China’s suspension of critical rare earth minerals exports to the US could become a major headache for US companies, particularly automakers like Tesla (TSLA), GM (GM), and Rivian (RIVN).

Per the New York Times and Reuters, China ordered restrictions on exports of six rare earth metals that are only refined within the country on April 4. The metals, along with rare earth magnets, are used in everything from autos to aerospace products, with rare earth metals in particular used in magnets for EV motors. The suspension comes after President Trump ratcheted up his trade war with China with enhanced tariffs on April 2.

Many of the metal shipments are stuck at ports in China, awaiting new instructions from the Chinese government on the special export permit process needed to ship the materials out. Currently no guidance is in place, per the reports.

China produces 99% of the world’s supply of rare earth minerals and 90% of the rare earth magnets.

Bert van Dijk via Getty Images

“Does the export control or ban potentially have severe effects in the US? Yes,” Daniel Pickard, the chairman of the critical minerals advisory committee for the Office of the US Trade Representative, told the New York Times. The Office of the US Trade Representative did not immediately respond when Yahoo Finance reached out for comment.

The Alliance for Automotive Innovation, which represents several automakers on trade and industry-related issues, also did not immediately respond.

“China’s ban on rare earth exports to the US slows access to a number of minerals crucial to modern vehicle production,” said manufacturing expert Sam Fiorani of AutoForecast Solutions. “Minerals such as yttrium and dysprosium are important for electric vehicle manufacturing as key ingredients for batteries and motors. Other minerals could slow production of smaller motors, speakers, camera lenses, and LEDs,” which are used in auto production as well.

Reuters reported that several Chinese rare earth sellers have declared force majeure (a legal term that means "superior force") on their contracts with overseas buyers, meaning they claim they cannot fulfill their commitments due to forces outside their control.

Top US EV manufacturers like Tesla, GM, Rivian, and Ford (F) are deeply exposed, as they assemble many motors for their vehicles in the US. Conversely, rivals like European, Japanese, and, to a lesser extent, Chinese manufacturers will benefit from their access to these important resources only available from China.

Tesla has cut its use of rare earth metals in its motors by 25% and intends for its next-generation EVs to be rare-earth free. GM said it is "exploring options to limit or potentially eliminate rare earth materials in EV motors" but did not provide a timetable.

Even if the US automakers are able to acquire these materials from other parts of the world (though in diminished quantities), they will likely have to pay up for it.

“These already expensive materials will only increase in cost with China removed as a potential source where they currently provide around half of the world’s supply of some rare earth minerals. Turning to other countries, where their production costs are already higher, will increase prices for manufacturers of many electric vehicle components,” Fiorani said.

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on X and on Instagram.

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