China’s escalating restrictions on rare earth mineral exports are intensifying concerns of severe supply shortages and production shutdowns across the global automotive industry. The move follows Beijing’s imposition of additional tariffs amounting to 84% on US goods, in response to former President Donald Trump’s 145% tariff hikes on Chinese products.
Earlier this month, China expanded its export controls to include seven key rare-earth elements and magnets vital to the manufacturing of electric vehicles, wind turbines, and military aircraft. Industry leaders, government officials, and market traders warn that existing stockpiles could be exhausted within three to six months, potentially forcing companies into urgent searches for alternative resources to avoid critical production delays.
Jan Giese of Tradium, a Frankfurt-based metal trading firm, noted that many automotive manufacturers and suppliers possess only two to three months’ worth of magnet reserves. He cautioned: “If we don’t see magnet deliveries to the EU or Japan in that time or at least close to that, then I think we will see genuine problems in the automotive supply chain,” speaking to the Financial Times.
China’s tightened controls primarily target ‘heavy’ and ‘medium’ rare earths, elements crucial for producing high-performance magnets capable of withstanding extreme temperatures. Materials such as dysprosium, terbium, and samarium are particularly important for the motors, rotors, and transmissions of electric and hybrid vehicles, as well as for advanced military equipment.
An automotive executive warned that the restrictions could severely impact companies like Tesla and other major manufacturers, rating the potential disruption as a ‘seven or eight’ out of 10 in terms of severity. He explained that the Chinese government’s actions serve as a form of retaliation, aiming not to mirror tariff increases directly, but to pressure American businesses into lobbying their own governments for policy changes.
Although rare earth metals are relatively plentiful in the Earth’s crust, their extraction remains costly and environmentally challenging. China maintains a near monopoly on the processing of heavy rare earth elements, heightening global dependence on its supply chain.
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