China, which produces almost all the world’s supply of critical minerals, has been tightening its grip on the materials.
Credit...Wu Changqing/VCG, via Getty Images

China Announces a Ban on Rare Minerals to the U.S.

The move escalates supply chain warfare and comes a day after the Biden administration expanded curbs on the sale of advanced American technology to China.

by · NY Times

China said on Tuesday that it would begin banning the export of several rare minerals to the United States, an escalation of the tech war between the world’s two biggest powers. The move comes a day after the Biden administration tightened Chinese access to advanced American technology.

The ban signals Beijing’s willingness to engage in supply chain warfare by blocking the export of important components used to make valuable products, like weaponry and semiconductors.

Sales of gallium, germanium, antimony and so-called superhard materials to the United States would be halted immediately on the grounds that they have dual military and civilian uses, China’s Ministry of Commerce said. The export of graphite would also be subject to stricter review.

China is central to many global supply chains, but it generally refrained from clamping down on its own exports during the first Trump administration, preferring instead to take more limited actions like buying soybeans from Brazil instead of the United States. But senior Chinese officials are worried that President-elect Donald J. Trump plans more stringent policies during his coming term in office.

Mr. Trump has promised to put hefty tariffs on goods from China and further sever the trading relationship between the countries. The move on Tuesday — one of the most aggressive steps China has taken to counter increasingly restrictive policies from the U.S. government — could foreshadow more economic conflict as Mr. Trump enters the White House.

China produces nearly all the world’s supply of critical minerals needed to make advanced technologies such as semiconductors. Beijing has been tightening its grip on the materials to retaliate for clampdowns on American technology exports to China over the past two years.

China created a legal framework last year for controlling exports of gallium and germanium, which are used in semiconductors, and on Sept. 15 China added antimony, which is used in military explosives. In October, China began requiring its exporters of rare earth metals, used in everything from advanced semiconductors to smart bombs, to disclose, step by step, how the minerals would be used in Western supply chains.

China’s exports of gallium and germanium briefly halted a year ago until officials in Beijing devised a system for approving such transactions. Shipments to the United States have never fully recovered, forcing the United States to rely more on the purchase of semi-processed materials from other countries like Japan that buy directly from China.

The move by China on Tuesday echoed an unannounced embargo on exports of rare earth metals to Japan that Beijing imposed for two months in 2010 during a territorial dispute between the countries. That embargo produced considerable distress among manufacturers in Japan worried about dwindling supplies, because China provides as much as 99 percent of the world’s supply of some rare earth metals.

The United States could be somewhat less vulnerable to China’s measures now than Japan was then. Many chemical factories in the United States have closed in recent decades, so the country already buys semi-processed materials from countries other than China.

The Chinese ban on superhard mineral exports could provoke particular unhappiness in America’s national security community. That ban appeared to be aimed at Chinese exports of tungsten, which is vital for making armor-piercing bullets and shells, said Oliver Friesen, the chief executive of Guardian Metal Resources, a London company that is planning to mine tungsten in Nevada.

It will take close to three years to establish a new tungsten mine in Nevada, he said, adding: “We’re moving things along quite quickly.”

When the Biden administration broadened tariffs in September that Mr. Trump imposed in his first term, it added a 25 percent tariff on imports of tungsten from China — part of an effort to persuade tungsten users in the United States to find more dependable suppliers elsewhere.

Even before China instituted the ban Tuesday, it had begun limiting its overall antimony exports tightly enough that global prices for the material have doubled in the past three months.

According to the United States Geological Survey, China has been supplying 54 percent of the germanium used by the United States, a material used in infrared technology and fiber optics.

The United States has not mined its own gallium, used in semiconductors, since 1987. Japan supplies 26 percent of American imports of gallium, China 21 percent and Germany 19 percent, along with several smaller suppliers.

Halting exports of critical minerals can backfire. After China temporarily halted exports to Japan in 2010, the Japanese government helped Lynas, a company in Australia, to develop a large rare earth metals mine there as an alternative supplier.

On Monday, the Biden administration expanded its curbs on technology to China by prohibiting the sale of certain types of chips and machinery and adding more than 100 Chinese companies to a restricted-trade list. American officials characterized the limits as a routine action to update the existing curbs and close loopholes that some businesses had used to circumvent prohibitions.

It was the third significant action in the past three years in the Biden administration’s bid to prevent China from catching up to the United States in cutting-edge technologies. The Biden administration has steadily expanded other restrictions on doing business with China, like curbing U.S. investment in certain Chinese industries, and blocking Chinese electric vehicles out of concern their operating systems could share data with Beijing.

Mr. Trump has promised his own aggressive measures that would further cut down on trade between the countries. For example, he campaigned on a promise to add tariffs of 60 percent or more on Chinese products and remove so-called permanent normal trade relations with China, which would also result in higher tariffs on Chinese goods.

China criticized the technology curbs by the United States, calling them “illegal.”

“Such practices seriously undermine the international economic and trade order, disrupt the stability of global production and the supply chain, and harms the interests of all countries,” said Lin Jian, a spokesman for China’s Ministry of Foreign Affairs.

In response to U.S. technology curbs, Chinese industry groups representing business sectors, including semiconductors and auto manufacturing, also released statements on Tuesday calling for Chinese companies to purchase more chips domestically or from countries other than the United States.

“American chip products are no longer safe and reliable, and related Chinese industries will have to be cautious in purchasing American chips,” the China Semiconductor Industry Association said.

These associations include some of the world’s largest consumers of semiconductors, so the warning could have financial implications for U.S. chip makers.

U.S. companies like Micron and Intel were previously targeted by national security investigations in China that threatened to cut them off from a major market. Chinese government officials have also been discouraged from using foreign-made devices, threatening Apple’s market share.

In a statement, John Neuffer, the president of the Washington-based Semiconductor Industry Association, said that the group was evaluating the impact of the proposals and that “any claims that American chips are ‘no longer safe or reliable’ are simply inaccurate.”

The association had “long urged that export controls should be narrow and targeted to meet specific national security objectives,” he said. “We encourage both governments to avoid further escalation.”

Berry Wang contributed research.

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