The US-China Critical Mineral Trade War

The conflict over germanium is not an isolated event. It is one front in a widening US-China trade war over the technologies and materials that underpin 21st-century military and economic power. Washington has restricted China's access to advanced semiconductors and manufacturing equipment. Beijing has responded by restricting Western access to critical minerals where it holds dominant supply positions. Germanium sits at the intersection of both strategies.

Oct 2022

US Semiconductor Controls Begin

Aug 2023

China Mineral Response Begins

Mineral Categories Now Weaponized

-55%

Drop in Chinese Ge Exports (2022-2024)

Overview: Two Asymmetric Strategies

The US-China technology trade conflict operates on two asymmetric battlefields. The United States holds dominant positions in semiconductor design, advanced chip manufacturing equipment, and AI software. China holds dominant positions in the processing and refining of critical minerals that go into every advanced electronic device. Each side is leveraging its dominant position to impose costs on the other.

The US strategy is to restrict China's ability to build advanced semiconductor manufacturing capacity, slowing the development of Chinese military AI systems, hypersonic weapons guidance, and electronic warfare capabilities that depend on cutting-edge chips. The China strategy is to restrict Western access to the raw materials needed to build and operate those same systems and the commercial technology infrastructure that funds Western military spending.

Germanium sits directly in the crossfire. It is needed for the infrared optics in US and NATO precision weapons, the fiber optic networks that carry data for Western cloud computing, and the SiGe transistors in 5G base stations. China's export controls on germanium impose costs on all three of these applications simultaneously.

The US Technology Export Control Strategy

The October 2022 US semiconductor controls were the most sweeping American export restrictions imposed on any country since the Cold War. They prohibited exports of advanced chip manufacturing equipment - including extreme ultraviolet lithography machines, certain deposition and etch tools, and inspection equipment - to China without individual licenses that are rarely granted. The controls extended to US persons (including non-citizens) working in China's chip sector.

The US extended these controls through allied coordination. In January 2023, the Netherlands agreed to restrict ASML's exports of deep ultraviolet lithography tools to China. Japan followed with restrictions on Tokyo Electron and Nikon equipment. This multilateral coordination dramatically increased the economic pressure on China's semiconductor sector - and directly triggered Beijing's mineral response.

The Technology-for-Minerals Exchange

The implicit logic of the US strategy was that China depended more on foreign semiconductor technology than the West depended on Chinese minerals. China's response challenged this assumption by demonstrating that mineral supply concentration could impose costs on Western defense and technology sectors that were equally disruptive, if not more immediately felt, than chip equipment restrictions.

China's Mineral Response Strategy

China's mineral controls are carefully calibrated to impose costs without triggering an immediate consumer backlash or damaging its own export revenues too severely. The targeted materials - germanium, gallium, graphite, antimony - share several characteristics: China holds dominant or near-dominant supply positions, they are essential for specific defense or technology applications with few short-term substitutes, and they represent a small fraction of total trade value (limiting retaliation risk from trading partners).

The licensing structure is particularly effective as a pressure tool. Unlike an outright ban, which would be legally challengeable and politically visible, a licensing regime creates uncertainty without definitive confrontation. Chinese authorities can adjust approval rates quietly without any formal announcement, and they can discriminate between buyers based on their country's alignment with US technology policy without publishing any discriminatory criteria.

US vs. China Export Control Strategies: Scope and Strategic Leverage

Category	US Controls Target	China Controls Target	Strategic Leverage
Semiconductor equipment	Restricts exports to China	Restricts German/US access	Balanced
Advanced chips (AI/HPC)	No sales to China	N/A (China lacks dominance)	US advantage
Critical minerals (Ge, Ga)	Limited leverage	Restricts Western access	China advantage
Battery materials (graphite)	Domestic investment	Export controls	China advantage
Defense materials (antimony)	DPA investments	Export controls	China advantage
Rare earth elements	MP Materials investment	Production dominance	China advantage

Source: Congressional Research Service; CSIS Critical Minerals Initiative; author analysis

The Escalation Cycle: Actions and Reactions

Each round of US technology controls has been followed by a Chinese mineral control response within 3-9 months. The escalation cycle has accelerated over time, with each iteration adding new materials to China's controlled goods list. The following chart shows the indexed germanium price response to each escalation event, using the pre-controls level as the baseline of 100.

Germanium Price Index vs. US-China Trade Escalation Events (Pre-Controls = 100)

Source: Argus Media price data; MOFCOM announcements; author analysis

Germanium in the Crossfire: Export Volume Impact

Chinese germanium export volumes dropped sharply following the August 2023 controls. Data from China's General Administration of Customs shows exports falling from a pre-controls annual run rate of approximately 85 metric tons to roughly 38 metric tons by 2024 - a reduction of more than 55%. The decline was not uniform: exports to countries with strong US alignment dropped disproportionately, while shipments to Southeast Asian and Middle Eastern buyers were less affected.

Chinese Germanium Export Volumes (Metric Tons), 2019-2024

Source: China General Administration of Customs; USGS estimates

Supply Chain Fragmentation: The Long-Term Consequence

The most significant long-term consequence of the US-China mineral trade war is not the immediate price impact but the fragmentation of global supply chains. Western governments and corporations are now actively investing to duplicate processing capacity outside China - an enormously expensive and time-consuming process that will reshape the economics of critical mineral markets for decades.

For germanium specifically, building new refining capacity outside China requires securing access to germanium-bearing feedstocks (zinc concentrate, coal fly ash), constructing hydrometallurgical processing facilities, and establishing new supply chains for high-purity products. The capital costs run into hundreds of millions of dollars per facility, and permitting and construction timelines are measured in years, not months.

The Decoupling Premium

Western companies and governments are now paying a decoupling premium for non-Chinese germanium. This premium - the price difference between Chinese and non-Chinese supply - reflects the cost of reducing strategic dependency. As non-Chinese capacity expands, this premium may narrow, but it will not disappear entirely as long as geopolitical tension persists. The fragmented supply chain will have structurally higher costs than the integrated global system it replaces.

Frequently Asked Questions

Neither side has achieved a decisive advantage. China has successfully imposed costs on Western defense and technology procurement, and germanium prices have increased dramatically. But the controls have also accelerated Western investment in alternative supply, which will reduce Chinese leverage over the medium term. The US has slowed China's semiconductor development but has not halted it - China is building alternative supply chains for chip manufacturing equipment. Both sides are incurring real costs while working to reduce their long-term vulnerabilities.

A full embargo by China on all critical mineral exports to the West is unlikely because it would harm China's own export revenues and trigger an immediate, severe Western response. The current strategy of selective licensing allows China to impose costs gradually while maintaining the ability to offer concessions in diplomatic negotiations. A full embargo would remove this flexibility and likely accelerate Western diversification efforts far more rapidly than the current approach.

The underlying drivers of the US-China technology competition - concerns about Chinese military modernization, AI development, and economic competitiveness - are structural and unlikely to be resolved by any single diplomatic agreement. Market participants should expect the current regime of targeted export controls to persist for at least a decade, with periodic escalations and possible partial de-escalations as the two sides negotiate in other areas.

A resolution would likely involve a package deal in which the US agrees to ease some semiconductor equipment export controls in exchange for China relaxing critical mineral licensing approval rates. This type of trade linkage has historical precedent, but requires both sides to accept domestic political costs. The US would face criticism from the technology security community; China would face criticism from state enterprises that have benefited from higher mineral prices. Such a deal is possible but would require leadership political will on both sides.