What's Happening?
China has intensified its export controls on rare earth elements (REEs), a move that could significantly impact the global automotive supply chain. On October 9, 2025, China's Commerce Ministry announced
additional restrictions, requiring export licenses for five more elements: holmium, erbium, thulium, europium, and ytterbium. This decision follows previous limitations on seven other REEs and is seen as a response to President Trump's threat of imposing 100% tariffs on all Chinese imports. The restrictions are part of a broader trend towards deglobalization in the automotive industry, as companies seek to mitigate risks associated with reliance on Chinese supply chains.
Why It's Important?
The increased restrictions on rare earth exports from China could have significant implications for the U.S. automotive industry, which relies heavily on these materials for manufacturing electric vehicles and other advanced technologies. The 'China+1' strategy suggests that original equipment manufacturers (OEMs) may need to diversify their supply chains to reduce dependency on China. This shift could lead to increased costs and supply chain disruptions in the short term but may also drive innovation and investment in alternative sources and technologies. The U.S. and other countries may need to accelerate efforts to develop domestic rare earth production capabilities to ensure a stable supply.
What's Next?
As the situation develops, OEMs are likely to explore partnerships and investments in countries outside of China to secure their supply chains. This could involve increased collaboration with countries that have untapped rare earth resources or the development of recycling technologies to reclaim these materials from used products. Additionally, the U.S. government may consider policy measures to support domestic rare earth production and reduce reliance on foreign sources. The automotive industry will need to closely monitor these developments and adapt their strategies accordingly to maintain competitiveness.
