On December 9, 2024, China's Ministry of Commerce announced a ban on the export of certain rare chemical elements to the United States. These elements, categorized as dual-use goods, are essential for semiconductor production and various technical applications.
This decision follows recent export controls imposed by the US on China, marking a continuation of the growing rivalry between the two nations, particularly in trade, defense technology manufacturing, and artificial intelligence development.
Claire Reade, a senior attorney at Arnold & Porter in Washington, noted an increasing hardening of positions on both sides. China perceives US actions as an attempt to hinder its legitimate development, while the US views it as a national security concern to prevent China's dominance in specific sectors.
The Chinese government justified its export restrictions as a measure to protect national security. Concurrently, the US continues its campaign against China's semiconductor sector, announcing a third list of restrictions in as many years, targeting 140 companies, including major technology firms.
US Secretary of Commerce Gina Raimondo described these export controls as the most stringent ever imposed by the US to limit China's ability to produce advanced chips necessary for military modernization.
China's response extends beyond metal and mineral exports, with four major trade associations urging their members to reduce reliance on US chips, labeling them as 'unsafe and unreliable.'
The US National Security Council is currently reviewing China's recent actions, emphasizing the importance of strengthening collaboration with other nations to shift critical supply chains away from China.
The banned exports include gallium and germanium, both of which have been under export controls since 2023. Gallium is vital for high-quality semiconductors, solar panels, and radar systems, while germanium is used in fiber optics and satellites.
According to the US Geological Survey, China produced 98% of the world's gallium supply in 2023. While sourcing germanium data is more challenging, China also dominates this market.
The US imports these products from China, Canada, Germany, and Japan. However, prices have surged significantly in the global market since China began implementing restrictions last year.
A warning from the US Geological Survey in November 2024 indicated that a complete export ban on gallium and germanium by China could result in a $3.4 billion drop in the US GDP.
Despite China's dominance, the US has alternative options for sourcing these metals, including increasing production from other countries. Gallium is primarily obtained as a byproduct of aluminum production from bauxite, suggesting that investments could be made to boost domestic production.
This latest exchange between China and the US occurs just over a month before President-elect Donald Trump begins his second term, during which he has pledged to impose high tariffs on imports from China, continuing the trade war initiated during his first term.
Reade believes that the decisions made by China reflect a broader trend, independent of who is in the US presidency, indicating a growing confidence in Beijing's efforts to reduce dependence on the West.
China aims to convey that it will not passively accept actions that threaten its economic development or national security, concepts that are broadly defined by the Chinese government.