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Top global auto executives are warning of an imminent shortage of rare-earth magnets from China, essential components in systems like windshield wipers and anti-lock brakes, which could lead to U.S. car plant shutdowns within weeks.
In a previously undisclosed letter dated May 9 to the Trump administration, the head of the Alliance for Automotive Innovation, which represents General Motors Company GM, Ford Motor Company F, Volkswagen AG VWAGY, and major automakers, raised alarm over the shortage of rare-earth magnets from China.
Per the letter, without consistent access to these elements and magnets, auto suppliers would be unable to manufacture vital automotive parts such as transmissions, throttle bodies, alternators, sensors, motors, lights, seat belts, power steering systems, speakers and cameras. Losing access to these critical components would soon disrupt U.S. vehicle production.
Per Alliance CEO John Bozzella, the matter was discussed during Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer’s recent meetings with Chinese officials in Geneva. Per Greer, while China had agreed to ease export restrictions, it was not moving swiftly enough to restore access for key U.S. industries.
Permit Delays in China Disrupt Rare-Earth Magnet Exports
China, which controls more than 90% of global processing for these magnets, used in everything from vehicles and military aircraft to household electronics, had introduced new rules in April requiring exporters to secure licenses from Beijing.
Exports of rare-earth magnets from China dropped by half in April as companies struggled with a complicated and unclear permit application process, which can require hundreds of pages of documentation.
President Donald Trump, in a social media post, accused China of breaking the terms of a recent agreement meant to ease tariffs and trade restrictions. In response, China’s embassy in Washington claimed it was the United States, not China, that was misusing export controls, particularly in the semiconductor industry.
A U.S. official familiar with the discussions told Reuters that the Geneva talks only addressed tariffs and China’s non-tariff trade measures, not U.S. export controls. Per the official, China was slow to deliver on its promise to issue export licenses for rare-earth materials. This delay could prompt retaliatory actions from Washington if U.S. automakers, already at risk due to the shortage, are forced to halt production.
So far, only a few licenses have been approved, including for some Volkswagen suppliers. Meanwhile, Indian car manufacturers reported they haven’t received any permits and may have to shut down production as early as June.