Covid restrictions are gradually lifting, however the expected rise of consumer prices when an economy opens back up is not taking effect. Consumer prices exhibited their first year-over-year decline in over two years in July. Similarly, producer prices moved into negative territory in late 2022, with their lowest reading of -5.4% in June. China is currently facing a litany of economic problems including rapidly decreasing exports, high youth unemployment, and a teetering housing market. China is heavily reliant on Western demand to drive its exports, and its trading partners have reduced consumption. To make matters worse for China, the U.S. CHIPS and Science Act provided $166 billion of investments in semiconductors and electronics in the first year, according to the U.S. government. One company taking advantage of this is Taiwan Semiconductor Manufacturing Co., the largest semiconductor manufacturer in the world. The company announced a massive project in Phoenix, investing nearly $40 billion and generating around 21,000 jobs. The Biden Administration is hoping these new operations will bring with it more development and suppliers in what could potentially create a “Silicon Desert” here in the U.S. This is emblematic of the intensifying geopolitical relationship between China and the West, which has caused many Western manufacturers to abandon dependency on China. This is evidenced by Chinese goods shipments to the U.S. dropping 23% in July compared with a year ago. With less active foreign trade partners, China is heavily relying upon domestic demand, which is proving far weaker than its foreign demand. If it cannot bolster its price indices, it could find itself stuck in a deflationary environment with a slim chance of the country’s typical stimulus measures being able to pull the economy out of its downward spiral.