The gravity model framing is useful here becuase it strips away the moralizing and shows why recoupling is structural, not accidental. Economic mass and technological sophistication create pull that policy can slow but probably can't reverse. I worked on supply chain visibility tools for a manufacturing client, and what became clear was that even companies actively trying to diversify out of China kept bumping into the reality that certain capabilities just don't exist elsewher at the same cost and quality combination. The Unitree example is telling - when a $20k robot becomes a de facto research standard, that's not ideology, it's infrastructure.
Hmm while I see the interdependence, it still feels like China is ultimately not that dependent on the US. Many of the key components are still only made in China while China has many alternatives to the American Companies listed here.
For example,
Humanoid robots like Tesla Optimus have many Chinese competitors like Unitree. But components wise, the US has no alternative to Green Harmonics or Sanhua
The best EVs and Batteries are clearly in China and Ford is a one way dependence.
Even self driving, Waymo has plenty of competition from the self driving companies you’ve listed here.
Uber is dominant for now, but Didi exists and is clearly a viable alternative, what happens if these Chinese self driving companies start requiring you to use Didi?
Semiconductors are the only place the US currently holds an advantage but the Chinese are much closer to developing equivalent capabilities than we are to matching their ability to produce hardware.
Even for biotech, the Chinese companies are the ones innovating while the American Companies are merely licensing. Ultimately what does the US offer other than a rich consumer market? And how long will that really last?
China offers a lot to the world but I agree with Kyle that the relationship is still very complimentary.The US dollar is still the global reserve currency and underpins all the major world markets. I don’t think that is a burden the CCP would want to take on because offering a true reserve currency requires ceding too much control to the markets.
I also think your statements are a bit short sighted. By the late 2000s China along with much of the developed world will be losing population. As this occurs I think interdependences between countries will be increasingly important.
Kyle, 'Love' is too romantic. Let's call it what it is: Industrial Symbiosis.
From a ChinArb perspective, the examples you list (Waymo/Zeekr, Ford/CATL, US Labs/Unitree) reveal a new structural reality: The 'US Brain + China Body' stack.
US companies are realizing they cannot compete on the Physical Layer (building the car, the robot, the battery) at a viable cost. So they are effectively outsourcing the 'Body' to China while trying to retain the 'Mind' (Algorithm/IP).
This isn't recoupling by choice; it's recoupling by Necessity. The arbitrage here is profound: The US is becoming the client for Chinese advanced manufacturing. The political decoupling is merely increasing the transaction costs (tariffs/licensing fees) of this inevitable physical integration.
This is the most realistic assessment of the trade war l've read in a while. 'Recoupling' is exactly the right word.
From my vantage point managing supply chains in China for 30 years, the 'Decoupling' narrative is a political fiction. The physical reality is just logistical adaptation.
We aren't seeing a reduction in dependence; we are seeing the industrialization of 'Origin Laundering.' The supply chain has simply added a layover.
While direct US-China trade dips, container volumes from China to Mexico have surged ~60%. The components are still Chinese, they just put on a
'Made in Mexico' poncho for the final mile.
I call this 'The Great Re-Routing.' I recently published a logistical autopsy of how this mechanism works on the ground in Monterrey-and why the US supply chain is actually becoming more entangled with China, not less.
Not lost at all. The US is now pivoting and sourcing its rare earth metals from a number of new jurisdictions including Australia. My husband is working on a deal as we speak.
The gravity model framing is useful here becuase it strips away the moralizing and shows why recoupling is structural, not accidental. Economic mass and technological sophistication create pull that policy can slow but probably can't reverse. I worked on supply chain visibility tools for a manufacturing client, and what became clear was that even companies actively trying to diversify out of China kept bumping into the reality that certain capabilities just don't exist elsewher at the same cost and quality combination. The Unitree example is telling - when a $20k robot becomes a de facto research standard, that's not ideology, it's infrastructure.
Hmm while I see the interdependence, it still feels like China is ultimately not that dependent on the US. Many of the key components are still only made in China while China has many alternatives to the American Companies listed here.
For example,
Humanoid robots like Tesla Optimus have many Chinese competitors like Unitree. But components wise, the US has no alternative to Green Harmonics or Sanhua
The best EVs and Batteries are clearly in China and Ford is a one way dependence.
Even self driving, Waymo has plenty of competition from the self driving companies you’ve listed here.
Uber is dominant for now, but Didi exists and is clearly a viable alternative, what happens if these Chinese self driving companies start requiring you to use Didi?
Semiconductors are the only place the US currently holds an advantage but the Chinese are much closer to developing equivalent capabilities than we are to matching their ability to produce hardware.
Even for biotech, the Chinese companies are the ones innovating while the American Companies are merely licensing. Ultimately what does the US offer other than a rich consumer market? And how long will that really last?
China offers a lot to the world but I agree with Kyle that the relationship is still very complimentary.The US dollar is still the global reserve currency and underpins all the major world markets. I don’t think that is a burden the CCP would want to take on because offering a true reserve currency requires ceding too much control to the markets.
I also think your statements are a bit short sighted. By the late 2000s China along with much of the developed world will be losing population. As this occurs I think interdependences between countries will be increasingly important.
Great piece, Kyle!
There is a key difference tho https://keshavjoshi00.substack.com/p/the-dragon-that-wont-roar-is-chinas
Kyle, 'Love' is too romantic. Let's call it what it is: Industrial Symbiosis.
From a ChinArb perspective, the examples you list (Waymo/Zeekr, Ford/CATL, US Labs/Unitree) reveal a new structural reality: The 'US Brain + China Body' stack.
US companies are realizing they cannot compete on the Physical Layer (building the car, the robot, the battery) at a viable cost. So they are effectively outsourcing the 'Body' to China while trying to retain the 'Mind' (Algorithm/IP).
This isn't recoupling by choice; it's recoupling by Necessity. The arbitrage here is profound: The US is becoming the client for Chinese advanced manufacturing. The political decoupling is merely increasing the transaction costs (tariffs/licensing fees) of this inevitable physical integration.
China and US are supposed to be partners not enemies
This is the most realistic assessment of the trade war l've read in a while. 'Recoupling' is exactly the right word.
From my vantage point managing supply chains in China for 30 years, the 'Decoupling' narrative is a political fiction. The physical reality is just logistical adaptation.
We aren't seeing a reduction in dependence; we are seeing the industrialization of 'Origin Laundering.' The supply chain has simply added a layover.
While direct US-China trade dips, container volumes from China to Mexico have surged ~60%. The components are still Chinese, they just put on a
'Made in Mexico' poncho for the final mile.
I call this 'The Great Re-Routing.' I recently published a logistical autopsy of how this mechanism works on the ground in Monterrey-and why the US supply chain is actually becoming more entangled with China, not less.
[Further read 'The Great
Re-Routing' article]"https://substack.com/@chinarbitrageur/note/c-190562064?r=71ctq6&utm_medium=ios&utm_source=notes-share-action]
This reads less like “recoupling” and more like constraint reality.
Once two systems share deep technical dependencies, separation becomes performative rather than operational.
Policy can slow flows, but capability ecosystems still seek equilibrium.
What a difference a decade makes. Both economies and labor markets look in dire trouble. Critical rare earth metals means the US lost the trade War.
Not lost at all. The US is now pivoting and sourcing its rare earth metals from a number of new jurisdictions including Australia. My husband is working on a deal as we speak.