Trump pledge of quick China magnet flows has yet to materialise

Business Times

21-06-2025

[HONG KONG] Almost 10 days since US President Donald Trump declared a 'done' trade deal with Beijing, US companies remain largely in the dark on when they will receive crucial magnets from China, and whether Washington, in turn, will allow a host of other exports to resume.
While there has been a trickle of required permits, many American firms that need Chinese minerals are still waiting on Beijing's approval for shipments, according to sources familiar with the process. China's system is improving but remains cumbersome, they said, contrary to Trump's assurances rare earths would flow 'up front' after a Jun 11 accord struck in London.
The delays are holding an array of American industries hostage to the rocky US-China relationship, as some firms wait for magnets and others face restrictions son elling to China. That friction risks derailing a fragile tariff truce clinched by Washington and Beijing in Geneva last month, and triggering fresh rounds of retaliation.
Interviews with multiple Western buyers, industry insiders and officials familiar with discussions revealed frustration over vague policies in both countries and lingering confusion about what level of magnet approvals from China would trigger Trump to abandon his tit-for-tat export curbs.
'Even if export approvals accelerate, there are so many unknowns about the licensing regime that it's impossible for companies to have a strong sense of certainty about future supply,' said Christopher Beddor, deputy China research director at Gavekal Research. 'At a minimum, they need to factor in a real possibility that talks could break down again, and exports will be halted.'
In response to China's sluggishness on magnets, Trump last month restricted US firms from exporting chip software, jet engines and a key ingredient to make plastic to China until President Xi Jinping restores rare-earth exports. Companies subject to Washington's curbs have halted billions of US dollars in planned shipments as they wait for players in unrelated sectors to secure permits from Beijing, which could take weeks or even months to process, given the current pace.
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Corporate chiefs affected by the export-control spat have sought clarity from the administration on its strategy, according to sources familiar with the matter. The Commerce Department, which administers the rules, has offered few details, they added.
Oil industry executives have tried to convince Trump officials that blocking exports of ethane – a gas used to make plastics – is contrary to US national security interests, according to sources familiar with the deliberations. Business leaders have asked for export restrictions to be removed but that's been unsuccessful so far, the sources said.
Energy and chemical giant INEOS Group Holdings has one tanker full of ethane waiting to go, while Enterprise Products Partners has three to four cargo ships stuck in limbo, according to a source familiar with the matter. That's particularly galling because China has adequate ethane supplies in reserve and can switch to using naphtha from the Middle East and other regions for much of their production, the sources said.
Representatives from the companies did not respond to requests for comment.
Industry figures have consistently told the Trump administration the ethane export restrictions are inflicting more pain on US interests than on China, according to the sources.
China's Ministry of Commerce, which administers export licenses, has not responded to Bloomberg's questions on how many for rare earths have been granted since the London talks. At a regular briefing in Beijing on Thursday, spokesperson He Yadong said Beijing was 'accelerating' its process and had given the go-ahead to a 'certain number of compliant applications'.
Access to rare earths is an issue 'that is going to continue to metastasise until there is resolution,' said Adam Johnson, chief executive officer of Principal Mineral, which invests in US mineral supply chains for industrial defence. 'This is just a spigot that can be turned on and off by China.'
China only agreed to grant licenses, if at all, for six months, before companies need to reapply for approvals. Firms doing business in the US and China could see recurring interruptions, unless the Commerce Ministry significantly increases its pace of process applications.
Adding an extra layer of jeopardy for US companies, Chinese suppliers to America's military-industrial base are unlikely to get any magnet permits. After Trump imposed sky-high tariffs in April, Beijing put samarium – a metal essential for weapons such as guided missiles, smart bombs and fighter jets – on a dual-use list that specifically prohibits its shipment for military use.
Denying such permits could cause ties to further spiral if Trump believes those actions violate the agreement, the terms of which were never publicised in writing by either side.
That sticking point went unresolved during roughly 20 hours of negotiations last week in the UK capital, sources familiar with the details said. Complicating the issue, companies often buy magnets from third-party suppliers, which serve both defence and auto firms, according to a person familiar with the matter. That creates a high burden to prove to Chinese authorities a shipment's final destination is a motor not a missile, the source added.
Beijing still has not officially spelt out the deal's requirements, nor has Xi publicly signalled his endorsement of it – a step Trump said was necessary.
'The Geneva and London talks made solid progress towards negotiating an eventual comprehensive trade deal with China,' White House spokesperson Kush Desai said. 'The administration continues to monitor China's compliance with the agreement reached at Geneva.'
China's Commerce Ministry is working to facilitate more approvals even as it asks for reams of information on how the materials will be used, according to sources familiar with the process. In some cases, companies have been asked to supply data including detailed product designs, one of the sources said.
Morris Hammer, who leads the US rare-earth magnet business for South Korean steelmaker Posco Holdings, said Chinese officials have expedited shipments for some major US and European automakers since Trump announced the agreement.
China's Advanced Technology & Materials said on Wednesday it had obtained permits for some magnet orders, without specifying for which destinations. The company's customers include European aerospace giant Airbus SE, according to data compiled by Bloomberg.
Around half of US suppliers to Toyota Motor, for example, have had export licenses granted, the company said – but they're still waiting for those materials to actually be delivered. It's likely some of the delays are transport-related, one of the sources said.
Even with permits coming online, rare-earth materials are still scarce because overseas shipments were halted for two months starting in April, depleting inventories.
Trump's agreement 'will allow for rare earths to flow out of the country for a short period of time, but it's not helping the auto industry because they are still talking shutdowns', Hammer said. 'Nobody trusts that this thaw is going to last.'
For many automakers, the situation remains unpredictable, forcing some to hunt for alternatives to Chinese supplies. Two days after Trump touted a finalised trade accord in London, Ford Motor chief executive officer Jim Farley described a 'day-to-day' dynamic around rare-earths licenses – which have already forced the company to temporarily shutter one plant.
General Motors has emphasised it's on firmer footing in the longer term, because it invested in domestic magnet making back in 2021. The automaker has an exclusive deal to get the products from MP Materials in Texas, with production starting later in the year. It has another deal with eVAC of Germany to get magnets from a South Carolina plant starting in 2026.
In the meantime, GM and its suppliers have applied for permits to get magnets from China, a source familiar with the matter said.
Scott Keogh, the CEO of Scout Motors – the upstart EV brand of Volkswagen – told Bloomberg Television his company is re-engineering brakes and drive units to reduce the need for rare earths. Scout is building a plant in South Carolina to make fully electric and hybrid SUVs as well as trucks starting in 2027.
Until the rare-earth supply line is reopened to Washington's satisfaction, Trump has indicated that the US is likely to keep in place its own export restrictions.
Senior US officials have suggested the curbs are about building and using leverage, rather than their official justification: national security. Commerce Secretary Howard Lutnick said the measures were used to 'annoy' China into complying with a deal US negotiators thought they'd already reached.
Restrictions on sales to China of electronic design automation (EDA) software for chipmaking are emblematic of the standoff.
Those EDA tools are used to design everything, from the highest-end processors for the likes of Nvidia and Apple to simple parts, such as power-regulation components. Fully limiting China's access to the best software, made by a trio of Western firms, has been a longtime priority in some Washington national security circles – and would build on years of US measures targeting China's semiconductor prowess.
While some senior Trump officials specifically indicated the administration would relax some semiconductor-related curbs if Beijing relents on rare earths, EDA companies still lack details on when, and whether, their China access will be restored, said industry officials who requested anonymity to speak candidly.
Even if that happens, there's a worry that heightened geopolitical risks will push Chinese customers to hunt for other suppliers or further develop domestic capabilities.
'The risk is there for the London deal to fall apart,' said Alicia Garcia Herrero, chief economist for Asia-Pacific at Natixis. 'Because rare earths is a very granular issue and mistakes can be made.' BLOOMBERG