US automakers are racing to secure access to Chinese magnets

Several major US automakers could be forced to shut down some car production in the coming days or weeks if they can’t find workarounds to recent Chinese restrictions on rare-earth magnets, per new reports from the Wall Street Journal and NY Times. Cue: Teams of lawyers thumbing through Beijing’s laws of attraction.

• China controls 90+% of the world’s supply of rare-earth magnets, which play a key role in much of the world’s modern technology—from smartphones to F-150 pickups to F-35 jet fighters—by helping magnets operate at high temperatures.

How we got here: In April, China suspended exports of a wide range of rare earths and related magnets amid an ongoing trade war with the US.

• Beijing was supposed to have eased export controls on rare-earth magnets as part of a 90-day tariff truce agreement last month.
• However, Chinese officials have slow-walked the implementation, framing it as retaliation for recent US moves like revoking Chinese student visas and restricting AI chip exports.

At a crossroads

US companies are currently reviewing several ideas to deal with a lack of rare-earth magnets, including potentially stripping out some premium features—like adjustable seats or high-end speaker systems—that use this tech.

• Other options include producing electric motors in Chinese factories, or shipping made-in-America motors to China to have magnets installed.
• Moving production to China could prove successful since Beijing’s restrictions only cover magnets by themselves—not when they’re already worked into a finished part.

Is decoupling from China a realistic option? Not in the immediate future. While many countries possess rare earth deposits, they’re currently unable to process or manufacture the materials without assistance from Chinese firms, since much of the advanced know-how is tied up in patents and proprietary IP from the country.

However, there is an ongoing push by Western countries to diversify the global rare-earth supply chain, thereby reducing reliance on China.

Zoom out: Car companies in Europe, Japan, and India have also warned of manufacturing disruptions in the coming weeks due to Chinese export restrictions on rare-earth magnets.