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Home World News Asia

China’s Mineral Export Ban Strikes at the US Defense Industrial Base – The Diplomat

December 6, 2024
in Asia
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China’s Mineral Export Ban Strikes at the US Defense Industrial Base
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On December 3, China’s Ministry of Commerce announced that “the export of dual-use items such as gallium, germanium, antimony, and superhard materials to the United States will not be permitted.” This announcement likely means that over 20 mineral items – encompassing both metals and chemicals – are banned from being exported from China to the United States.

Many of these items are important to U.S. national security. For example, antimony is found in bullets and artillery rounds; gallium is used in integrated circuits for advanced radar systems; and germanium is needed for night-vision and thermal-sensing systems. Without adequate supplies of these elements, the defense industrial base could be delayed in manufacturing the downstream munitions and weapons systems, undermining the warfighting capabilities of the U.S. military.

Critically, China – the United States’ “most consequential strategic competitor” according to the 2022 National Defense Strategy – is the largest source of U.S. imports for antimony metal and oxide, as well as germanium metal. China is also the second largest source of U.S. imports for gallium. Since China’s export ban takes immediate effect, the U.S. defense industrial base could experience short-term mineral shortages and higher prices. This should not be taken lightly: mineral shortages can impede defense manufacturing and undermine the strength of the military, just as the United States experienced during World War II.

The resulting supply disruptions from China’s new export ban could also have a multi-billion-dollar impact on the U.S. economy. For example, the U.S. Geological Survey recently calculated that if China blocked all exports of gallium alone, U.S. gross domestic product could decline by up to $8.2 billion.

Importantly, firms in third-party countries that import antimony, gallium, and germanium from China and then export them to the United States would violate China’s export ban and “will be held accountable according to [the] law.” While firms in other countries do themselves produce these minerals, these firms may not have enough production and uncontracted capacity to fully replace U.S. imports from China. For instance, China has a near monopoly on gallium production, producing about 98 percent of the world’s gallium annually.

In the long term, however, the impact on the U.S. defense industrial base could be positive if U.S. firms develop more resilient supply chains that exclude foreign adversaries and if the U.S. government financially backs mineral projects that help fill these supply gaps.

Yet, in the interim, China could expand its export bans to include other minerals on its dual-use export control list. These minerals include the following: aluminum, beryllium, bismuth, calcium, graphite, hafnium, magnesium, nickel (powder), rhenium, titanium, tungsten, zinc, and zirconium. The U.S. Defense Logistics Agency has designated many of these elements as “materials of interest.”

The incoming Trump administration is well aware of the United States’ mineral vulnerability. The first Trump administration issued Executive Order 13953, which declared a national emergency concerning U.S. reliance on foreign adversaries – namely China – for critical minerals. To reduce this dependence, the administration increased mineral stockpiling and financial support for U.S. mining and processing projects. The incoming Trump administration could go further.

Under the first Trump administration, the Department of Commerce recommended stockpiling to reduce vulnerability to mineral supply disruptions, and the Department of Defense took steps to increase the U.S. government’s stockpile of rare earth elements. Notably, the incoming Trump administration will have over $300 million in existing funds to boost the volume and scope of minerals in the National Defense Stockpile.

The first Trump administration also increased financial support for U.S. mining and processing projects. Trump’s Department of Energy issued guidance making U.S. mining and processing projects eligible for loan guarantees under the Title 17 program and U.S. processing projects eligible for direct loans under the Advanced Technology Vehicle Manufacturing (ATVM) program. As of October 31, 2024, the Title 17 program has over $62 billion remaining in loan authority, and the ATVM program has over $45 billion remaining. The incoming administration could prioritize quickly disbursing these funds to U.S. mineral projects.

Additionally, the first Trump administration’s Department of Defense, under Title III of the Defense Production Act, awarded grants to rare earth element projects. As of December 3, 2024, the Defense Production Act fund has nearly $1.1 billion in unobligated funds. The incoming administration could, for example, disburse these grants to U.S. alumina refineries for building capabilities to extract gallium and to U.S. zinc smelters for building capabilities to extract germanium.

In sum, China’s new export ban on antimony, gallium, and germanium could severely disrupt supply chains for the U.S. defense industrial base. The United States relies heavily on China for other minerals, too, so export bans by China on other minerals could prove similarly damaging. Now is the time for the U.S. government to deploy its whole arsenal of policy tools to reduce U.S. mineral dependence on foreign adversaries and bolster U.S. supply chains of critical minerals.

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