Ford still struggling to source rare-earth magnets despite US-China trade deal, warns of potential factory shutdowns
Jun 24, 2025
Key Points
- Ford halted Chicago-area production in May due to rare-earth magnet shortages and still operates on hand-to-mouth supply despite a June 2025 US-China trade deal.
- China controls 90% of global rare-earth processing capacity; export licenses for magnets containing dysprosium and terbium arrive week-to-week, not reliably enough for automotive production.
- Decades of offshoring rare-earth processing to avoid US pollution created a geopolitical vulnerability now threatening EV production across the entire American auto industry.
Summary
Ford is still scrambling to secure rare-earth magnets for electric vehicle production despite a US-China trade deal struck in June 2025 that was supposed to ease the crunch. Lisa Drake, Ford's vice president overseeing industrial planning for batteries and electric vehicles, described the situation as "hand-to-mouth" supply chain scrambling. The automaker halted production at a Chicago-area factory in May due to magnet shortages, and while the situation has improved marginally, Ford is still shuffling production schedules to avoid future shutdowns.
The core problem is not scarcity of raw material in the ground. Rare earths are relatively abundant geologically. China controls roughly 90 percent of the world's industrial capacity to process and refine rare-earth elements into usable magnets. This concentration spans mining operations, equipment, and processing facilities. The US and other countries have known deposits, but moving from discovery to production requires mining permits, environmental approvals, and years of capital investment.
Rare-earth magnets are essential to EV motors because they allow high-speed operation at low cost. Smartphones, jet fighters, and most modern technology depend on them. China began requiring export licenses for rare-earth magnets containing dysprosium and terbium in April 2025, creating a bottleneck. The Trump administration's recent trade deal theoretically opens the spigot, but in practice, export license approvals are still arriving on a week-to-week basis. That is far from the reliable supply automotive production demands. Other automakers report similar delays.
The offshoring of rare-earth processing decades ago was justified on environmental grounds to avoid pollution in the US, but the strategy backfired on both counts. China's manufacturing capacity for these materials comes with severe air and water pollution. Relocating the problem overseas did not solve it globally or achieve the stated environmental goal. More critically, it created a geopolitical supply chain vulnerability that now threatens EV production across the entire US auto industry.