the original analysis, the content presented here reflects a broader interpretation and additional commentary. The views expressed do not necessarily represent those of VoxEU or CEPR.
Amid U.S.-China Tensions, China Boosts Inland Economic Zones Guizhou Province Sees Heavy Investment in Aviation and Digital Economy Building New Growth Engines for Economic Security
China is developing Guizhou Province, a mountainous inland region once among the poorest in the country, into a “strategic rear base” in preparation for an extended trade war with the United States. As Guizhou emerges at the forefront of China’s economic transition, Beijing aims to integrate inland provinces to expand domestic demand and build an industrial structure resilient to external shocks.
According to the South China Morning Post (SCMP) on July 9, Chinese authorities are considering a plan to integrate 10 inland provinces, including Guizhou, into a single economic zone as part of the country’s upcoming long-term economic roadmap—the 15th Five-Year Plan (2026–2030), set to be officially announced in March next year. SCMP reported, “Amid the U.S.-China trade war, China is fully preparing for the long haul,” adding that the new plan is expected to “reshape China’s economic and industrial landscape.”
Previously, Beijing-based think tank Pangoal Institution proposed in a May report that China should integrate the economies of 10 inland provinces including Guizhou to strengthen the domestic market and counter external risks. During the 1960s and 1970s, China adopted the Third Front Movement—a strategy to relocate critical industrial facilities, including defense plants, to interior regions amid tensions with the Soviet Union. However, in 1978, under Deng Xiaoping’s reforms, the country shifted focus to coastal development, prioritizing regions like Guangdong, Jiangsu, Zhejiang, and Shanghai.
The Pangoal Institution stated, “Now is the time for a new shift,” predicting that the 15th Five-Year Plan will likely revive a strategy akin to the Third Front Movement. The report said the plan would urge state-owned and private enterprises to intensify investments in inland regions. “This redistribution of regional economic functions will help offset external uncertainties and foster new growth drivers,” it concluded.
Guizhou was designated a “rear base strategy” target at a Chinese policy decision-making meeting in December 2023. At a preparatory meeting for the 15th Five-Year Plan on May 28, Xu Lin, Guizhou’s Party Secretary, emphasized, “We will leverage Guizhou’s comparative advantages in alignment with national strategy.” Geographically located between the Guangdong-Hong Kong-Macao Greater Bay Area and the Sichuan-Chongqing Belt—which together account for 20% of China’s GDP—Guizhou connects inland and coastal regions and is favorably positioned for attracting foreign investment and linking with Southeast Asia.
Despite its rugged terrain historically deterring investment, Guizhou has seen significant infrastructure development over the past two decades, including the construction of numerous high-elevation highways. The province is home to COMAC, the manufacturer of the C919 passenger aircraft, and has seen substantial growth in big data, data storage, and computing industries. Tech giants like Huawei and Tencent have launched operations in Guizhou, and major U.S. firms—including Apple, Qualcomm, Intel, HP, and Oracle—have established big data centers there. Digital services now account for half of Guizhou’s GDP.
The focus on Guizhou is largely due to its favorable climate for data center construction. With high elevation and cool weather, Guizhou naturally reduces the heat output of internet data centers (IDCs). The region’s mountainous terrain and mild climate make it an optimal location for such infrastructure. Taiwanese electronics manufacturer Foxconn, for example, built a wind tunnel-style data center between two mountains that uses natural airflow for cooling. Alibaba founder Jack Ma once said, “If you missed investment opportunities in Guangdong and Zhejiang 30 years ago, go to Guizhou now.”
It’s no exaggeration to say that Guizhou’s transformation into a big data valley was “decided by nature.” The region’s stable climate—with an annual average temperature of 23°C—and low risk of natural disasters such as earthquakes or floods make it ideal for natural cooling and secure data storage. Guizhou also boasts abundant energy resources, including fossil fuels like coal and renewable sources like solar and wind, resulting in low electricity costs. The local electricity rate is around USD 0.062 per kilowatt-hour—about 20% lower than the national average of USD 0.076.
Luo Yi, Deputy Director of Guizhou’s Foreign Affairs Office, explained, “Thanks to the province’s karst terrain—covering 73.8% of the area—and its cool and disaster-free climate, Guizhou rapidly developed into a big data valley.” He added, “We offer reduced utility rates—including electricity and water—to businesses in the valley, which is a major advantage for companies with substantial server equipment.”
U.S. EV Tax Credits Abolished as OBBBA Takes Effect Musk: “Trump’s Tax Cuts Will Wreck the U.S. Economy” Hyundai and Broader EV Industry Bracing for Fallout
President Donald Trump’s massive tax bill, a core initiative of his second-term agenda, has officially gone into effect, dealing a direct blow to the U.S. electric vehicle (EV) market. In particular, Tesla, the market leader in U.S. EV sales, is expected to suffer a sharp decline in profitability due to the elimination of EV tax credits. In response, Tesla CEO Elon Musk has fiercely criticized the Trump administration’s tax policies and announced the launch of a new political party—an apparent attempt to offset managerial uncertainties through increased political influence.
On July 8 (local time), Investor’s Business Daily (IBD) reported that due to President Trump’s sweeping tax reform, Tesla will no longer be eligible for federal EV subsidies for vehicles sold in the U.S. after September 30. In addition, the Zero Emission Vehicle (ZEV) credit program, which has generated hundreds of millions of dollars in quarterly revenue, has also been repealed. ZEV refers to vehicles that emit no exhaust gas during operation, including battery electric vehicles (BEVs) and hydrogen fuel cell vehicles, but excluding hybrid electric vehicles (HEVs), plug-in hybrid vehicles (PHEVs), and internal combustion engine vehicles.
IBD stated, “The elimination of EV tax credits along with the highly profitable credit program will significantly impair Tesla’s profitability and competitiveness,” predicting that “U.S. consumer demand may spike temporarily in Q3 before the subsidy ends, but starting in Q4, EV prices will rise, inevitably slowing sales.” In Q2 of this year, Tesla’s total sales reached 384,122 units, a 13.5% drop from the same period last year. Amid weak demand for the Cybertruck and aging models, the last support beam—tax credits—has now collapsed.
This move was formalized with the enactment of the “One Big Beautiful Bill Act (OBBBA)” on July 4. The bill includes the early termination of EV tax credits, the permanent extension of Trump’s first-term tax cuts, and sweeping tax reductions for individuals and corporations, including exemptions for tips and overtime pay. It also features increased fossil fuel subsidies, massive welfare budget cuts, boosts to defense and immigration funding, and a $5 trillion increase in the federal debt ceiling. After signing the bill, President Trump expressed confidence, saying, “OBBBA will propel the U.S. economy like a rocket.”
As the repeal of EV tax credits materialized, CEO Musk intensified his criticism of President Trump. After weeks of relative silence, Musk wrote on his social media platform X, “President Trump’s tax policy is completely insane,” warning it would “destroy millions of jobs and inflict enormous fiscal damage on the U.S. economy.” He added, “It’s a policy that favors legacy industries while causing serious harm to future industries like EVs and renewables,” and warned it would “push America down the path of debt slavery.”
Musk also sharply criticized the Republican Party, which spearheaded the passage of OBBBA. “Even polling data suggests this is a political suicide mission for the GOP,” he said. Addressing the Republican lawmakers who voted in favor, he asserted, “Shame on you,” and pledged to support efforts to unseat them in next year’s primaries. He recently announced the launch of the “America Party,” formalizing his political engagement. On July 5, Musk stated via X, “There needs to be an alternative that truly reflects the voice of the people,” adding that he aims for 2–3 Senate seats and 8–10 House seats.
Experts view these moves as an attempt by Tesla, facing profit deterioration due to shifting policy environments, to find a breakthrough through Musk’s political clout. Although Musk has repeatedly claimed that Tesla would not rely on EV subsidies—especially after boosting Tesla’s stock by supporting Trump last year—the company’s performance has remained highly sensitive to policy changes. The latest measures are expected to significantly impact Tesla’s short-term profitability and long-term investor sentiment. Adding to this is Musk’s escalating rhetoric, which is heightening owner-related risk and amplifying management uncertainty around Tesla.
In fact, following Musk’s new party announcement, Tesla’s stock on July 7 plunged 6.79% from the previous trading day, closing at $293.94. In just one day, its market capitalization shrank by $68 billion to $921 billion. Tesla stock fell below the $300 mark for the first time since last month, when a public spat between Trump and Musk over OBBBA caused a 14% plunge. Investor pullback is also becoming visible. For example, investment firm Azoria Partners postponed the launch of a Tesla-focused ETF that was originally scheduled for this week.
The impact of OBBBA extends beyond Tesla. Hyundai Motor Group, which had been making large-scale investments in Georgia and other states based on incentives from the Inflation Reduction Act (IRA), now faces weakened price competitiveness and shrinking demand. Moreover, exceptions to tax credits for leased and rental commercial vehicles will only apply until September this year, effectively amounting to comprehensive regulation. Last year, Hyundai Motor Group sold 120,000 EVs in the U.S., ranking second in the market after Tesla. Assuming each vehicle qualified for the $7,500 tax benefit this year, the total amount would reach $900 million.
The solar and wind industries were also directly impacted. The expiration dates for the Investment Tax Credit (ITC) and Production Tax Credit (PTC) were moved up from 2032 to the end of 2027. A new condition was added that electricity must begin being generated by 2027 for benefits to apply, making compliance significantly more burdensome. However, the Advanced Manufacturing Production Credit (AMPC) will be maintained. Additionally, clauses imposing taxes on Chinese technologies or components used in solar and wind power plants were removed during Senate deliberations. For projects that break ground within one year of the bill’s enactment, the 2027 electricity generation requirement will be waived.
In the semiconductor sector, tax credits for companies establishing production facilities in the U.S. were increased from 25% to 35%. These benefits apply to facilities operating after the end of 2022 and breaking ground before the end of 2026, positioning companies like Samsung Electronics and TSMC to benefit. The bill also includes provisions allowing companies to deduct R&D expenditures incurred within the U.S. for semiconductors. However, the Trump administration has announced plans to re-evaluate the validity of subsidies from the previous Biden administration as part of tariff negotiations, leaving the total amounts of actual tax credits and subsidies uncertain.
