EU warns China's rare earth export curbs may trigger supply crisis

Business Standard

2 days ago

The European Union has raised urgent concerns with China over its tightened export restrictions on rare earth elements and magnets, warning of a potential supply crisis that could cripple industrial output across the bloc.
EU Trade Commissioner Maroš Šefcovic pressed Chinese Commerce Minister Wang Wentao on the issue during talks in Paris this week, calling the situation 'extremely disruptive' and 'alarming' for key sectors, especially automotive manufacturing.
'Rare earths and permanent magnets are absolutely essential for industrial production — from cars to washing machines,' Šefcovic said on Wednesday. 'If the issue isn't addressed, there could be huge production difficulties in a short period of time.'
China's response to Trump tariffs affects global partners
China, which supplies nearly 90 per cent of the world's rare earths, imposed export controls in April following the latest round of reciprocal tariffs from US President Donald Trump. The curbs now require export licences for seven rare earth elements, including dysprosium, gadolinium, and terbium, along with several rare earth magnets.
Although initially aimed at the US, the restrictions affect all of China's trading partners. The move has prompted EU governments, business chambers, and automakers to seek an urgent resolution.
Šefcovic said the EU and China compared data on licence applications and approvals, but discrepancies were found. The EU will now share company-provided figures with Beijing in an effort to clarify the mismatch.
Automotive sector fears repeat of chip crisis
European carmakers are already feeling the effects. Mercedes-Benz is in talks with suppliers to secure short-term stocks, while BMW has reported supply disruptions, according to Bloomberg.
The shortages are drawing comparisons to the global chip crisis during the Covid-19 pandemic, which disrupted production lines worldwide.
Rare earths deepen EU-China trade rift
The rare earth row adds to mounting EU-China trade tensions. This week, EU members voted to exclude Chinese firms from its medical procurement market, citing Beijing's refusal to reciprocate.
The EU also plans to impose a €2 levy on small parcels from Chinese e-commerce platforms such as Temu and Shein, in an effort to curb the influx of cheap imports. Beijing has accused the bloc of discriminatory treatment.
In response to supply concerns, the European Commission has announced 13 overseas projects to reduce dependence on Chinese rare earths. These include mining and processing ventures in Malawi, South Africa, Brazil, Canada, and New Caledonia. ALSO READ |
Dialogue continues despite trade friction
Despite rising tensions, both sides have pledged to maintain dialogue on rare earths. The EU imported 6,000 tonnes of rare earths from China in 2024, representing 46.3 per cent of its total rare earth imports.
'We want to find a pragmatic solution — fast,' Šefcovic said, emphasising the urgency of resolving the dispute.