An Eye for an Eye: The China-US Trade War

China bans Micron Chips and things escalate rather quickly. Now, the China-US trade war takes a new turn as the US considers its next move.

• China imposes export controls on critical metals gallium and germanium.
•  Meanwhile, the US is looking to hit back with restricted access to cloud computing.

WASHINGTON – BEIJING: The China-US trade war intensifies as Beijing hits the U.S. back with critical metal export curbs for its AI chip export tightening, leading the US to look into restricting China’s access to cloud computing.

The China-US technology trade war has been escalating since 2019, with the U.S. imposing trade blacklists and export restrictions on China’s access to key technology components and semiconductors. But things took an intense turn earlier this year as China bans micron chips. The EU has also participated in this battle against China. These actions have increasingly targeted China’s technological advancements, making crucial tech components a focal point in the TRADE battle between the two powerhouses.

China has now taken a strategic step by imposing export controls on gallium and germanium products – metals that play a vital role in the manufacturing of semiconductors and electric vehicles.

“China has hit the American trade restrictions where it hurts,” said Peter Arkell, chairman of the Global Mining Association of China, reflecting on Beijing’s recent announcement of export controls on gallium and germanium products.

“Gallium and germanium are just a couple of the minor metals that are so important for the range of tech products and China is the dominant producer of most of these metals,” Arkell said. “It is a fantasy to suggest that another country can replace China in the short or even medium term.”

Germanium, a silvery-white metal, is primarily used in fiber optics and solar products, while gallium is a critical material for semiconductors and the manufacturing of radio frequency chips for mobile phones and satellite communication. China currently dominates the production of these metals, accounting for 60% of the world’s germanium and 80% of gallium, according to the Critical Raw Materials Alliance.

China’s commerce ministry recently announced that new regulations will require exporters of gallium and germanium to obtain licenses for shipment, citing national security concerns. The timing of this announcement, just before U.S. Secretary of Treasury Janet Yellen’s visit to Beijing, is seen as a deliberate message to the Biden administration that China holds significant leverage in key industries.

According to Paul Triolo, Senior Vice President for China at strategy firm Albright Stonebridge, the restrictions are likely to target companies in the semiconductor and defense industry, potentially helping China gain more bargaining power. “It’s clearly timed to send a not-so-subtle message to the Biden administration that China holds significant cards when it comes to inputs to the semiconductor, aerospace, and automobile industries, and can and will increasingly be willing to inflict pain on U.S. companies,” said Triolo.

However, the U.S. is not backing down as it is now looking to restrict China’s access to cloud computing technology. The focus now shifts to safeguarding advanced technology by controlling China’s ability to utilize cloud computing infrastructure.

Cloud computing services are critical for data storage, processing, and advanced AI applications. The new rule, if adopted, would likely require U.S. cloud-service providers such as Amazon and Microsoft to seek government permission before providing cloud-computing services that use advanced AI chips to Chinese customers, people familiar with the situation told The Wall Street Journal. This move aims to protect sensitive information and prevent the potential exploitation of advanced technology by China.

The U.S. measures to restrict China’s access to cloud computing come amid concerns that China could utilize its dominant position in the tech industry to gain an advantage in key sectors such as semiconductor, aerospace, and automobile industries. The U.S. believes that limiting China’s access to cloud computing infrastructure will provide more bargaining power and deter China from exploiting American companies.

With both countries engaging in strategic moves to safeguard their technological interests, the risk of escalation in the China-US trade war looms large. The stance of China on bans of micron chips was the first service for this year’s match. As the trade war continues, the tech battle intensifies, and the potential for more restrictive measures remains a significant concern for the global tech industry.

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