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China's Rare Earths Weapon Could Kill Europe's Auto Industry

China's Rare Earths Weapon Could Kill Europe's Auto Industry

Yahoo4 days ago

China earlier this year introduced restrictions on its exports of rare earths. The move marked a new stage in the US- China trade spat, when the two sides no longer tried to out-tariff each other but took to more concrete steps. The problem is, the restrictions don't just apply to U.S. companies. And they may well deliver the fatal blow to Europe's struggling auto industry.
China controls 90% of the world's rare earths processing capacity. It is the indisputable, if not exactly celebrated in the West, master of the rare earths industry. And now, it is using this position to make a point to trade partners that have gone above and beyond to restrict Chinese exports to their own countries and regions—essentially the same thing that Washington does when it uses the dominance of the dollar to sanction governments it doesn't see eye to eye with.
Rare earths are used in a perhaps surprisingly wide variety of products. More specifically, it's rare-earth magnets that are troubling carmakers on both sides of the ocean. '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, an industry body, wrote in a letter addressed to the Trump administration in early May.
The letter, cited by Reuters in a recent report on the rare earths restrictions, is one of what looks like a cry for help that is only going to get louder. It was signed by auto industry leaders including Toyota, Volkswagen, and General Motors, which thanked the administration for trying to resolve the issue. If they didn't, the carmakers said, it would be only a matter of time before car factories started shutting down.The same is happening in Europe, and it's worse—because with Trump, U.S. carmakers no longer have to worry about EVs. With the current European parliament and the Commission, local carmakers do have to worry about EVs, a lot. Because EVs feature greater amounts of those rare earths than internal combustion engine cars. And European carmakers have been mandated with the production and sale of certain minimum numbers of these EVs over the next three years.
'I informed my Chinese counterpart about the alarming situation in the EU car industry — the rare earth and permanent magnets are essential for industrial production… this is extremely disruptive for industry,' the European Union's trade commissioner, Maros Sefcovic, said this week, as quoted by the Financial Times. He added that the 'Carmakers are warning of huge production difficulties in a short period of time.'
The clock, in other words, is ticking and China does not really seem in a hurry to stop it. The restrictions that Beijing implemented in mid-April are not literal—or direct. They are in the form of a new licensing regime for anyone who wants to buy rare earth magnets from Chinese producers. To do that, the prospective buyer needs to apply for a license, provide a substantial amount of information, and wait. As a Bosch spokesperson described it, the application process was 'complex and time-consuming, partly due to the need to collect and provide a lot of information.'
Because of this complexity, only a few car parts suppliers have been granted such licenses, making the car companies' freak-out only a matter of time, really. But this is coming at a really bad time for European carmakers, despite the substantial rise in EV sales. They are still to turn in a solid profit on their electric cars and they are supposed to be making ever more of these—which means a lot more rare earths.
Things are not that swell in the United States, either, after President Donald Trump accused the Chinese of violating a deal the two earlier agreed, on the temporary relaxation of trade warfare, including tariffs and other trade restrictions—only to be slapped back with the accusation that he did that first, by restricting semiconductor exports.
Things are not looking good for the car industry right now but there is, as always, a silver lining. It consists in the fact that the world is entirely dependent on a single source of rare earths and this is not a sustainable or secure state of affairs. There has been a lot of talk in both Europe and the United States about building their own supply chains in such critical materials but action has not really been forthcoming. Even if it was, building a supply chain from scratch takes many years—just ask China. Yet the rare earths drama may boost Europe's resolve to actually start working on that supply chain, however long it takes to build it. Import dependence can be fatal.
By Irina Slav for Oilprice.com
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China's AI chip tool QiMeng beats engineers, designs processors in just days
China's AI chip tool QiMeng beats engineers, designs processors in just days

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time41 minutes ago

  • Yahoo

China's AI chip tool QiMeng beats engineers, designs processors in just days

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Stock market today: Dow, S&P 500, Nasdaq edge higher amid renewed tariff threats, Boeing stock slumps
Stock market today: Dow, S&P 500, Nasdaq edge higher amid renewed tariff threats, Boeing stock slumps

Yahoo

time42 minutes ago

  • Yahoo

Stock market today: Dow, S&P 500, Nasdaq edge higher amid renewed tariff threats, Boeing stock slumps

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China strikes cautious tone after Trump claims trade deal is 'done'
China strikes cautious tone after Trump claims trade deal is 'done'

Yahoo

timean hour ago

  • Yahoo

China strikes cautious tone after Trump claims trade deal is 'done'

China will "always honour its commitments" when it comes to negotiating trade disagreements with the US, according to a spokesperson for the Chinese government. But when pushed by Sky News, he refrained from confirming what those commitments are. The reluctance is at odds with President Trump, who declared on his Truth Social account on Wednesday that "our deal with China is done", while also claiming that China has agreed to supply rare earth metals to the US "upfront", and to a 55% tariff rate on its goods. The comments follow high-stakes talks between delegations from the two countries in London aimed at stabilising the relationship amid an escalating trade and supply chain war. China's refusal to confirm these details has raised speculation that, contrary to what the US side is claiming, there may still be significant disagreements and some details yet to be worked out. The continued silence comes after two days of negotiations between delegations from the US and China in the UK. While both sides confirmed that they had agreed a "framework" to implement the "consensus" reached at previous talks in Geneva last month, as well as during a phone call between President Xi and President Trump on 5 June, the delegations were supposed to be taking the agreement to their respective leaders for sign-off. When asked by Sky News if any of the details in Trump's Truth Social post reflected what China understood to be in the deal, Lin Jian, China's foreign ministry spokesperson, said "the two sides achieved new progress in addressing the concerns on economic and trade issues". "We always honour our commitments. Since we've reached common understandings, the two sides need to follow them." 👉 Follow Trump100 on your podcast app 👈 When pushed by Sky News on whether China agrees with Trump's Truth Social assessment that the US-China relationship is "excellent", Lin declined to agree, saying simply: "Our position on relations with the United States has been consistent and clear." Such lukewarm language is not uncommon in China but there will likely be significant displeasure at the way Trump is unilaterally publishing details that may not yet have been officially signed off. It is in stark contrast to China's communication landscape which is highly scripted and controlled, and if it was designed to force China into an agreement it could well backfire. Indeed, if everything in Trump's Truth Social post is true it would represent quite a coup for the US, and that feels a little unlikely given the valuable bargaining chips China has, particularly over rare earth metals. This will likely have been a crunch point in negotiations. China has the vast majority of the world's rare earth metals which are vital in the production of everything from cars to weaponry, and recent export controls imposed in response to Trump's tariffs have brought some production lines to the brink of standstill. In response, the Trump administration imposed extra export controls on high-tech chips, chip development technology and parts needed to make jet engines, as well as moving to revoke student visas for Chinese nationals. Read more from Sky News: President Trump indicated in his Truth Social post that the measures to revoke visas will be rowed back. When pushed by Sky News, Lin refrained from commenting on whether Trump's communications on this matter have undermined the relationship more broadly, but the stakes remain enormously high, with the unfolding supply chain war set to do significant damage to the economies of both nations.

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