President Donald Trump announced the completion of a trade framework with China, pending final approval from Chinese President Xi Jinping. The deal outlines that China will provide the United States with full magnets and rare earth materials upfront, a move that will alleviate immediate pressure on the U.S. auto industry. The U.S. and China will maintain reciprocal tariffs, with the U.S. imposing a 55% tariff and China a 10% tariff.
This breakthrough provides some relief to American automakers, who have been rushing to secure magnet supplies after China tightened export controls. In April, China imposed stricter requirements on rare earth exports, significantly limiting the flow of these materials to global markets. The move triggered panic across the automotive sector, with automakers and suppliers bracing for what could become the third major supply shock in five years. Automakers warned that without new supplies, plant shutdowns could begin as early as mid-July.
China dominates the global rare earth supply chain, accounting for 70% of mining, 85% of refining and 90% of magnet production. These magnets are indispensable in vehicle production, where they are used in motors, side mirrors, windshield wipers and EV batteries.
Like many industries, the automotive sector remains heavily dependent on China for these critical minerals. While the trade deal may delay a crisis, it does little to resolve the industry’s long-term vulnerability. The fragility of U.S.-China relations, combined with the lack of alternative sourcing options, continues to expose American automakers to sudden disruptions. Until the U.S. can establish reliable rare earth supply chains outside of China, the auto industry remains vulnerable to future restrictions.
