China’s ban on key high-tech materials could have a huge impact on industries and the economy
BANGKOK– China has exports prohibited of key materials used to make a wide range of products, including smartphones, electric vehicles, radar systems and CT scanners, which are returning to Washington after its expansion. export controls to include dozens of Chinese companies that make equipment used to produce advanced computer chips.
Both sides say their controls are justified by national security concerns and accuse the other of “weaponizing” trade. Analysts say the latest restrictions could have a significant impact on manufacturing across many sectors and supply chains.
“Critical mining security is now intrinsically linked to the escalating tech trade war,” wrote Gracelin Baskaran and Meredith Schwartz of the Center for International Strategic Studies, in a report on Beijing’s decision.
The full impact will depend in part on the ability of U.S. industries to compensate for any loss of access to strategically important materials, equipment, and components.
Here’s why it could be a turning point in the trade conflict between the two largest economies, coming at a time when antagonisms are already expected to intensify once President-elect Donald Trump takes office, given his promise to increase prices on imports of products manufactured in China.
China has banned in principle exports to the United States of gallium, germanium and antimony — critical minerals needed to make advanced semiconductors, among many other types of equipment. Beijing has also tightened controls on exports of graphitewhich is used in electric vehicle batteries and grid storage. China is the largest source of most of these materials and also dominates the refining of these materials, which are used for both consumer goods and military purposes.
The limits announced Tuesday also include exports of ultra-hard materials, such as diamonds and other non-compressible, extremely dense synthetic materials. They are used in many industrial fields such as cutting tools, disc brakes and protective coatings.
Next on the list of potential bans, experts say: tungsten, magnesium and aluminum alloys.
China’s Commerce Ministry announced its measures after the U.S. government ordered a series of new measures intended to prevent sales to China of certain types of advanced semiconductors as well as the tools and software needed to make them. Washington also expanded its “entity list” of companies subject to strict export controls to include 140 additional companies, almost all of them based in or Chinese-owned in China.
Commerce Secretary Gina Raimondo said the revised rules were aimed at harming China’s ability to use advanced technologies that “pose a risk to our national security.” The updated regulations also limit exports to China of high-bandwidth memory chips, needed to process huge amounts of data in advanced applications such as artificial intelligence.
Export licenses will likely be denied to any U.S. company attempting to do business with the 140 companies newly added to the “entity list,” as well as the dozens more already on the list. The goal, officials say, is to prevent Chinese companies from exploiting American technology to make their own semiconductors.
The Biden administration has increased the number of companies affected by such export controls while encouraging an expansion of semiconductor investment and manufacturing in the United States and other Western countries.
Washington has also extended restrictions on exports of advanced semiconductor technologies to companies in other countries, while excluding companies from key allies like Japan, South Korea and the Netherlands, which are believed to have of their own export controls.
In a word: very. For the United States, Japan, South Korea, Taiwan and other producers of advanced technologies and components, access to materials with properties such as high conductivity is crucial: gallium and germanium are increasingly used in advanced semiconductors in place of silicon.
The materials subject to Chinese export controls are among 50 that the United States Geological Survey has designated as “critical minerals” — non-combustible minerals essential to the economic or national security of the United States and whose supply chains are vulnerable to disruption.
Gallium topped that list. It is necessary to manufacture the same high-bandwidth memory chips that the United States wants to avoid allowing China access to for use in artificial intelligence and defense applications. It is used to make LEDs, lasers and magnets used in many products. Germanium is used, among other things, for optical fiber and solar panels.
A USGS study recently estimated the likely total cost to the U.S. economy of gallium and germanium supply disruptions alone at more than $3 billion. But the situation is complicated. China imposed licensing requirements for exports of both metals in July 2023. It has not exported either to the United States this year, according to Chinese customs data. Antimony exports also fell.
China produces the lion’s share of the most critical minerals, but there are alternatives. Japan also imports almost all of its gallium, for example, but it also extracts it by recycling scrap metal.
Washington has decided to exploit sources other than China, forming a “Mineral Security Partnership” with the EU and 15 other countries. President Joe Biden’s visit to Africa this week highlighted this effort. Potential supply disruptions have also spurred efforts to exploit U.S. deposits of rare earths and other critical materials in southeastern Wyoming, Montana, Nevada, Minnesota and parts of the Southeast. American West.
Germanium was extracted from zinc mined in Alaska and Tennessee and the U.S. government has stockpiles of it. The Department of Defense has a recycling program to extract germanium debris from night vision lenses and tank turret windows.
But China’s dominance as a supplier gives it a significant cost advantage, and U.S. resource companies face intense pressure over the potential environmental impact of mines and refineries.
Since President Trump launched a trade war against Beijing, which has intensified over time, China has taken a relatively constrained and cautious approach to responding to U.S. limitations on access to advanced technologies.
Much depends on the future development of global relations. It’s unclear whether Trump will follow through on his promise to significantly raise tariffs once he takes office or whether such statements will be a first step in future trade negotiations.
China responded by raising tariffs, but excluding many items crucial to its own economy. It has sanctioned some companies, including defense contractors that do business with Taiwan, but stopped short of outright banning exports of vital materials to the United States.
This time it might be different.
Just after China’s Ministry of Commerce announced its export ban, various Chinese industry associations, including automakers and the China Semiconductor Association, issued statements denouncing Washington’s moves to restrict access to strategically sensitive technologies. and declaring that American computer chips are unreliable.
Beijing’s announcement also expands its ban on the export of Chinese-produced gallium and other critical minerals to the United States to apply to all countries, entities and individuals, saying violators “will be held accountable in accordance with to the law.”
