How China Is Weaponizing Its Dominance In Critical Minerals Trade – Analysis

By Keith Rockwell

Export curbs applied to technology or critical raw materials are often justified by the need to promote downstream industries, the raising of revenue and environmental protection. But there are other motivations, including the desire to gain an upper hand on a geopolitical rival.

Governments justify export restrictions as necessary for national security, an ill-defined concept often used to defend trade-distorting actions. During the 2007 food crisis, countries hoarded rice and maize. During the COVID-19 pandemic, governments applied export bans on vaccines and medical diagnostic products. The war in Ukraine saw Russia restricting agricultural, mineral and energy exports. An average of more than 110 export restrictions were introduced each yearbetween 2021–23.

China’s December 2024 ban on exports to the United States of critical raw materials was predictable, given their strategic value in the production of semiconductors, electric batteries and armaments. The number of restrictions on the export of critical raw materials applied by governments grew more than five-fold between 2009–20 to 13,102. But this move represents a dangerous step which will further damage US–China relations.

Gallium is used in semiconductors, germanium in both semiconductors and infrared technologies, antimony in the production of everything from bullets to missiles, while graphite is critical for electric batteries. China dominates the world market in all of these materials, producing roughly 60 per cent of the world’s germanium, 80 per cent of global gallium production and 78 per cent of antimony.

The perceived utility of export curbs was underscored when China replied to Donald Trump’s decision to hit Chinese goods with 10 per cent tariffs. In addition to its imposing import duties on automobiles and filing a dispute settlement case at the World Trade Organization, Beijing imposed another layer of export restrictions on 4 February, this time on materials used in the production of military, information technology and clean energy products.

Beijing’s muscle flexing signals to Trump that it will respond aggressively to Washington’s cascade of trade restrictions. In the past, China’s actions have been a direct response to the cavalcade of technology sanctions imposed by the United States and its allies.

In 2018, the Trump administration banned Huawei and ZTE telecommunications equipment for government use. US allies later adopted similar prohibitions. Under former president Joe Biden, the United States banned exports to China of advanced semiconductors, quantum computing equipment and lithography equipment, also barring Japanese and Dutch companies using US technology from exporting to China.

Reciprocal sanctions have driven up costs for both US and Chinese tech companies and fuelled national security concerns. Washington’s fear of being shut out of supply chains led the Biden administration to completely rethink its approach. Sustainability and ‘friendshoring’ became the principal objectives.

In 2006 and 2010, China imposed export restrictions on rare earth minerals that are important components in defence technologies, clean energy products, smartphones, digital cameras and computer hard disks.

China is the dominant global producer of rare earths, mining 240,000 tonnes in 2023. Chinese reserves at the end of 2023 amounted to 44 million tonnes. By contrast, the United States — the second largest producer — extracted 43,000 tonnes and had reserves of 1.8 million tonnes.

Alarmed at the prospect of being cut off from rare earth supplies, Washington, Brussels and Tokyo all brought cases against China to the World Trade Organization in 2012. The United States argued that the artificial shortage of these minerals constituted a national security threat. In 2014, dispute settlement panels ruled in their favour and the Chinese measures were withdrawn.

Trade restrictions have been unsettling and costly, but have also inspired companies to adapt, either with alternative technologies or by exploring new sources of materials. Despite US sanctions, Chinese companies have shown surprising resilience. Cut off from imports of advanced chips, Huawei developed its own advanced semiconductor for its Mate 60 Pro smartphone. Barred from using technologies like Apple’s iOS or Google’s Android in the production of its smartphones, the company unveiled in August 2023 its own operating system, HarmonyOS NEXT.

Price surges for scarce minerals — gallium has risen 212 per cent from its 2020 price of US$298.20 per kilogram — have also driven new entrants to the mining business, threatening China’s dominant position. This mirrors the rising global production of rare earth metals since 1995, jumping from 75.7 kilotons to more than 350 kilotons in 2023.

It is impossible to predict whether Trump will ramp up sanctions against China or seek a deal for greater access to the vast Chinese market. He is a dealmaker, but has also pledged to levy tariffs as high as 60 per cent on all Chinese goods and has surrounded himself with China hawks who will encourage a hard line. Distrust of Beijing in Washington is deep and cuts across party lines.

Many US commentators see China weakened by slowing economic growth, demographic challenges and few real allies. But it would be a mistake to take China lightly. The January announcement that Chinese tech company Deepseek has developed an artificial intelligence model at a fraction of the cost of Western companies is further proof of this.

President Xi Jinping is determined to preserve and augment China’s greatness and has made clear that any future aggression will be dealt with promptly and formidably.

Even before Trump’s decisive victory in November, the US–China relationship was volatile. As he retakes the White House, there is a real risk that relations will deteriorate further. Keeping a lid on trade tensions will be a tall order.

• About the author: Keith M Rockwell is Senior Research Fellow at the Hinrich Foundation and Global Fellow at the Wilson Center.
• Source: This article was published by East Asia Forum