LONDON, Dec 17 (Reuters) - It's clear that critical

minerals will be China's weapon of choice in its escalating

trade war with the United States.

Every time Washington imposes new restrictions on exports of

advanced semiconductor chips to China, Beijing responds by

tightening controls on exports of the critical inputs for chip

manufacturers.

A third clamp-down on China's semiconductor industry has

drawn a swift response in the form of a full ban on exports of

Chinese gallium and germanium to the United States.

Exports of antimony, used in photovoltaic glass, are now

also banned in what looks like a riposte to U.S. tariffs on

Chinese solar panels.

This is a carefully calibrated escalation, China using its

dominance of critical metals to land like-for-like retaliatory

blows for U.S. attacks on its high-technology capabilities.

However, the rules of engagement are set to change with the

incoming Donald Trump administration threatening blanket tariffs

on all Chinese goods.

The big question is how well the United States can withstand

China's potential metallic response.

MARKET DISRUPTION

The United States was 100% reliant on imports of gallium

last year with China accounting for 21% of metal imports,

according to the United States Geological Survey (USGS).

U.S. import dependency was 82% for antimony and over 50% for

germanium, with Chinese products accounting for 63% and 26%

respectively of total imports.

Flows of Chinese gallium and germanium to the U.S. have

dried up this year after Beijing tightened export controls in

August 2023.

This month's ban is just official confirmation that China's

Ministry of Commerce (MOFCOM) had already stopped approving

exports to the U.S.

The supply chains of all three metals have been massively

disrupted with buyers scrambling to find non-Chinese supply.

The price of antimony has rocketed from $13,000 per metric

ton at the start of the year to $38,000 after China announced

new export restrictions. The germanium price has jumped from

$1,650 to $2,862 over the same period.

RACE TO BUILD

The Biden administration has poured billions of dollars into

rebuilding domestic critical minerals production capacity but

progress can be slow, particularly when it comes to permitting

new mines.

The Pentagon is backing Perpetua Resources' ( PPTA ) plans

to reopen the Stibnite antimony mine in Idaho but first

production is only expected in 2028.

The country's only processor, United States Antimony ( UAMY )

, is planning to ramp up production in response to the

current price boom but needs to secure enough non-Chinese

third-party feed to do so.

The U.S. hasn't produced any primary gallium since 1987.

Rio Tinto thinks it may be able to produce the metal

at its Saguenay-Lac-Saint-Jean alumina refinery in Canada. It

plans to build a demonstration plant with backing from the

Quebec government.

Rio has a successful track record of finding critical

minerals in its smelter waste-streams. It already produces

scandium at its titanium operations in Canada and tellurium at

its copper smelter in Utah.

However, Rio's gallium contribution to the U.S. industrial

base will be at least partly dependent on whether Trump makes

good on his threat to impose tariffs on his Canadian neighbour.

DUAL-USE LIST

The big problem facing the U.S. is the extent of China's

supply-chain dominance in the critical minerals space.

China is the largest source of supply for 26 of the 50

minerals currently classified as critical by the USGS, according

to the Center for Strategic and International Studies

think-tank.

Many of them are on the same MOFCOM military-civilian

dual-use export control list as gallium, germanium and antimony.

China has multiple channels of attack in the event of

further sanctions on its high-tech industries.

Tighter restrictions on exports of graphite, announced at

the same time as the U.S. export ban, are an ominous sign the

tit-for-tat is spilling into the battery metals space.

Although graphite doesn't garner the same headlines as other

battery metals such as lithium and cobalt, it is a critical

battery input in the form of the anode.

That makes it an obvious choice for retaliation against U.S.

duties on Chinese electric vehicles.

Tungsten, also on the list, is another metal in the

spotlight after the U.S. announced plans to impose 25% tariffs

on some Chinese products from the start of 2025.

DECOUPLING

Tungsten shows how the metallic decoupling is working both

ways.

The more China flexes its critical mineral muscles, the more

the U.S. uses tariffs to create a price incentive for domestic

producers.

Import duties on Chinese aluminium and steel have been hiked

to 25% this year. Tariffs on Chinese imports of natural graphite

will rise to a similar level in 2026.

That is, if China doesn't get there first by banning exports

to the U.S. before then, just as it has done with gallium,

germanium and antimony.

The U.S. is walking a fine line between using tariffs to

reduce import dependency on China and not being hit with a full

retaliatory trade ban before it can build its own replacement

capacity.

This is a multi-faceted task given each critical metal has

its own unique supply profile.

The common theme, however, is China's control of global

supply and it's only a question of which component of the

periodic table is next to be thrown into the escalating trade

war.

The opinions expressed here are those of the author, a

columnist for Reuters.

(Editing by Mark Potter)