Car makers warn ‘rare-earth curbs could halt production'
China's export restrictions impact global auto production
WASHINGTON: Global auto executives are sounding the alarm on an impending shortage of rare-earth magnets from China – used in everything from windshield-wiper motors to anti-lock braking sensors – that could force the closure of car factories within weeks. In a previously unreported May 9 letter to Trump administration officials, the head of the trade group representing General Motors, Toyota, Volkswagen, Hyundai and other major automakers raised urgent concerns.
'Without reliable access to these elements and magnets, automotive suppliers will be unable to produce critical automotive components, including automatic transmissions, throttle bodies, alternators, various motors, sensors, seat belts, speakers, lights, motors, power steering, and cameras,' the Alliance for Automotive Innovation wrote the Trump administration.
The letter, which also was signed by MEMA, The Vehicle Suppliers Association, added that, without those essential automotive components, it would only be a matter of time before US vehicle factories are disrupted. 'In severe cases, this could include the need for reduced production volumes or even a shutdown of vehicle assembly lines,' the groups said. Both Alliance CEO John Bozzella and MEMA CEO Bill Long told Reuters on Friday the situation was not resolved and remained a concern. They expressed gratitude for the Trump administration's high-level engagement to prevent disruption to US auto production and the supply chain.
Bozzella noted that the automotive issue was on the agenda during Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer's talks with their Chinese counterparts in Geneva earlier this month. Greer told CNBC on Friday that China had agreed to lift restrictions on the exports of rare-earth magnets to US companies and was not moving fast enough to grant access for key US industries. 'We haven't seen the flow of some of those critical minerals as they were supposed to be doing.'
China - which controls over 90 percent of global processing capacity for the magnets used in everything from automobiles and fighter jets to home appliances - imposed restrictions in early April requiring exporters to obtain licenses from Beijing.
Rare-earth magnet exports from China halved in April as companies grappled with an opaque application process for permits that sometimes require hundreds of pages of documents. In a social-media post Friday, President Donald Trump accused China of violating terms of a deal reached this month to temporarily dial back tariffs and other trade restrictions. 'China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US,' Trump said in a post on his Truth Social platform.
China's embassy in Washington responded by saying it was the US that was abusing export controls in the semiconductor sector. A US official with knowledge of the talks told Reuters that only tariffs and Chinese non-tariff countermeasures were covered in Geneva talks, and that US export controls were not part of the deal. The official also expressed frustration that Beijing appeared to be moving slowly on promises to issue rare-earth export licenses, which could kick start export control retaliation by Washington if automakers vulnerable to shortages of the minerals are forced to halt production.
While a handful of licenses have been granted, including to some Volkswagen suppliers, Indian automakers say they still have received none and will have to stop production in early June. German auto parts maker Bosch said this week that its suppliers have been bogged down by China's more-rigorous procedures to receive export licenses. A Bosch spokesperson described the process as 'complex and time-consuming, partly due to the need to collect and provide a lot of information.' — Reuters
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Kuwait Times
an hour ago
- Kuwait Times
Trade war and rising oil supplies weigh on crude prices
KUWAIT: Worries over the health of the global economy amid escalating trade protectionism together with an accelerated unwind of OPEC+ output cuts pushed Brent crude to a four-year low of $60/bbl in early May – though prices have risen off their lows. Responding to the weaker economic outlook, the IEA downgraded its 2025 oil demand growth projections to a multi-year low of 740 kb/d, which, in the context of faster OPEC+ supply increases and rising non-OPEC flows, risks a supply glut over the medium term. This is the central downside risk to oil prices, signaled by weaker oil futures and a spate of downward price revisions by forecasting agencies. Providing some upside potential is the prospect of supply disruptions from more stringent US sanctions on Iran and Venezuela or a de-escalation in the global trade tariff conflict. Largely unchanged in Q1,benchmark oil prices have dropped precipitously so far in Q2, after President Trump's 'Liberation Day' tariff deluge on US trading partners and OPEC+'s decision to accelerate the pace of its supply cut unwinding schedule. Brent fell to four-year lows in April, shedding 15 percent by the close of the month, the steepest monthly decline since November 2021, and then dropped further to $60.2 earlier in May. The marker has since struggled to break out of the low-to-mid-60s range, though President Trump's decision to slash tariffs on Chinese goods for 90-days did lift prices marginally. Prices are now ranging around $64/bbl, caught between bearish sentiment linked to unexpected crude inventory builds in the US and a third consecutive month of schedule-busting OPEC+ supply hikes on the one hand, and falling US oil rig counts and pessimism surrounding the prospects for a new Iran nuclear deal that would satisfy both the US and Iran on the other. President Trump's 'maximum pressure' strategy vis-à-vis Iran and threat to impose even more stringent sanctions on the country's energy exports has been one of the few bullish impulses for oil prices and could puncture the negative sentiment that has befallen the oil market in 2025. The pessimism has also been evident in the formation of a curious anomaly in Brent's forward curve: while the front end of the curve has been 'backwardated'(near-term prices higher than prices in the future), later month prices have shifted into a contango structure that see prices rising over earlier months. This so-called 'smiley' structure is fairly unprecedented and appears to signal that markets believe summer oil demand will be healthy enough to keep prices firm in the short term but insufficient to prevent a surplus and stock builds later on. And this is due to the potent combination of trade-tariff linked macroeconomic weakness and accelerating OPEC+ supply especially. Meanwhile, the bullish speculator positions that had built up in Q1 quickly reversed in Q2 amid the spike in risk and uncertainty that followed April's tariff onslaught and OPEC+'s accelerated resupply timetable. 'Net length', the difference between the number of 'long' (betting on prices rising) and 'short' contracts (positions staked on prices falling) declined by 155,838 lots w/w in the week-ending 4 April, the sharpest drop in the available data. Net length has recovered slightly more recently as hedge funds view some upside risk in US-Iran nuclear talks failing to progress. Growth at slowest Near-term oil demand growth was revised sharply lower following the escalation of the trade war between the US and China. The International Energy Agency (IEA), taking its cue from the earlier downgrade by the IMF to global GDP growth in 2025 (and beyond), has lowered its forecast for oil demand growth this year to 740 kb/d and 760 kb/d in 2026. This is the weakest rate of growth since pandemic-affected 2020. The IEA pegs total oil demand at 105 mb/d in 2025. OPEC lowered its demand growth forecast by a less severe 150 kb/d to 1.3 mb/d for both years. OPEC cites higher petrochemical production, solid road and air mobility as well as robust industrial activity in support of its more bullish oil demand growth projection compared to peers. This would also not be incongruous with its recent policy of fast-tracking the unwinding of members' voluntary supply cuts. Despite broad demand-side worries, OPEC+ surprised the markets by accelerating the pace of unwind of 2.2 mb/d in voluntary output cuts by the 'OPEC-8' (which includes Saudi Arabia, Russia, Iraq, UAE, Kuwait, Kazakhstan, Algeria, and Oman) from 131 kb/d per month from April to 411kb/d in May and then again for both June and July. The move was ostensibly framed as a bid to 'punish' serial quota violators, such as Kazakhstan and Iraq, for failing to cut production in line with their quota obligations and compensatory cut promises. The Saudis hoped the fiscal discomfort of freefalling oil prices would bring about the discipline that has so far been absent among these overproducing members. Part of the deal was that overproducing members would in good faith compensate for their non-compliance by cutting production according to a mutually agreed timetable thereby offsetting some of the supply that was about to be released. According to OPEC secondary sources, the average aggregate volume of OPEC-8 compensatory cuts required as 'payback' for members' overproduction from January 2024 to March 2025 is 305 kb/d, which would have easily offset the 131 kb/d of monthly incremental production OPEC-8 had originally planned. This would have resulted in a de-facto output cut. That said, in April, the first month in the schedule that called for higher OPEC-8 supply, monthly supply gains from the group, at 23 kb/d, fell far short of the 131 kb/d that had been planned. Only four of the eight producers – Saudi, the UAE, Oman and Russia – increased production. Despite lowering output in April, Kazakhstan and Iraq were once again producing well above their respective quotas never mind honoring compensatory cut pledges. Declaration of Cooperation(DOC) production (excluding quota-exempt Iran, Libya, Venezuela and Mexico) fell slightly in April to 30.0 mb/d (-17 kb/d). In the US, crude production hovered near record levels of 13.4 mb/d by mid-May, as per Energy Information Administration (EIA) data. (Chart 6).Following the plunge in oil prices and the downturn in global macroeconomic prospects, the EIA lowered its forecast for US crude oil output growth this year by nearly half to 208kb/d, the slowest rate of expansion since 2021. For 2026, growth is expected to decelerate even further to just 82kb/d as producers pull back on activity amid lower oil prices. According to a Dallas Fed energy survey, the average breakeven price in the shale patch to drill a new oil well is around $65/bbl, several dollars above the current price of West Texas Intermediate. US shale firms have also been grappling with the challenges of rising gas-to-oil and water-to-oil ratios, which are straining infrastructure and raising operational costs. The EIA is projecting US crude oil production to peak in 2027at 14 mb/d, with shale oil production topping out at 10 mb/d before declining through to 2050. The recent decline in oil prices is also weighing on broader non-DoC production, prompting downgrades to the outlook, though at an estimated 1.3 mb/d this year according to the IEA, supply growth is still well outpacing demand growth. This is being driven by higher production in Brazil, Guyana, and Canada as well as in the US. 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With OPEC-8seemingly pressing ahead with a more rapid resupply pace, that buffer will quickly erode. Assuming no change to current OPEC-8 policy and no offsetting compensatory cuts, the entirety of 2023-2024's 2.2 mb/d of supply cuts would have been unwound by October 2025 (rather than the original late 2026), pushing the market into firm surplus territory, averaging 1.4 mb/d, according to our calculations. Risks to our standing oil price forecast of $70/bbl (2025 and 2026) are increasingly concentrated to the downside, barring significant supply-side geopolitical disruptions such as tighter Iran sanctions or, on the demand side, an upturn in global economic prospects, perhaps by a rolling back of trade tariffs.
Kuwait Times
5 hours ago
- Kuwait Times
Chinese students face anxious wait for visas under Trump's crackdown
Chinese students face anxious wait for visas under Trump's crackdown Sign of latest spillover from US-China trade war tensions BEIJING: Caught in the middle of Washington's renewed visa crackdown on Chinese international students, Beijing postgraduate Lainey is anxiously waiting to resume the visa process to study a PhD at her dream school, the University of California. 'We feel helpless and unable to do anything,' said the 24-year-old sociology student, who declined to give her surname for privacy reasons. 'The situation in North America this year is not very good. From applying for my PhD until now, this series of visa policies is not very favorable to us. But we have no choice but to wait.' The US State Department said on Thursday it would not tolerate the 'exploitation' of American universities or theft of US research and intellectual property by Beijing. Spokesperson Tammy Bruce did not elaborate on how many Chinese students would be affected by a new plan announced on Wednesday to 'aggressively' revoke visas. The visa crackdown is the latest in a series of moves targeting the international student community, especially Chinese nationals, who make up roughly 1 in 4 of all international students in the US, as the Trump administration pursues its hardline immigration agenda. If applied to a broad segment of the 277,000 Chinese students already at US colleges, the visa revocations could disrupt a major source of income for universities and a crucial pipeline of talent for US technology companies. Chinese students make up 16 percent of all graduate science, technology, engineering and maths (STEM) students in the United States. Defer enrolment? The announcement on Chinese student visa holders came after the Trump administration ordered its missions worldwide to stop scheduling new appointments for student and exchange visitor visa applicants. If the visa appointment system is not resumed soon, Lainey wishes to defer enrolment for a year. 'Although everyone says the US admissions system may be biased against Chinese students, in reality US schools are indeed the top in terms of academic quality,' she said. 'I may also consider (applying to) some places outside the US, such as Europe, as well as Hong Kong and Singapore.' The measures are a sign of the increasing spillover from a bruising trade war between the two global superpowers, and threaten to derail a fragile truce reached mid-May in Geneva. A Friday editorial by China's state-owned Global Times newspaper said the new visa measures raised 'the spectre of McCarthyism' and likened them to an 'educational witch-hunt'. 'In recent years, the suppression of Chinese students has increasingly become an important part of the US strategy to contain China,' the commentary said. Potentially even more damaging than the immediate economic impact for the US could be a long-term erosion of the appeal of US universities and the subsequent brain drain. International students – 54 percent of them from India and China - contributed more than $50 billion to the US economy in 2023, according to the US Department of Commerce. 'If I really have to wait until 2026 to reapply, I might not have such positive feelings towards America,' said Lainey. 'If I can't even get a visa, then I'd have no choice but to go somewhere else.'— Reuters
Kuwait Times
8 hours ago
- Kuwait Times
Tarrif tensions and mixed economic data continue to challenge Central Banks
KUWAIT: In the last week of May 2025, markets experienced heightened volatility amid mixed economic data, influencing global asset classes. WTI crude oil futures dropped over 1 percent, dropping towards $60.3 per barrel, driven by renewed trade fears ahead of an anticipated OPEC+ meeting. US equities faced downward pressure, falling approximately 0.3 percent, after President Trump's accusations against China intensified trade uncertainty. Concurrently, softening US inflation data reinforced expectations of potential Federal Reserve rate cuts. In currency markets, the Japanese yen advanced toward 142 per dollar, benefiting from heightened safe haven demand due to increasing US fiscal concerns and unpredictable trade policies. Meanwhile, the Australian dollar retreated to roughly $0.643, reflecting risk-off sentiment amid global economic uncertainties and expectations of further easing by the Reserve Bank of Australia, highlighted by persistently soft economic indicators and mixed regional economic data. FOMC minutes Minutes from the Federal Reserve's May 6th-7th meeting highlighted elevated risks to the US central bank's dual mandate, with officials warning of the possibility that inflation and unemployment could rise simultaneously. The unemployment rate stood at 4.2 percent in April, and rising inflation remains a concern. The Fed maintained its policy rate at 4.25 percent to 4.50 percent. Meanwhile, the US Court of International Trade ruled that President Donald Trump lacked legal authority to impose sweeping tariffs, including levies on Chinese goods. The administration intends to appeal. US PCE moderates The US Personal Consumption Expenditures (PCE) price index increased by 0.1 percent month-over-month in April 2025, matching market expectations. Core PCE, excluding food and energy, also rose 0.1 percent, aligned with forecasts. On an annual basis, headline PCE inflation eased to 2.1 percent, the lowest level in seven months, down from 2.3 percent in March and below the forecast of 2.2 percent. Core inflation similarly moderated to 2.5 percent, marking its lowest since March 2021, highlighting continued easing inflationary pressures. The US Dollar index closed the week at 99.129. Canadian outpaces expectations Canada's GDP expanded by 0.5 percent in the first quarter of 2025, maintaining growth from the previous quarter and surpassing market expectations. Growth was primarily driven by robust exports of goods and services, which rose 1.6 percent, alongside significant inventory accumulation driven by firms preemptively addressing US tariffs. However, underlying economic strength appeared mixed, with household consumption slowing to 0.3 percent from 1.2 percent previously and government expenditure contracting by 0.8 percent, marking its first decline in a year. On an annualized basis, Canadian GDP grew at 2.2 percent, exceeding forecasts of 1.7 percent. The USD/CAD currency pair closed the week at 1.3740. Euro-zone inflation softens Recent economic data from Europe highlights mixed trends. Germany's retail sales unexpectedly fell by 1.1 percent in April, marking the first decline in four months and missing expectations, driven by reductions in both food and non-food sectors. Meanwhile, Italy's inflation eased to 1.7 percent in May, marking its lowest rate since February and remaining below the European Central Bank's 2 percent target for the 20th consecutive month. Similarly, Spain saw inflation decelerate to a seven-month low of 1.9 percent in May, driven by reduced leisure and transport prices, and a slower increase in electricity costs. Against this backdrop, European equity markets ended May broadly stable but achieved their strongest monthly performance since January, despite persistent uncertainty around US-China trade tensions and renewed tariff pressures. The EUR/USD currency pair closed the week at 1.1347. Australia's inflation holds steady Australia's Consumer Price Index (CPI) remained unchanged at 2.4 percent in April 2025, slightly exceeding the 2.3 percent forecast. The figure remains within the RBA's 2–3 percent target range, with mixed inflationary trends across sectors. Food and alcohol inflation moderated, while housing at 2.2 percent, recreation at 3.6 percent and health at 4.4 percent saw accelerated price gains. Transport inflation fell sharply amid a steep 12 percent drop in fuel prices. The trimmed mean CPI rose to 2.8 percent from 2.7 percent, and the core CPI excluding volatile items picked up to 2.8 percent, up from 2.6 percent in March, signaling persistent underlying inflation pressures. Australia's Retail Sector Contracts in April Australian retail sales unexpectedly declined by 0.1 percent month-over-month in April 2025, falling short of market forecasts of a 0.3 percent increase. This marked the first drop in retail turnover since December, driven largely by decreases in clothing, footwear, and personal accessories, as well as department store sales, each down 2.5 percent. Food retailing also dipped by 0.3 percent, reversing the previous month's gain. However, increases were seen in household goods (0.6 percent), other retailing (0.7 percent), and cafes and restaurants (1.1 percent). On a yearly basis, retail sales growth slowed to 3.8 percent, easing from March's recent peak of 4.3 percent. RBNZ cuts rates The Reserve Bank of New Zealand cut its official cash rate by 25 bps to 3.25 percent in May 2025, following similar cuts in April and earlier reductions in October, November, and February. The move, aligned with expectations, brings borrowing costs to their lowest since August 2022. While inflation remains within the 1 percent–3 percent target, the RBNZ flagged risks from US tariffs, global policy uncertainty, and weaker Asian demand as downside threats to growth. The bank now forecasts the rate will decline to 2.92 percent in Q4 2025 and to 2.85 percent in Q1 2026, reflecting a more dovish outlook amid growing concerns over export-driven vulnerabilities. Yen strengthens The Japanese yen strengthened past 144 per dollar following the release of stronger-than-anticipated Tokyo core inflation figures. The Tokyo Core CPI rose 3.6 percent year-on-year in May 2025, surpassing market expectations of 3.5 percent and marking the highest inflation rate in over two years. This robust inflation data reinforced expectations that the Bank of Japan (BOJ) might pursue further monetary tightening. BOJ Governor Kazuo Ueda reiterated the central bank's commitment to meeting its inflation target, while highlighting global growth risks, trade uncertainties with the US, easing cost-push inflation, and falling crude oil prices as factors behind the recent downgrade in inflation forecasts. Despite these challenges, the BOJ affirmed its near-term policy decisions remain anchored to achieving its 2 percent inflation goal. The yen additionally gained support from renewed safe-haven demand amid renewed US tariff uncertainties.
