U.S. Tariffs, China's Rare Earth Controls Create Perfect Storm for Global Supply Chain Collapse: Everstream Analytics

China's new export controls on rare earths could disrupt semiconductor and automotive manufacturing within days. Here's how.

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China's new export controls on rare earths could disrupt semiconductor and automotive manufacturing within days.

Key takeaways:

 

  • New Chinese export controls on rare earths, imposed in April are starting to ripple through global supply chains.
  • The export controls affect rare earths as well as rare earth magnets, which are used in electric vehicles, wind turbines and military hardware.
  • China granted the first rare earth magnet export permits in mid-May but it remains unclear for what quantities and for which customers.
  • European semiconductor makers face severe shortages of rare earths and production lines could grind to a halt as soon as early June 2025.
  • Car plants and suppliers in Europe, the United States and Japan typically hold between 2-3 months’ worth of stockpile material, which is quickly depleting.
  • Tariffs causing $6.5-plus billion in immediate automotive losses.
  • Mass production shutdowns and layoffs are already underway.
  • Pharmaceutical manufacturers have rushed to import medicines ahead of the possible tariffs. In March, pharmaceutical imports exceeded $50 billion, 20% of total pharmaceutical imports in 2024.
  • The farming and agriculture sector, which often works with tight operating margins when compared to other industries, is particularly susceptible to financial losses in the face of tariffs. Soy, the United States’ top agricultural export in 2024, has thus far dodged fallouts from tariffs given that the steepest tariffs were initiated near the end of the export season. However, risks remain if the United States and China do not reach a trade deal. U.S.-based livestock producers have already seen portions of their profit shares shift abroad.
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