US Auto Suppliers Urge Immediate Action To Tackle China's Rare Earths Restrictions Amid 'Serious, Real-Time Risks'

The U.S. Vehicle Suppliers Association has called for immediate measures to address China’s limited rare earths exports, warning of potential disruptions in auto parts production.

What Happened: The Motor & Equipment Manufacturers Association (MEMA) issued a statement on Wednesday, urging prompt action to resolve the issue of China’s restricted exports of rare earths, minerals, and magnets. The association warned that the situation could quickly disrupt the production of auto parts, Reuters reported.

China, which dominates more than 90% of the world's rare earth processing capacity, imposed export restrictions in April, mandating that companies secure licenses from Beijing. These measures came in response to a trade war that began when President Donald Trump introduced tariffs on Chinese goods.

The MEMA, in its statement, highlighted the “serious, real-time risks” faced by parts companies due to the unresolved situation. The association stressed the immediate need for strong action to avoid major disruptions and economic consequences throughout the vehicle supplier industry.

The report states that the U.S. auto industry is already experiencing the effects of these restrictions. In May, Ford Motor Co. F was forced to suspend production of its Explorer SUV at its Chicago plant for a week due to a shortage of rare-earth materials.

Why It Matters: The restrictions on rare-earth magnets from China have been a cause for concern for global automakers, potentially leading to factory closures within weeks. 

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During early May, auto suppliers and trade groups representing major automakers, including General Motors GM, Toyota Motors TM, Volkswagen and Hyundai, warned that Chinese restrictions on key materials could seriously disrupt the production of essential automotive components.

Jim Cramer, renowned CNBC host, also raised concerns about China's tightening grip on the rare-earth supply chain, which poses a critical risk to U.S. industries.

That being said, industry experts believe that the U.S. has multiple options to establish a domestic supply chain for rare earths within the next five years, but warn that the process is fraught with challenges.

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