U.S. Faces $3.4 Billion Economic Loss as China Tightens Control Over Essential Tech Minerals

The United States is forecasted to face significant economic damage due to China’s export ban on gallium and germanium. The ongoing conflict between the U.S. and China over these critical minerals, essential for advanced semiconductor manufacturing, is intensifying.

The U.S. Geological Survey (USGS) recently warned in a report that if China fully bans exports of gallium and germanium, the U.S. economy could incur losses of $3.4 billion. According to the USGS, the semiconductor manufacturing sector would bear over 40% of the total impact, with additional economic losses affecting downstream producers reliant on semiconductors.

China has tightened regulations on exporting critical minerals such as gallium and germanium, which are vital for semiconductor production. Since August 1 last year, the country has implemented export restrictions on eight gallium and six germanium products. Furthermore, since the end of last year, China has added graphite—used in producing anodes for electric vehicle batteries—and rare earth processing technologies, where it holds an effective monopoly, to its list of export controls.

Recently, China has made it more difficult for foreign semiconductor companies to purchase rare earth and other minerals from its territory while expanding state ownership of rare earth mining and production companies. Additionally, the government has classified rare earth mining and refining processes as state secrets, restricting related information and advancing nationalization efforts. These actions are widely viewed as a response to U.S. export controls on semiconductor technology.

China supplies 60% of the world’s germanium, a mineral widely used in advanced industries such as fiber optic cables, solar cells, and infrared technology. Earlier this year, speculation about potential government purchases drove germanium prices in China to record highs.

The USGS predicts that if the export ban on gallium and germanium is fully implemented, gallium prices could surge by over 150%, while germanium prices might rise by more than 26%. Nedal Nassar, the lead author of the USGS report, stated, “Losing access to critical minerals that make up a fraction of the value of products like semiconductors can add up to billions of dollars in losses across the economy.”

The Chinese government maintains that these measures are necessary to “protect national security and interests and fulfill international obligations.” As the global supply chain for scarce minerals like gallium and germanium becomes increasingly unstable, the tech war between the U.S. and China is expected to escalate further.