China’s Critical Minerals Embargo Is Even Tougher Than Expected

Alarm is rising among multinational companies doing business with China about Beijing’s decision last week to order a trade embargo on the export of four critical minerals to the United States. The central subject of concern is a provision extending the ban to companies in other countries that transfer minerals to American firms after acquiring them from China.

The order is the first time China has included a broad ban on so-called transshipment in a government regulation on exports. It also underlines Beijing’s readiness to escalate its tit-for-tat response to the tougher trade policies promised by President-elect Donald J. Trump.

China has long condemned attempts by other countries, particularly the United States, to impose similar limits on transshipment by companies outside their borders.

The ban by Beijing threatens to divide global supply chains further, by forcing companies to choose whether products with certain materials and components can be supplied only to the American market or only to the Chinese market.

China has been trying to persuade companies elsewhere, particularly in Europe, that they should invest and build supply chains in China, not the United States.

“The move marks a significant escalation of the ongoing tech war between the U.S. and China, and E.U. businesses are increasingly worried about being caught in the crossfire,” said Jens Eskelund, the president of the European Union Chamber of Commerce in China.