China Retaliates Against U.S. Semiconductor Restrictions by Banning Critical Mineral Exports

In the latest sign of its growing efforts to cut off American access to crucial inputs for advanced technologies, China introduced new export controls on several critical minerals used in both civilian and military production on December 3. The latest restrictions are a retaliation for the U.S. administration’s imposition of new limits on the export of semiconductors to China, denounced in a Chinese Foreign Ministry statement as a “malicious suppression of China’s technological progress.”

Beijing’s new measures mean that Chinese firms are prohibited from exporting gallium, germanium, and antimony to the United States. Citing national security concerns, the Chinese Ministry of Commerce also announced greater restrictions on the export of industrial-strength diamonds and other dense synthetic materials used for cutting tools and other manufacturing processes.

Export Restrictions Build on Previous Measures

The restrictions build on previous Chinese export controls launched in retaliation for U.S. high-tech trade restrictions. In July 2023, following the Biden administration’s initial 2022 restrictions on semiconductor exports, the Chinese Ministry of Commerce introduced limited export controls on gallium and germanium, both of which are used in the production of semiconductors and other advanced electronics sold domestically and abroad.

In August 2024, China followed this announcement with additional restrictions on exports of antimony, a key component in armor-piercing ammunition, night-vision goggles, and nuclear weapons. China had also previously restricted the export to the United States of graphite, which is used in a broad range of industrial processes, including within the nuclear and aerospace engineering industries.

U.S. Can Handle New Restrictions Over the Long Term

While China is a significant global supplier of these resources, the United States also has substantial domestic deposits and has expanded its reliance on allies and partners for alternate sources. U.S. firms are key customers for gallium suppliers based in Canada, Japan, and Singapore. Additionally, American companies imported nearly half of their germanium from Belgium in 2023, signaling a move away from the Chinese market. The United States also boasts significant estimated domestic deposits of germanium in Alaska, Tennessee, and Washington, though nearly all domestic processing now occurs via recycling.

However, despite these shifts, the United States will initially struggle to replace these losses brought about by China’s retaliation. Much of the U.S. mining sector operates on long-term contracts, which presents challenges for firms seeking to rapidly identify alternate suppliers. Moreover, American companies rely on China for nearly two-thirds of their antimony imports, while other global producers, including Australia and Central Asian countries, sell primarily to Chinese refineries.  

Restrictions Offer an Opening for Renewed Domestic Production and Ally-Shoring

While painful in the short term for the United States, Beijing’s decision will likely be harmful to its own interests over the long run by prompting potential partners to diversify their supply chains away from Chinese critical minerals.

Moreover, China’s restrictions will provide a critical opening for Washington to promote domestic production and strengthen its supply chains. In the short term, Congress can ease the adjustment required to secure alternate suppliers by offering financing for U.S. firms seeking new agreements with other industry partners, particularly those within allied and partner nations. In the longer term, the United States can strengthen its efforts to encourage ally-shoring by incentivizing the location of mineral production and refining capabilities on U.S. allies and partners’ soil, as well as expanding domestic production. These measures should include bolstering the U.S. domestic stockpile of critical minerals and encouraging mine development by offering regulatory relief and lowering financial barriers to entry.

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.