by Mish Shedlock, Mish Talk:
I have been warning about this for years. It’s now happening.
China Halts Critical Exports
The New York Times reports China Halts Critical Exports as Trade War Intensifies. That is a free link for those who wish to read the full article.
China has suspended exports of a wide range of critical minerals and magnets, threatening to choke off supplies of components central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.
TRUTH LIVES on at https://sgtreport.tv/
Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while the Chinese government drafts a new regulatory system. Once in place, the new system could permanently prevent supplies from reaching certain companies, including American military contractors.
The official crackdown is part of China’s retaliation for President Trump’s sharp increase in tariffs that started on April 2.
On April 4, the Chinese government ordered restrictions on the export of six heavy rare earth metals, which are refined entirely in China, as well as rare earth magnets, 90 percent of which are produced in China. The metals, and special magnets made with them, can now be shipped out of China only with special export licenses.
But China has barely started setting up a system for issuing the licenses. That has caused consternation among industry executives that the process could drag on and that current supplies of minerals and products outside of China could run low.
If factories in Detroit and elsewhere run out of powerful rare earth magnets, that could prevent them from assembling cars and other products with electric motors that require these magnets. Companies vary widely in the size of their emergency stockpiles for such contingencies, so the timing of production disruptions is hard to predict.
The so-called heavy rare earth metals covered by the export suspension are used in magnets essential for many kinds of electric motors. These motors are crucial components of electric cars, drones, robots, missiles and spacecraft. Gasoline-powered cars also use electric motors with rare earth magnets for critical tasks like steering.
The metals also go into the chemicals for manufacturing jet engines, lasers, car headlights and certain spark plugs. And these rare metals are vital ingredients in capacitors, which are electrical components of the computer chips that power artificial intelligence servers and smartphones.
Michael Silver, the chairman and chief executive of American Elements, a chemicals supplier based in Los Angeles, said his company had been told it would take 45 days before export licenses could be issued and exports of rare earth metals and magnets would resume. Mr. Silver said that his company had increased its inventory last winter in anticipation of a trade war between the United States and China, and could meet its existing contracts while waiting for the licenses.
In a potential complication, China’s Ministry of Commerce, which issued the new export restrictions jointly with the General Administration of Customs, has barred Chinese companies from having any dealings with an ever-lengthening list of American companies, particularly military contractors.
One American mining leader, James Litinsky, the executive chairman and chief executive of MP Materials, said that rare earth supplies for military contractors were of particular concern.
“Drones and robotics are widely considered the future of warfare, and based on everything we are seeing, the critical inputs for our future supply chain are shut down,” he said. MP Materials owns the sole rare earths mine in the United States, the Mountain Pass mine in the California desert near the Nevada border, and hopes to start commercial production of magnets in Texas at the end of the year for General Motors and other manufacturers.
Many American companies keep little or no inventory because they do not want to tie up cash in stockpiles of costly materials. One of the metals subject to the new controls, dysprosium oxide, trades for $204 per kilogram in Shanghai, and much more outside China.
Rare earth magnets make up a tiny share of China’s overall exports to the United States and elsewhere. So halting shipments causes minimal economic pain in China while holding the potential for big effects in the United States and elsewhere.
Chinese customs officials are blocking exports of heavy rare earth metals and magnets not just to the United States but to any country, including Japan and Germany. Enforcement of the new export license requirement, though, has been uneven so far among different Chinese ports, rare earth industry executives said.
Until 2023, China produced 99 percent of the world’s supply of heavy rare earth metals, with a trickle of production coming out of a refinery in Vietnam. But that refinery has been closed for the past year because of a tax dispute, leaving China with a monopoly.
China also produces 90 percent of the world’s nearly 200,000 tons a year of rare earth magnets, which are far more powerful than conventional iron magnets. Japan produces most of the rest and Germany produces a tiny quantity as well, but they depend on China for the raw materials.
What to Expect
Trump will back down. Expect Trump to ask Xi for a meeting.
All the clowns who thought Trump holds all the cards were wrong.
OK, the US imports more from China than vice versa. However, the US desperately needs some things China exports while China does not desperately need anything the US produces.
Related Posts
On April 4, 2025, I commented China Strikes Back With 34 Percent Tariffs, Stocks Plunge Second Day
China restricts 7 more rare earths, something I have warned about many times.
China Panics
Trump says China Panicked
CHINA PLAYED IT WRONG, THEY PANICKED – THE ONE THING THEY CANNOT AFFORD TO DO!
Actually, Trump will be the one to panic if China halts all rare earth exports, not just to the US.
The market is excited by the prospects “MY POLICIES WILL NEVER CHANGE.”
The greatest tariff experiment since the Great Depression is underway.
“My Policies Will Never Change“
The laughable absurdity of that comment is on full display today.
For discussion, please see Tariff Clown Show Continues, Tech Tariffs Back On, Separately
That April 4 restriction was for the US only, leaving open the possibility of getting rare earths from another country.
