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US-China tech clash heats up: Beijing’s export move

TL;DR

  • China has imposed export restrictions on gallium and germanium, key elements used in semiconductors and electric vehicles, causing global supply chain disruptions.
  • This move is viewed as Beijing’s counter to U.S. attempts to hinder China’s technological progress, escalating the ongoing U.S.-China tech trade war.
  • Fears of potential restrictions on rare earth exports are surfacing, given China’s dominance in their production.

The temperature in the tech arena between the United States and China is escalating, as Beijing’s recent maneuver in the export sector introduces a new dynamic to this complex relationship.

In an unexpected move, China has clamped down on the export of two essential metals, gallium and germanium, largely utilized in the manufacture of semiconductors and electric vehicles.

Businesses worldwide are now in a mad dash to ensure their supplies amid this disruption, sparking concerns about potential rare earth export restrictions.

An unexpected curveball in global trade

The sudden controls, due to take effect from August 1, on certain gallium and germanium products could bring significant shifts to global supply chains, intensifying the ongoing trade war between the U.S. and China.

This step is interpreted by many as China’s response to increasing U.S. efforts to rein in its tech strides, adding a layer of strategic complexity to the global trade chessboard.

Beijing has struck the U.S. trade impediments at their most vulnerable point, says Peter Arkell, chairman of the Global Mining Association of China.

The implications of this move extend beyond the U.S., with Europe expressing apprehensions and German Economy Minister Robert Habeck labeling any expansion of controls to materials such as lithium as “troublesome”.

The affected gallium and germanium commodities find extensive application in numerous high-tech industries. Industry insiders are apprehensive that this might be a precursor to additional restrictions on rare earth exports, an area where China holds global production dominance.

Upheaval in the semiconductor space

U.S. companies, reliant on these materials, are feeling the pinch. Semiconductor wafer manufacturers are scrambling to apply for export permits while their Chinese counterparts are witnessing a surge in buyer inquiries amid rising prices.

The fallout from this move will likely have a lasting impact on tech companies globally, given that China produces the lion’s share of these vital metals.

The fear of a ripple effect is not unfounded. Over a decade ago, China curtailed rare earth exports during a dispute with Japan. Arkell cautions that it is a “fantasy” to expect any country to step into China’s shoes in the short or medium term when it comes to the production of these minor metals integral to a range of tech products.

While China’s export restrictions don’t specifically target any country, they make exports more challenging, potentially denying licenses to some locales.

This could lead to increased prices due to a supply deficit, which might eventually prompt semiconductor companies to consider alternative materials.

All eyes are on Washington as it mulls over new restrictions on high-tech microchips shipment to China, following several curbs in recent years.

This ongoing trade tussle shows no signs of cooling, with the U.S. and the Netherlands also reportedly planning to limit the sales of chipmaking equipment to China to prevent their technology from being utilized by the Chinese military.

As the U.S.-China tech face-off heats up, it seems like the global stage is set for a dynamic trade dance with Beijing’s export move. However, it’s not yet clear how this complex choreography will play out in the grand scheme of the global tech industry.

Disclaimer: The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decision.

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Jai Hamid

Jai Hamid is a passionate writer with a keen interest in blockchain technology, the global economy, and literature. She dedicates most of her time to exploring the transformative potential of crypto and the dynamics of worldwide economic trends.

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