Highlights
- China has imposed strict export controls on rare earth magnets, dramatically reducing global shipments.
- Companies are forced to disclose extensive proprietary information.
- Major industries like automotive and defense are experiencing significant disruptions.
- Companies like Ford are halting production due to magnet shortages.
- Beijing is using rare earth magnet exports as a geopolitical leverage tool.
- China controls over 90% of global production and strategically limits international access.
China has once again reminded the world that it controls the chokepoint of the modern industrial economy: rare earth magnets. During the US-China trade war, a move that has upended global supply chains, Beijing has imposed strict new licensing rules, customs bottlenecks, and surveillance requirements on the export of rare earth magnets, driving down shipments by more than half and increasing desperation among Western manufacturers.
Even with the recent successful talks in London, offering a pathway toward a Sino-American trade deal (and normalization), it’s apparent that any company seeking to export magnets from China must now pass through a Ministry of Commerce (opens in a new tab) (MOFCOM) approval process. One that is at once opaque and intrusive. Exporters are required to submit not only basic documentation but also exhaustive details about their buyers, including end-use declarations, customer lists, manufacturing specifications, and even video evidence of production. Companies across Europe and the United States are being compelled to disclose trade secrets to maintain their supply chains. One European executive described it plainly: “This isn’t industrial espionage from the shadows—it’s institutionalized access.”
Rare Earth Exchanges (REEx) has confirmed, through multiple sources, that magnet buyers are being asked to share proprietary information that extends beyond compliance, including technical specifications, supply chain maps, and downstream customer profiles. The goal? Leverage industrial knowledge while keeping the rest of the world dependent.
A Framework or a Facade?
Last week’s much-touted London talks between the U.S. and China yielded a fragile “framework” to restore trade. Beijing promised expedited licenses for select buyers and launched a “green channel” to speed paperwork. President Trump declared victory and insisted America had “everything we need (opens in a new tab).”
But the details tell another story. Critical military-grade magnets—the kind used in missile systems, radar arrays, and jet propulsion—it appears, remain off the table. Sources briefed on the talks report that Beijing explicitly tied defense-grade exports to concessions on unrelated U.S. tech export bans. That linkage is a warning: China is bargaining with magnets the way OPEC once did with oil.
While a few companies have received short-term licenses, many applications are still pending or rejected over “incomplete disclosures.” Beijing retains full discretion. The result? A trade deal in name, a trade trap in practice.
Factories Falter, and the Warning Signs Multiply
Evidence of fallout has emerged. Ford Motor Company was forced to halt production at its Chicago Explorer SUV plant for a week due to magnet shortages. CEO Jim Farley confirmed the shutdown was caused by the unavailability of a part worth under $100—a rare earth magnet essential to the vehicle’s operation. One $50 part can now idle a $50,000 vehicle.
This isn’t an isolated incident. Industry executives describe the auto sector as “in full panic.” REEx has reported on the troubles in the auto sector in both Europe and India.
Supply managers are scrambling to stockpile magnets, redesign systems, or find alternate suppliers. None of it is working. China dominates more than 90% of global rare earth magnet production. The semiconductor crisis of 2021-2023 is repeating itself—this time with magnets, and with possibly more ominous implications.
The Alliance for Automotive Innovation (opens in a new tab) has already warned the White House (opens in a new tab) that without immediate access to magnets, parts production across the U.S. will grind to a halt. Sensors, throttle bodies, motors, speakers, seats, steering columns—everything depends on the uninterrupted flow of rare earths. The Ford shutdown may be a preview, not an outlier.
Defense Industry Stays Quiet, But Strains Are Real
If the auto industry is worried, the defense sector is alarmed—quietly. American military systems are heavily reliant on rare earth magnets, particularly samarium-cobalt varieties, which are used in high-heat, high-performance applications. Think missiles. Fighters. Submarines.
Yet defense contractors have remained largely silent, likely due to national security constraints. Still, REEx has confirmed that multiple military suppliers are experiencing stalled magnet orders from China. Some contractors are reportedly drawing from strategic reserves, while others are relying on classified stockpiles managed by the Defense Logistics Agency.
Beijing has made it clear: defense-related magnet exports remain embargoed. Laurie Chen (opens in a new tab) and Fanny Potkin (opens in a new tab) at Reuters confirmed certain defense-related magnets (opens in a new tab) are not leaving China’s shores. And their release is now openly linked to geopolitical bargaining chips far removed from mineral supply chains.
Cooperation or Coercion?
So far, China has granted a handful of six-month licenses, but only to buyers who submit to full disclosure. Industry sources say that approvals often require hundreds of pages of documentation and still end in denial without a clear explanation.
China’s Ministry of Commerce has stressed that it will prioritize “global civilian needs.” But the pattern suggests something else: a calibrated drip-feed of supply, just enough to calm markets, just little enough to keep leverage. There is no indication that China plans to relax the intellectual property demands embedded in the licensing process. And even if shipments rise temporarily, the structure remains unchanged: Beijing controls the flow, and it can shut it off again at any time.
The Bottom Line
This is no longer just a supply chain issue. It is a battle over sovereignty—industrial, economic, and strategic—not to mention defense. With China dominating the world’s magnet valve market, the West is, not surprisingly, exposed, dependent, and increasingly cornered. Without a parallel critical mineral (including rare earth elements) industrial policy, the London talks didn’t loosen that grip; they certified it.
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