The European Union is pressuring China to ease new restrictions on rare earth exports, warning that the bloc’s automotive industry faces an “alarming” supply crisis that could lead to factory shutdowns across the continent.
EU trade commissioner Maroš Šefčovič raised the issue directly with Chinese commerce minister Wang Wentao during a meeting on Tuesday, following mounting complaints from carmakers and other manufacturers over delivery delays of rare earth elements and permanent magnets critical to industrial production.
“These materials are essential for the EU car industry and broader manufacturing. The current situation is extremely disruptive,” Šefčovič said after the talks, adding that “production lines are at risk of grinding to a halt.”
China introduced a licensing system in April restricting the export of seven types of rare earths and related magnets—materials used in electric vehicles, wind turbines, and consumer electronics—after former U.S. President Donald Trump imposed new tariffs on Chinese goods. Though ostensibly aimed at the U.S., the move has triggered ripple effects across global supply chains.
Ford Motor Company temporarily suspended production at its Chicago SUV plant last week due to a magnet shortage, signaling that the impact is already being felt.
Šefčovič said that while Chinese officials provided more optimistic data on the availability of export licences, “carmakers are warning of huge production difficulties in a short period of time.” He called for civilian products to be exempt from the licensing regime or, at minimum, for companies to receive annual approvals rather than face bureaucratic delays.
China processes about 90% of the world’s rare earth magnets, giving it significant leverage in global supply chains. EU officials and analysts say the bloc is becoming collateral damage in escalating U.S.-China trade tensions.
“This reinforces our urgency to diversify sources and reduce dependencies,” said EU industry chief Stéphane Séjourné. On Wednesday, he unveiled 13 new raw material sourcing projects in third countries, including the UK, as part of the EU’s critical raw materials strategy aimed at reducing supply vulnerabilities by 2030.
In Washington, U.S. automotive lobby groups echoed the EU’s concerns. In a letter to the Trump administration last month, they warned that delays in Chinese export licensing were already “leading to major disruptions in the global supply of needed elements.”
Meanwhile, business leaders and diplomats in China are pushing for a resolution. Jens Eskelund, president of the EU Chamber of Commerce in China, said pressure is mounting from both governments and industry. “For everyone advocating for de-risking, this episode proves their point,” he noted.
Maximilian Butek of the German Chamber of Commerce in China said he does not believe Beijing is deliberately targeting European firms. “It’s more likely a bureaucratic monster they’ve created,” he said, citing an overwhelmed commerce ministry fielding thousands of licence applications.
China has defended the export controls, with foreign ministry spokesperson Lin Jian insisting they are “in line with international practices” and “not directed at any specific country.” He added that Beijing is “committed to maintaining the stability of global production and supply chains.”
But EU analysts are less convinced. “EU industry is caught in the crossfire of U.S.-China tensions,” said Abigaël Vasselier of the German think-tank Merics. “We are now talking about job losses across Europe.”
The European Commission and several member states are expected to escalate the issue diplomatically in the coming weeks if a solution is not found. For now, Šefčovič said both sides had agreed to “compare and clarify” data and revisit the issue after further analysis—though time is running out for Europe’s auto sector.
