China’s growing restrictions on the global flow of rare earth elements are threatening to upend auto and EV markets around the world — an under-the-radar flashpoint that’s emerging in President Donald Trump’s trade war with Beijing.
Ford, General Motors, Toyota, Volkswagen, Hyundai and other members of the Alliance for Automotive Innovation have warned top Trump officials for weeks that China has slowed export approvals for rare earth elements needed to make transmissions, alternators, motors, power steering systems and other auto parts. Those warnings are significant because China dominates the mineral markets and can shut off or throttle supplies to U.S. automakers, defense, energy and other sectors.
“Without those essential automotive components, it will only be a matter of time — before the end of this month, most likely — until vehicle assembly in the U.S. is disrupted,” the industry group wrote in a May 9 letter. “In severe cases, this could include the need for reduced production volumes or even a shutdown of vehicle assembly lines.”
China has for decades been building its dominant position in the rare earths markets and is now wielding that power in talks with Trump. Today, the country has a near-monopoly on the mining and refining of rare earth elements, a group of 17 metallic elements used to make some of the strongest magnets in the world that are needed to make everything from smart phones to EVs and military equipment. As it stands, China refines more than 99 percent of the world’s heavy rare earths needed for magnets in EVs, wind turbines and electronics.
Beijing’s strength is now a focal point in trade talks.
John Bozzella, the alliance’s president and CEO, said in an email to POLITICO’s E&E News that China’s limits on rare earths was on the agenda when Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer met with their Chinese counterparts in Geneva earlier this month. The issues remain unresolved, however, and automakers will soon feel the pinch, he said.
“That’s a concern,” said Bozzella. “We’re grateful for the high-level intervention and the administration’s work to protect supply chains and prevent disruption to U.S. auto production.”
Bessent on Sunday accused China of withholding critical minerals and rare earth elements and violating the Geneva agreement. “[T]he fact that they are withholding some of the products that they agreed to release during our agreement,” said Bessent, “maybe it’s a glitch in the Chinese system, maybe it’s intentional.”
China has clapped back, and said the U.S. — not Beijing — is violating the agreement with its handling of Chinese microchips and student visas.
While efforts are underway to build up domestic supply chains and sources of rare earth elements and magnets, automakers say they remain reliant on China for those materials — and warn the fight is affecting other needed materials.
The Alliance for Automotive Innovation said in the May 9 letter to Bessent, Greer, Secretary of State Marco Rubio and Secretary of Commerce Howard Lutnick that there are currently few, if any, alternative sources to Chinese rare earth elements.
“We also have reports this is impacting elements that are not subject to the export restrictions but processed in the same facility as the controlled elements, such as neodymium,” the trade groups wrote. “Taken together, this is leading to major disruptions in the global supply of needed elements.”
Chinese leverage
China’s latest move to restrict rare earth elements is part of a broader trade war between the world’s two largest economies — one that’s likely to escalate in the coming weeks.
In April, Beijing raised the bar for exports of rare earth elements like samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium needed for magnets, nuclear tech, cancer research, oil drilling and other high-tech sectors. China did so after imposing restrictions on critical minerals like graphite, gallium and germanium.
Greer in an interview with CNBC on Friday said China was the only country to retaliate with countermeasures and restrictions on rare earths. He also said China agreed in Geneva to pull back on those policies but continues to strangle the flow of critical minerals.
White House National Economic Council Director Kevin Hassett said on CNBC that Trump and Xi could talk trade as soon as this week. Hassett’s comments arrive on the heels of Trump accusing China of violating its preliminary trade agreement with the U.S. “So much for being Mr. NICE GUY!” Trump wrote in a social media post.
But Beijing has pushed back on the Trump administration’s assertions.
China’s ministry of trade said in a statement Monday that accusations that it had broken the terms of a trade war truce by holding back key materials were “groundless” and argued that the U.S. had “seriously damaged” the agreement with its handling of Chinese microchips and student visas.
Trump and previous administrations have moved to ramp up domestic production of minerals and rare earth elements. As it stands, the Mountain Pass project in California is the nation’s only mine commercially producing rare earth elements. Other projects are in the pipeline, including Cyclic Materials’ construction of two facilities in Arizona and Ontario that would process scrap to produce rare earth elements.
Yet China continues to have leverage in trade talks because of its widespread control of mineral markets and, more recently, a clearer view of how those materials are being shipped around the world, said Emma Bishop, a vice president at Venn Strategies, which works with companies across the battery and permanent magnet supply chains.
Bishop noted that China last summer launched a government-run program to track rare earth imports, exports, production and related technologies, which has given Beijing unprecedented insight into the processes companies use, as well as pricing, who they are selling to and where that material is going.
This means the government knows what companies are most vulnerable as the rare earth supply bottleneck tightens, including the impact on U.S. automakers, she said.
“They know that this is causing pressure for U.S. autos because they have that visibility into the supply chain,” said Bishop. “China has that insight and supply chain control, and the U.S. doesn’t, which puts us continuously on the back foot when we’re trying to be competitive in these trade talks.”
Reporter David Ferris contributed.
