China is banning the export to the United States of certain strategic minerals used in the military and high-tech industries as a trade war worsens between the two superpowers.
China on Tuesday said it is stopping exports of gallium, germanium and antimony to the U.S., citing national security concerns. China is also looking at restricting the export of graphite, which is a key input for electric car batteries.
The crackdown on critical minerals exports is in retaliation over U.S. President Joe Biden’s recently imposed restrictions on shipments to China of select semi-conductors used in artificial intelligence, also citing national security concerns.
Chinese Foreign Ministry spokesperson Lin Jian in a briefing on Tuesday lashed out at the U.S. over its “malicious suppression of China’s technological progress,” according to the Associated Press.
While the United States is the world leader in artificial intelligence and companies such as Nvidia Corp. dominate chip sales, China is a key supplier of many of the critical minerals needed for the technology.
“The only way to effectively break the Chinese monopoly in the critical mineral space is to stand up and build a free-standing North American critical mineral supply chain,” U.S. Ambassador to Canada David Cohen said in a meeting with The Globe and Mail’s editorial board.
The U.S. has had no domestic production of primary unrefined gallium, (raw metal as opposed to recycled) since 1982, according to the United States Geological Survey. After Japan, China is the biggest supplier to the U.S., accounting for 21 per cent of its imports. Gallium is used in semi-conductors, LEDs and LCD displays.
Antimony is not mined in the United States on a primary basis, with the country relying on China for 35 per cent of its imports, according to the USGS. The mineral is used in semi-conductors, and well as a flame retardant in the aerospace industry, an alloy in lead storage batteries and in night vision goggles for the military.
Christopher Ecclestone, principal and mining strategist with Britain-based commodities researcher Hallgarten & Co., said that while the optics of China clamping down on U.S. exports of certain critical minerals on the surface may appear alarming, in practice it will be very difficult for China to police. That’s because there is little to stop critical minerals exported from China to countries other than the United States eventually ending up in the U.S.
“The U.S. has multiple subsidiaries all around the world, there are no end of sleazy Swiss-based trading firms who will swear on their mother’s grave that the product isn’t going to the U.S. as it’s going to the U.S.,” Mr. Ecclestone said.
“Having a ban where you think you can pick and choose who the recipients of the product are going to be is somewhat ludicrous.”
Canada can also help fill some of the supply gaps to the U.S. stemming from the ban.
While the U.S. imports 54 per cent of its germanium metal needs from China, Canada supplies 46 per cent of its germanium dioxide (a compound of germanium and oxygen). Vancouver-based Teck Resources Ltd. is a major supplier. Teck produces germanium dioxide at its Trail smelter in British Columbia as a byproduct of zinc mining in Alaska. Germanium is used in fibre optics communication networks, infrared night vision systems and solar panels.
Trade relations have been tense for months between the U.S. and China. In May, the Biden administration increased tariffs on China across a broad swath of imports, including electric cars, lithium ion batteries, steel and aluminum products, and on many critical minerals, accusing the country of unfair trade practices.
President-elect Donald Trump has promised to get even tougher on China once he is inaugurated, promising tariffs of in excess of 60 per cent on the country. China’s latest move against the U.S. on critical minerals will only embolden Mr. Trump to follow through and possibly go even further, Mr. Ecclestone said.
“Trump is a bull who very much reacts to a red rag, and the Chinese are waving it at him at the moment.”
Canada so far has been more timid than the United States in cracking down on Chinese imports. While Ottawa followed Washington in imposing tariffs on Chinese imports of electric cars, steel and aluminum products, it has stopped short of imposing tariffs on a bigger basket of critical minerals.
With a report from Mark Rendell