Rare earth export curbs threaten auto production

Global automakers are facing a looming production shutdown crisis as China restricts exports of critical minerals, such as rare earth elements, in response to the U.S. tariff war, Reuters reported on March 3rd. The New York Times warned that the U.S.-China trade war is shifting into a much more damaging phase of supply chain control, calling it the start of a new era in the conflict.

According to Reuters, China began requiring government approval for rare earth exports in April. Export companies must now submit application packages that can span hundreds of pages, with approvals being uncertain. As a result, rare earth exports have dropped to about half their previous levels.

This has led to severe supply chain disruptions across global industries, including automotive, aerospace, semiconductors, and defense. A particular concern is rare earth magnets, which are used in nearly all major automotive components, from windshield wiper motors to ABS sensors. Reuters reported that automakers such as Toyota, Volkswagen, and Hyundai have expressed urgent concerns, warning that shortages could force factory closures within weeks.

General Motors reportedly sent a confidential letter to the Trump administration last month highlighting the situation. The Alliance for Automotive Innovation also released a statement stating that rare earth minerals are essential for components such as automatic transmissions, alternators, various motors and sensors, seatbelts, speakers, and lighting systems. “Without these essential parts, it is only a matter of time before U.S. car plants come to a halt,” the statement said.

Reuters interpreted China’s export restrictions as a move to strengthen its dominance in the critical minerals industry. The report suggested that China is trying to leverage its position in the trade war with President Trump. Governments in Japan, Europe, and elsewhere have reportedly requested urgent meetings with Beijing. White House spokesperson Karoline Leavitt said President Trump is expected to speak with Chinese President Xi Jinping later this week and that China’s rare earth export controls will be a key topic in the conversation.


Woo-Sun Lim imsun@donga.com