US and China: A New Trade War?

Beijing on Monday announced export controls on gallium and germanium. Now the Biden administration is set to restrict Chinese companies’ access to U.S. cloud-computing services that use AI chips.

Beijing on Monday announced export controls on gallium and germanium. Now the Biden administration is set to restrict Chinese companies’ access to U.S. cloud-computing services that use AI chips.
Beijing on Monday announced export controls on gallium and germanium. Now the Biden administration is set to restrict Chinese companies’ access to U.S. cloud-computing services that use AI chips.
(Lindsey Pound)

Beijing on Monday announced export controls on gallium and germanium—two obscure minerals key to the production of semiconductors, electric vehicles and aerospace manufacturing. And now the Biden administration is set to restrict Chinese companies’ access to U.S. cloud-computing services that use AI chips.

The Ministry of Commerce announced that effective from August 1, exporters will need to obtain a license. Chinese state-run newspaper, the Global Times, said it shows “China will not be passively squeezed out of the global semiconductor supply chain,” while a former Chinese vice commerce minister described it as a “well-thought-out heavy punch.”

These retaliatory measures are significant as China hadn’t largely initiated direct retaliation against U.S. semiconductor restrictions until 2023. The restrictions could disrupt Western production of semiconductors and dual-use technologies. However, the extent to which China will enforce this ban and its ability to prevent circumvention of these export controls is still unclear.

China is the leading global producer of both germanium and gallium. According to 2022 data from the U.S. Geological Survey, China generated approximately 67% of the global germanium supply and 86% of gallium. These elements have important applications in the semiconductor industry, including the production of gallium nitride semiconductors and solar panels.

In a contrasting July 4 speech, Chinese President Xi Jinping called on nations to “reject the moves of setting up barriers, decoupling and severing supply chains.”

Treasury Secretary Janet Yellen’s visit to China Thursday is another sign that both sides want progress. Experts don’t expect big breakthroughs, especially as the trade fight shows little sign of abating. But China’s stuttering economy and Beijing’s focus on elections in the U.S. and Taiwan next year are driving a calculation by Chinese policymakers that it is still worth engaging, according to the New York Times.

AgWeb-Logo crop
Related Stories
Greg McBride of Allendale says corn and soybean futures are trying to bounce as they are oversold, the key is what will it take to bottom the markets?
Ted Seifried of Zaner Ag Hedge says funds continue to sell for a host of reasons including harvest pressure and better than expected soybean yields.
Randy Martinson of Martinson Ag says soybeans are trying to bounce early Tuesday with talk of China looking for more soybeans and a stabilization of the real.
Read Next
Forty-three candidates are running for the House and five for the Senate with backgrounds on apple orchards, dairy farms and cattle ranches.
Get News Daily
Get Market Alerts
Get News & Markets App