Commentary
In the on-again, off-again trade war between China and the United States, Beijing has used its near-monopoly on rare-earth elements to great effect. Threats to cut off global supplies so critical to most technologies have given President Donald Trump pause and got him to significantly moderate his tariff policies.
Beijing has another card to play. It controls enough of the global pharmaceutical supply to create shortages in the United States and elsewhere.
So far, China’s leadership has held off on playing this card or even mentioning it, probably because of the humanitarian implications of such a supply cutoff. But the threat is implicit. After all, shortfalls in Chinese exports of medical supplies during the COVID-19 pandemic demonstrated the global importance of Chinese sources.
Pressed by an overly aggressive Washington, there can be little doubt that Beijing would use supply limitations on pharmaceuticals and related goods to moderate Trump’s actions. Even with the best efforts, it will take a long while to neutralize this Chinese power.
Though Chinese dominance in pharmaceutical production gets fewer headlines than its control of rare-earth elements, it is nonetheless impressive. One-fourth of imported medicinal inputs come from product lines in which China accounts for at least three-quarters of total U.S. imports.
China controls about 41 percent of the key starting materials (KSMs), or chemical building blocks, used to make active pharmaceutical ingredients (APIs). China accounts for more than 99 percent of U.S. imports of 10 percent of critical pharmaceutical inputs.
The dependence in other countries is even greater. India, for instance, depends on China for 70 percent of its APIs and 90 percent of critical antibiotics. Nor is it just drugs and their components.
Pfizer CEO Albert Bourla has noted, citing the 2025 Nature Index, that eight of the top ten universities in STEM research are located in China. China has also become a popular destination for clinical trials, taking much of that activity away from America, which dominated it not long ago.
China’s commanding position is far from accidental. Beijing heavily subsidizes the country’s drug producers and directs state-owned banks to offer them easy credit terms. This support has enabled Chinese products to compete in global markets at attractive prices, and it has enabled Chinese producers to undercut any potential competing drug or API producer elsewhere in the world so completely that they fail for lack of profitability.
At the same time, Beijing has used its power within the Chinese population to attract clinical trials by making them faster, less expensive, and much less legally complex than in, say, the United States.
So far, in difficult and sometimes acrimonious Sino–American trade negotiations, Beijing has had no need to call attention to this source of power. Threats—explicit and implicit—to deny America and the world the rare-earth elements so important to technology have pushed Washington to moderate its positions on trade.
There can be little doubt, however, that if the United States develops adequate alternative rare-earth supplies and revisits its once highly aggressive approach, China would use its power in global pharmaceuticals the same way it has used rare earths. And while Washington and others have made headlines in their efforts to develop alternative rare-earth sources, the government and the pharmaceutical industry have begun taking tentative steps to weaken China’s currently commanding position.
Drug companies have begun experimenting with biofermentation, which would use living microbes instead of Chinese chemicals to produce active drug ingredients. To soften the ability of Chinese producers to undercut potential competition, Washington has considered offering near-term premiums to domestic producers, though no legislation has yet made it onto Congress’s agenda.
There is also vague talk of easy regulatory impositions on production and on clinical trials. Other nations have offered to work with Washington on answers to Chinese power in this area.
As with efforts to find alternative sources of rare-earth elements, pharmaceutical diversification away from China will take time to take effect and even longer to significantly weaken China’s present position. In the interim, Chinese leader Xi Jinping could retain considerable power when meeting with Trump to hammer out U.S.–China trade arrangements.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.
