The USA tightens its chip sanctions against China - the next day, the People's Republic responds with an export ban on certain critical minerals. There is also likely to be an impact on markets in third countries.
The export of certain critical raw materials from China to the USA has been banned since Tuesday. The The Ministry of Commerce justified the export restrictions, which became known on the same day, with national security.
Specifically affected are several dual-use goods that can be used for both civilian and military purposes, including the technology metals Gallium, Germanium and Antimony, whose main producer is China. In addition to their civilian use, gallium and germanium are also used in the military, for example for lasers and night vision devices. Antimony is primarily used as an alloy component to harden soft metals and in the form of antimony trioxide as a flame retardant. Both applications are also of military importance.
The measure can be seen as the final step so far in the ongoing trade conflict between the two countries. Only the day before the USA tightened its existing export restrictions against the People's Republic, and China's access to advanced memory chips and chip manufacturing technologies has been even more restricted since then.
What is new is that the latest restrictions are now aimed directly at the USA, whereas in the past China's export controls affected all trading partners.
Onward delivery from third countries to the USA also prohibited
The supply situation in the United States could be exacerbated by another crucial aspect of the new regulations. China not only prohibits the export of gallium and other materials to the United States, but has also announced legal consequences for companies and organisations in third countries that want to supply these materials there as intermediaries.
Matthias Rüth, Managing Director of TRADIUM: "The latest export restrictions from China to the USA are once again causing nervousness on the international commodity markets. Once again, China is consistently exploiting its dominant market position in many industrial metals. What is new is that Beijing is also paying more attention in future to ensuring that raw materials do not reach the US via detours. Every buyer country - whether the USA, Japan or European states - is faced with the challenge of strategically diversifying its supply of raw materials in order to be able to cushion such restrictions. China remains an indispensable player and its dependence on a few sources continues to harbour great potential for conflict."
De facto delivery stop to the USA since June 2023
Even though the official supply ban is only now in force, the USA has in fact not received any more gallium and germanium directly from China since June 2023. This is confirmed by data from the Chinese customs authority. Exports to the USA came to a standstill even before China announced global export controls in July. Since August 2023, Chinese companies wishing to export gallium or germanium must apply for licences and provide extensive background information on the recipients. As a result of these new regulations Exports of both metals collapsed completely for two months. In the meantime, however, deliveries are once again being made to countries such as Germany, while the USA is left empty-handed.
The Antimony situation out. The metal was only subject to export controls one year after gallium and germanium, in August 2024. Larger quantities were last exported to the USA in September of this year. After that, exports fell to almost zero in October.
Effects on the US economy
Only recently, the US Geological Survey calculated, The US government is currently analysing the impact it would have on the domestic economy if China were to stop exporting gallium and germanium in its entirety, including to third countries. According to the authority, this would threaten to reduce the gross domestic product of the USA by 3.4 billion US dollars. In addition to its importance for the defence industry, gallium in the form of gallium nitride and gallium arsenide is of great importance for the production of semiconductors in the chip industry. The latest sanctions, which are likely to have a major impact on the US high-tech industry, have thus come full circle to a certain extent.
