As of June, China’s rare earth magnet exports have already increased fourfold. This recovery followed a sharp plummet due to export controls that Beijing enacted beginning in April. The new measures were introduced as a direct counter to US tariffs. They blocked shipments that are critical to the production floor for every industry, from automotive to electronics and even defense.
Rare earth magnets are key components to all of the modern technology enabling this clean energy transition. They’ve become essential inputs into smartphones, electric vehicles, and military munitions. China is easily the most important player in the worldwide supply chain for rare earth elements. As the world’s largest and only reliable producer of these critical materials, its leverage is profound. Despite the April export controls, shipments dropped off right away. This disruption affected manufacturers and automakers especially hard, since they rely on these resources to create their products.
The underlying export restrictions were a part of a broader trade war initiated by the U.S. against China. These two countries make up the largest economies in the world. When Trump first started shooting off tariffs and getting upset with China’s trade practices, REEs became one of the unexpected battlegrounds. These metals are key enablers in advanced, high-tech applications. This made them a significant strategic asset, leading to increased scrutiny and regulation.
In June, China’s rare earth permanent magnet exports bounced back sharply as manufacturers adjusted to the new export controls. This resurgence is a sign that despite issues still ongoing, the industry has started to rebound. This recovery is especially important for automakers and manufacturers, which were hurt the most by the earlier, deeper shipment declines.
Like EVs, smartphones are going mainstream at an unprecedented pace. Given all of the above, demand for rare earth magnets is poised to skyrocket. This trend further highlights the importance of a stable, secure supply chain in the context of the increasing geopolitical tensions. Now more than ever, manufacturers are being pushed to look at alternative sourcing strategies as they face new challenges caused by these export controls.