Escalating Trade War: China’s Ban on Rare Mineral Exports to the US
Marina Gruzer | 15 January 2025
Summary
The US imposed export restrictions on 140 Chinese semiconductor firms, prompting China to ban exports of gallium, germanium, and antimony to the US, escalating tensions in Sino-US trade politics.
China's global dominance in the mining and refinement of these minerals (94% of gallium, 83% of germanium, 56% of antimony) risks price hikes and supply disruptions in semiconductor manufacturing, defence, EV and renewable energy industries.
Short to medium-term trade turbulence is expected, as the US may implement retaliatory trade restrictions on China and seek alternative suppliers of gallium, germanium and antimony. Overall, long-term tensions depend on the extent to which President-elect Trump commits to his promised tariff restrictions on China.
On 2 December 2024, the US Department of Commerce launched a new crackdown policy on Chinese semiconductor firms and limited exports to 140 Chinese companies under a strict “entity list”. Aiming to ‘slow China’s development of advanced AI’ and limit Beijing’s semiconductor production, this policy package limits US shipment of high bandwidth memory (HBM) chips, chip-making tools and equipment to China. Additionally, this entity list bans the targeted Chinese firms from trading with companies based in the US or US-allied states such as Japan and Singapore. China then retaliated by banning exports of critical minerals to the US, including gallium, germanium and antimony. This reflects a broader escalation in Sino-US tensions with Biden’s administration’s increased restrictions on trade and technology transfer.
China’s ban on critical minerals exports to the US disrupts supply chains across many industries, such as advanced semiconductor manufacturing, defence and renewable energy technology. Importantly, finding alternative trade partners for these critical minerals will be challenging due to China’s domination of market share. Currently, China controls 94% of the global supply of gallium, which is crucial for manufacturing the HBM chips used for advanced defence and AI capabilities. China also accounts for 83% of the supply of germanium and 56% of antimony. As the largest miner and refiner of all three materials, China’s export ban risks increasing the prices of these minerals. The price impact of previous restrictions can be seen in the 228% price rise of antimony trioxide in the Netherlands at the start of 2024.
Some US zinc mine firms argue that diversifying the supply of germanium and gallium is possible by increasing the capacity of refining facilities for minerals recovery as a byproduct of zinc mining. However, this would not be economically feasible due to the extensive infrastructure investment that would be required to achieve meaningful results. It is estimated that disruptions in germanium and gallium supply chains could cost the US a ‘$3.4 billion decrease in GDP’ as costs rise for US semiconductor device industries. Specifically, this is because gallium and germanium prices risk growing by more than 150% and 26% respectively in the event of a full embargo. Despite this, there have been no Chinese exports of germanium and gallium to the US in 2024 and overall Chinese antimony exports fell by 97% after previous export restrictions took place. Consequently, while disruptions in mineral supply chains risk rising costs across semiconductor, renewable energy and EV manufacturing industries more broadly, Beijing’s recent bans may have a limited impact as the US has already been facing limited imports from China.
Andy Li/Unsplash
Forecast
Short-term
With the risk of US retaliation, tensions in trade relations between the two countries will likely rise. This could further escalate price volatility in critical minerals and semiconductor manufacturing industries due to disrupted supply chains and production delays, especially if China introduces export bans on other materials such as graphite, lithium and copper.
Medium-term
Considering the export bans and risk of tit-for-tat restrictions on other critical minerals, it is likely that the US will search for gallium and germanium supply chain options among alternative largest exporters such as Canada and Japan.
Long-term
US-China trade conflict is likely to continue, level of volatility or escalation depends on President-elect Trump's implementation of global tariffs