China Retaliates Against U.S. Export Controls with Ban on Key Raw Materials

In a fresh escalation of the ongoing trade and technology tensions between the U.S. and China, Beijing announced on Tuesday a sweeping ban on the export of critical high-tech materials such as gallium, germanium, and antimony, with potential military applications.

This move is seen as a direct response to the U.S.’s expansion of export controls on Chinese companies involved in semiconductor manufacturing, which have become a key focal point in the broader geopolitical rivalry.

The announcement by China’s Ministry of Commerce follows the U.S. government’s decision to add 140 companies to a so-called “entity list,” effectively placing them under strict export restrictions. These include controls on the export of essential semiconductor-related equipment and software, as well as high-bandwidth memory chips crucial for advanced technological applications.

The U.S. justifies these actions on national security grounds, citing concerns over the potential military use of technologies that could be diverted to Chinese military applications.

The Materials at the Center of the Dispute

Gallium and germanium, which are produced almost exclusively in China, are vital components in the production of advanced semiconductors, solar panels, and military technologies, including GPS systems and missiles. These metals are also crucial in the development of mobile phones, electric vehicles, and other high-tech consumer goods.

As the largest global supplier of both materials, China’s decision to restrict its export to the U.S. is expected to have significant implications for the American tech industry, which relies heavily on these imports for its own manufacturing processes.

In addition to gallium and germanium, the export ban also includes antimony, a versatile material used in a range of industries from batteries to weapons production. The restrictions on graphite and super-hard materials, such as synthetic diamonds, further complicate the situation. These super-hard materials are used in manufacturing cutting tools, disc brakes, and protective coatings in various industrial sectors.

Washington’s actions are driven by concerns over national security, particularly around China’s military capabilities and the rapid advancements in its AI and semiconductor sectors. However, these measures have been widely criticized by Chinese industry leaders who argue that the U.S. is using national security as a pretext to gain an unfair economic advantage.

The China Semiconductor Industry Association and the China Association of Automobile Manufacturers have both issued statements condemning the U.S. restrictions, calling them an abuse of export control mechanisms and a violation of free-market principles. The statements also highlight the negative impact on global supply chains, arguing that these measures are inflating costs and disrupting business for American companies that rely on Chinese supply chains for materials like gallium and germanium.

“Such behavior seriously violates the laws of the market economy and the principle of fair competition, undermines the international economic and trade order, disrupts the stability of the global industrial chain, and ultimately harms the interests of all countries,” it said in a statement.

The U.S. Geological Survey indicates that nearly half of the U.S. supply of gallium and germanium comes from China. In 2022, China exported approximately 23 metric tons of gallium and produced around 600 metric tons of germanium. These figures underscore China’s dominant role in the global supply of these critical materials and its ability to leverage this position in the ongoing trade conflict.

While the U.S. is already experiencing disruptions due to these export restrictions, experts have warned that the long-term consequences could be far-reaching. American tech companies are now facing significant challenges in securing supplies of essential materials for semiconductor manufacturing, which could result in delays and higher costs for new technologies.

The semiconductor sector, already under pressure from U.S. sanctions on Chinese firms, is likely to experience additional strain as China tightens access to these vital raw materials.

In response, China’s government has signaled that these measures are not just retaliatory but are also aimed at protecting its own “rights and interests” in the global trade arena. As the U.S. seeks to limit China’s access to cutting-edge technology, China is asserting its control over the materials crucial for the manufacturing of those same technologies.

This means the trade war over high-tech materials is going to intensify as both nations continue to ramp up tariffs and restrictions.

Analysts believe that beyond the semiconductor and high-tech industries, the growing tensions over trade restrictions could have significant geopolitical ramifications. As the U.S. continues to press its allies to limit their economic ties with China, particularly in the tech sector, they note that Beijing may look to strengthen its alliances with other global players, including Russia and parts of Europe, to mitigate the impact of Western sanctions.