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China has a magnet stranglehold that causing some seemingly strange discussions.

Got Rare-Earth Magnets?

The Wall Street Journal reports Automakers Race to Find Workaround to China’s Stranglehold on Rare-Earth Magnets

Four major automakers are racing to find workarounds to China’s stranglehold on rare-earth magnets, which they fear could force them to shut down some car production within weeks.

Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said.

Ideas under review include producing electric motors in Chinese factories or shipping made-in-America motors to China to have magnets installed. Moving production to China as a way to get around the export controls on rare-earth magnets could work because the restrictions only cover magnets, not finished parts, the people said.

If automakers end up shifting some production to China, it would amount to a remarkable outcome from a trade war initiated by President Trump with the intention of bringing manufacturing back to the U.S.

China in April began requiring companies to apply for permission to export magnets made with rare-earth metals, including dysprosium and terbium. The country controls roughly 90% of the world’s supply of these elements, which help magnets to operate at high temperatures. Much of the world’s modern technology, from smartphones to F-35 jet fighters, rely on these magnets.

In the auto industry, rare-earths are what allow electric-vehicle motors to function at high speed. They are also used in less exotic, though no less critical, functions from windshield wipers and headlights.

China was supposed to have eased export controls on rare-earth magnets as part of a 90-day tariff truce agreement with the White House, but the country has slow walked license approvals for magnets. Trump accused China of violating its deal with the U.S. China has pushed back at the notion that it was to blame, alleging “discriminatory and restrictive measures” by Washington, including restricting exports of AI chips and revoking visas for Chinese students.

As exports of rare-earth magnets have virtually ground to a halt, carmakers face hard decisions about whether they can continue to keep some plants operating, according to people familiar with the planning.

Shipping an unfinished part halfway across the world to have a chiclet-sized magnet installed adds to the cost and time it takes to manufacture, but the companies see it as perhaps the only alternative to shutting down some production lines altogether. The move could expose carmakers to additional tariffs, but auto executives believe the alternative would be even worse.

Car companies are also looking at alternative sources for magnets in Europe and Asia, instead of purchasing them directly from Chinese factories as they do currently. None of these sources would provide enough magnets to support the demand from the automotive industry, said one company official.

American carmakers aren’t the only ones struggling to source magnets from China.

Car companies in Japan and India have also warned of looming manufacturing disruptions. In Europe, automakers say that the pace of export license approvals hasn’t kept up with their demand.

In the U.S., Ford Motor shut down production of the Ford Explorer at its Chicago plant for a week in May because of a rare-earth shortage, a spokesman said.

Carmakers are also considering stripping out some premium features, such as adjustable seats, that make use of several tiny electric motors. High-end speaker systems that use rare-earth magnets could also be replaced with downgraded versions.

Understanding Rare Earths

China produces 60 percent of the world’s rare earths but processes nearly 90 percent, which means that it is importing rare earths from other countries and processing them. This has given China a near monopoly.

According to the United States Geological Survey, China has been supplying 54 percent of the germanium used by the United States, a material used in infrared technology and fiber optics.

The United States has not mined its own gallium, used in semiconductors, since 1987. Japan supplies 26 percent of American imports of gallium, China 21 percent and Germany 19 percent, along with several smaller suppliers.

Antimony (Sb), a critical metalloid, is a key element of the American war machine, essential for communication equipment, night vision goggles, explosives, ammunition, nuclear weapons, submarines, warships, optics, laser sighting and more, according to U.S. Army Major General (retired) James Marks.

China controls nearly 50% of the global antimony supply.

Hello President Trump

It seems China wants to discuss who has the upper hand in these trade wars.

Over the past six years I have read countless articles stating the US has the upper hand over China because the US imports more goods from China than China does the US.

And I repeatedly cautioned about rare earths. Let’s take a look.

May 20, 2019: Trade Hardball: China Threatens to Cut Off US Supply of Rare Earth Elements

China does not have the means to match the US in the total number or amount of tariffs. But China can strike back in other ways. One critical way would be to cut off the US supply of rare earth elements.

Rare earths are 17 minerals used to make cell phones, hybrid cars, weapons, flat-screen TVs, magnets, mercury-vapor lights, and camera lenses.

November 21, 2024: China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology

In a warning shot to the Trump administration, China tightens export controls on some dual-use minerals.

December 3, 2024: China Halts Rare Exports Used by US Technology Companies and the Military

This is China’s advance salvo at Trump tariffs. It comes one day after the Biden administration expanded curbs on the sale of advanced American technology to China.

February 4, 2025: China Retaliates Against Tariffs, Will Trump Escalate the Trade War?

Trump backed down from Canada and Mexico Tariffs. I suspect not this time. But China retaliated, so what now?

China holds one key card that Trump will have to deal with if he pushes China too hard. 

The US avoided problems by buying rare earth minerals from allies. If China blocks minerals totally, there will be no minerals to get.

April 7, 2025: What Happens if All Trade With China Comes to a Screeching Halt?

This is no longer a highly unlikely scenario after Trump threatens another 50 Percent Tariff on China.

Trump’s Social Media Threat

“If China does not withdraw its 34% increase above their already long term trading abuses by tomorrow, April 8th, 2025, the United States will impose ADDITIONAL Tariffs on China of 50%, effective April 9th,” he wrote on Truth Social.

“Additionally, all talks with China concerning their requested meetings with us will be terminated!”

Point of No Return

We may already be past the point of no return (where nothing Trump further does to China is meaningful).

That is not true in reverse. China can easily play hardball with the US over rare earth minerals.

April 9, 2025: China Retaliates with 84% Tariffs on the US, Most Trade Will Stop

We are already at the point trade with China will cease or nearly cease. Another 4,000 percent hike would not do much.

China can easily block rare earth exports to the world. If that happens, Trump will panic.

We should not be in this position, but we are.

June 3, 2025: China’s New Trade Negotiator Will Not Cater to Trump on Tariff Negotiations

Rare earth minerals are China’s trump card.

It’s not just magnets.

Rare earths are also used in night vision goggles, explosives, ammunition, nuclear weapons, submarines, warships, optics, laser sightings, computer chips, and wind turbines.

Hoot of the Year

Automakers discuss moving some production to China at the same time Trump is upping tariffs on parts from China.

Is this stupid or what? And why does anyone think that would even work?

Curiously, some do.

“If you want to export a magnet [from China] they won’t let you do that. If you can demonstrate that the magnet is in a motor in China, you can do that,” said a supply-chain manager at one of the carmakers.

Yeah, OK for how long? Who says China won’t clamp down on that after the parts are already in China.

More Ironies and Zero Trust

Trump is howling China did not honor the 90-day tariff reprieve.

OK, did Trump honor USMCA?

Can anyone count on Trump to honor any deal? If not, why should any country honor its deals with Trump?

Trust is gone and won’t come back for at least four years. That is one of the unfortunate consequences that I have discussed many times regarding USMCA.

Please recall my March 2, 2018 post Trump Tweets “Trade Wars are Good and Easy to Win”

Have we won yet?

If China wants to play serious hardball, it can demand access to Nvdia chips in return for rare earths.

This was all so predictable. Yet, no one could possibly have seen it coming, especially Trump.

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