In retaliation to new export controls from Washington designed to restrict China’s ability to develop artificial intelligence, Beijing has banned shipments to the US of several critical minerals and metals used in energy infrastructure and military applications.
Such critical minerals remain essential to many energy transition technologies and countries around the world are competing to secure reliable access to supply chains or develop resources domestically. Below, we outline what the ban means for the US and assess the global implications.
China’s complete bans of critical minerals to the United States
In 2023, China started its pathway to progressive export restrictions by imposing export licensing controls on some mineral commodities containing gallium and germanium.
On 3 December 2024, China announced an immediate ban on exports of gallium, germanium, and antimony to the United States (US). The decision also enforces stricter reviews of graphite commodities shipped to the US.
China dominates the global mining and refining of those minerals. The US depends on imports from China for 54% of its germanium and gallium consumption and 63% of its antimony consumption.1
Gallium and germanium are critical materials crucial for the manufacturing of advanced technologies such as semiconductors, with germanium also critical for infrared technology, fibre optic cables, solar cells, and space exploration. Antimony is used in bullets and other weaponry, while graphite constitutes the largest component in electric vehicle batteries.
Trump’s agenda and Beijing’s tit-for-tat response
Minerals play a crucial role in energy infrastructure and operations; how the Trump administration addresses energy transition critical minerals will be vital.
Since the US currently lacks sufficient production to meet domestic demand and must rely on imports, the US government has employed tactics such as reforming the mine permitting process and imposing tariffs on minerals in order to enhance mineral independence and security for the US energy sector, aimed at ‘decoupling from China and reliance on foreign supply chains’ and ‘expedited permitting and reduced environmental regulation’.
The trigger to China’s mineral bans was on 2 December 2024, one day before the ban, Washington added more than 100 Chinese companies to a restricted trade list and banned some of the fastest semiconductors and the equipment being sold to China, aimed at hindering China’s advancement in semiconductors and AI systems.2
Impact on US economy
According to the United States Geological Survey (USGS), China’s germanium, gallium ban could cost the US $3.4 billion.3 The economic losses in the US would primarily impact the semiconductor device manufacturing industry and any downstream producers who rely on semiconductors as inputs.
USGS also predicts gallium prices could increase by more than 150% and germanium prices by 26% in the event of a total ban. This forecast took into consideration of currently available production capacity outside of China, and the short-term substitute potential.4
Global implication of the export ban
Globally, the bans threaten to divide global supply chains further, by forcing companies to choose whether products with these critical minerals should be supplied only to the US and aligned country market or only to the Chinese market. China has been trying to persuade companies globally (particularly from Europe), that they should invest and build supply chains in China and not the US.
EU businesses are increasingly worried about being caught in the crossfire of the ongoing tech war between the US and China. China’s critical minerals embargo is a ‘direct threat to Japanese and European interests to push them away from the US.’5
Conclusion
From the US’s perspective, as China is weaponising its control over essential resources, the US will renew calls for US critical mineral independence. Despite Trump’s ambition in taking the ‘decoupling’ approach and producing these critical minerals domestically, the challenge is new mines cannot be opened soon enough. The immediate solution for US might be to quickly purchase and stockpile critical minerals domestically whenever possible and from allies wherever needed. This will give other supplying countries such as Canada6 and Australia greater opportunities.
For further information, please contact:
Jay Leary, Partner, Herbert Smith Freehills
Jay.Leary@hsf.com
Footnotes
- ‘China Dominates the Supply of U.S. Critical Minerals List’ at https://www.visualcapitalist.com/china-dominates-supply-of-u-s-critical-minerals-list/#google_vignette.
- China’s Critical Minerals Embargo is Even Tougher than Expected at https://www.nytimes.com/2024/12/09/business/china-critical-minerals.html.
- ‘China’s germanium, gallium ban could cost the US $3.4 billion’ at https://www.mining.com/chinas-germanium-gallium-ban-could-cost-the-us-3-4-billions/.
- USGS Critical Minerals Study: Bans on Gallium and Germanium Exports Could Cost the US Billions at https://www.usgs.gov/news/national-news-release/usgs-critical-minerals-study-bans-gallium-and-germanium-exports-could.
- China’s Critical Minerals Embargo is Even Tougher than Expected at https://www.nytimes.com/2024/12/09/business/china-critical-minerals.html.
- Canada mining group uses China ban to push back on Trump tariffs at https://www.mining.com/web/canada-mining-group-uses-china-ban-to-push-back-on-trump-tariffs/.
