China responds to US tariffs in early December—export bans on several highly sought-after minerals. You know the ones--gallium, germanium, antimony, and so on. If those words don’t mean much to you, it’s because you probably don’t manufacture computer chips or military technology.
This export ban is the latest installment in a long series of increasingly heated policy decisions exchanged between the United States and China. The Chinese government was responding specifically to the Biden administration’s decision to limit semiconductor-related exports—another manufacturing component used in tech hardware.
“China has lodged stern protests with the U.S. for its update of the semiconductor export control measures, sanctions against Chinese companies, and malicious suppression of China’s technological progress,” a Chinese Foreign Ministry spokesperson said in response to the decision.
Things are only expected to escalate in January when the self-described “Tariff King,” Donald Trump is sworn into office.
How will the increasingly heated tech trade war influence the two largest economies on the planet? And more to the point, what impact will export restrictions have on the price and availability of tech products?
Background - Export Bans
To provide a comprehensive explanation of how trade-related tension has developed between China and the United States, one would need considerably more than the 1000 or so words that constitute this article.
Going back just a year, China announced in the Summer of 2023 that they would require exporters to apply for a specialized licence to ship materials like gallium—a key component for everything from weapon development to cell phone technology—to the United States.
They also put restrictions on the export of more common components like graphite and diamonds—which are often used in small quantities for cutting tools.
They followed those restrictions up later with a ban on antimony exports—a material common to weapon development. They described this ban as a national security initiative. One needn’t stretch their imagination to understand the reasoning. You don’t shake your fists at an opposing country on the one hand and give over the ingredients for nuclear weapons with the other.
Still, these restrictions did nothing to relieve trade tensions.
The United States furthered the conflict considerably this December when the Biden administration announced 140 companies (almost all of which were either located in China or owned by Chinese individuals) on an “entity list.”
Basically, companies on this list are very limited in what they can import from the United States.
Why does this matter? - Importance of Gallium
China is the global leader in gallium extraction. Simply put, it’s a material that every tech company needs. Restricting access to U.S. companies could have a significant impact both on the availability of new products, and their price.
Historically, the United States has gotten about half its gallium supply from China. That’s significant. Worse yet, finding a secondary supplier might be tricky. China controls an estimated 98% of the global gallium supply.
Totaled, these export restrictions influence the manufacturing of products that constituted 10% of the U.S.’s GDP in 2023.
In other words, it’s a noticeable disruption. While trade figures are often abstract to the average consumer, a potential 10% reduction to the GDP is the sort of swing that could influence jobs and product pricing.
However, it’s important to understand that this deficit is not an inevitability. What happens next will depend on how trade negotiations between China and the United States go, and if U.S. tech companies will be able to source sustainable alternatives to Chinese components.
While it’s true that China is a considerable exporter of gallium, it isn’t the only option. Japan exports virtually all of its gallium. They source it primarily through recycling.
The Biden administration has also been focused on identifying sustainable alternatives, primarily through the “Minerals Security Partnership,” a partnership between the United States, the European Union, and fourteen other countries to source necessary manufacturing minerals.
Consequences
In the short term, alternative mineral supply chains may prevent global consumers from feeling the sting of the U.S./China trade war.
Still, China’s almost total control of gallium and other important tech-related minerals means that a long-term solution will eventually be necessary.
When one nation controls almost 100% of one of the world’s most critical minerals, that gives them a lot of bargaining power.
Without Chinese gallium, many tech-related products will eventually experience shortages. Costs will rise. Accessibility will dwindle. Getting the new iPhone will be a whole heck of a lot harder, and people will hoard things like LED lightbulbs, exacerbating the shortage and driving prices up.
Does it have to be that way?
Moving Forward - Trump and his US Tariffs
Both the United States and Chinese economies will eventually need to de-escalate this trade conflict. Of course, “De-escalating trade conflict,” is not in President-Elect Donald Trump’s middle name. Trump has already been pretty clear about his position on tariffs. The incoming president has announced plans to raise tariffs on China by 10% when he returns to office in January.
It's hard to say how that will influence the trajectory of this conflict. Things may very well get worse before they get better.
Conclusion
Trade wars and supply chain disruptions are justifiable topics of concern. Most people reading this will have vivid memories of pandemic-related supply chain disruptions when everything from cars to home appliances were very difficult to acquire.
Challenging though these situations can be, they are not permanent. China needs to export just like the United States requires imports.
Neither country wants to tank their economies just to prove a point.
“Trade wars,” are ultimately just negotiation tactics. Things will calm down eventually. What happens until then remains to be seen.
