US-China Tensions Rise Over Critical Minerals

January 7, 2025

The ongoing trade tensions between the United States and China have intensified, particularly regarding critical minerals essential for advanced technology and defence. Following the US’s stringent export controls on chipmaking equipment and software, China has responded with its own set of restrictions. This escalation marks shift in the dynamics of the tech war, with both nations leveraging national security as a justification for their actions.

Background of Trade Restrictions

Since 2022, the US has imposed increasing restrictions on China’s access to critical technologies. This includes advanced semiconductor components. In response, China has restricted imports from US companies, notably banning chips from Micron in sensitive sectors. The tit-for-tat nature of these restrictions marks the strategic importance of critical minerals in the ongoing conflict.

China’s Export Control Measures

On December 3, 2024, China announced its most stringent controls on critical minerals. This was a direct response to the US’s actions against Chinese companies. The restrictions specifically target dual-use materials crucial for defence and technological development. By creating a consolidated list of restricted items, China aims to exert pressure on the US and signal its leverage in the trade war.

Impact on Global Supply Chains

China dominates the global critical mineral supply chain, producing nearly 60% of these minerals and refining about 85%. The US’s reliance on these resources complicates its position. Delays in deliveries have already impacted companies like Henkel, leading to declarations of force majeure. The interconnectedness of global supply chains means that restrictions can have widespread repercussions.

National Security Justifications

Both the US and China invoke national security to justify their export controls. The US aims to hinder China’s advancements in artificial intelligence and semiconductor technology. Conversely, China defends its actions by citing the need to protect its national security and fulfil international obligations. This mutual invocation of national security raises concerns about the genuine motivations behind these trade restrictions.

Future Projections Under Trump’s Administration

With Donald Trump returning to the White House, changes to the US’s critical minerals strategy are expected. Anticipated actions include increasing tariffs on mineral imports and investing in domestic mining projects. Trump’s administration is likely to continue Biden’s focus on reducing dependence on China for critical minerals, further securitising the supply chain.

The Broader Geopolitical Landscape

The trade restrictions between the US and China are affecting relationships with other nations, particularly allies like Canada, South Korea, and Japan. These countries are key exporters of critical minerals to the US. Increased tariffs and restrictions could lead to retaliatory measures from these nations, complicating diplomatic relations.

Henkel, a German firm, faced force majeure due to mineral delays.
China controls 60% of global critical mineral production.
Micron chips are banned in China’s sensitive sectors.
Trump’s previous executive order aimed to curb foreign dependence.
Canada is exploring retaliatory measures against US tariffs.

The Complexity of National Security

As both nations continue to expand their definitions of national security, the implications for global trade are deep. The critical mineral sector is becoming increasingly securitised, with potential ramifications for international relations. The ongoing trade war marks the complexities of balancing national interests with global economic realities.

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