On April 21, 2025, the Lhasa Customs Directorate in the Shigatse region of Tibet Autonomous Region reported a significant boost in foreign trade during the first quarter of the year. The total import and export value for the area reached 2.308 billion yuan (approximately 320.25 million USD), marking a 5.9 percent increase compared to the same period last year. This growth outpaced the national average for foreign trade by 4.6 percentage points, reflecting the region's strategic advantages.
The Shigatse area, leveraging its position as a key gateway to South Asia, has effectively connected with the new western land-sea corridor. The total volume of imports and exports amounted to 57,100 tons, a notable 27 percent increase year-on-year. This surge in trade has been attributed to the region's advantageous geographic location, which facilitates easier access to international markets.
Among the exported goods, new energy vehicles and agricultural products have demonstrated robust performance. In the first quarter alone, Shigatse exported 2,955 new energy vehicles, representing a remarkable increase of 76.7 percent. Additionally, agricultural product exports reached 18,000 tons, up by 10.4 percent compared to the previous year. These figures underscore the region's growing significance in both the automotive and agricultural sectors.
However, the landscape of international trade is rapidly changing due to new restrictions imposed by China on the export of rare earth materials, which pose a potential threat to the automotive industry. According to a report by the Financial Times, the latest Chinese export controls on rare earth elements could halt car production, as magnet reserves are expected to run out within months if shipments are completely stopped.
These restrictions, which include seven rare earth elements essential for electric vehicles, wind turbines, and fighter jets, have been implemented in response to a 145 percent tariff imposed by the U.S. under former President Donald Trump. Executives and trade directors in the automotive sector estimate that current reserves of magnets will only last between three to six months, prompting companies to stockpile materials and seek alternative suppliers to avoid significant disruptions in production.
Jan Geizi, a trade consultant based in Frankfurt, noted that many car manufacturers and their suppliers are currently holding enough magnets for only two to three months. He warned that if shipments of magnets are not restored to the European Union or sourced from nearby regions soon, it could lead to serious problems in the car manufacturing sector.
The new Chinese controls target rare earth elements that are critical for producing high-performance magnets capable of withstanding high temperatures, such as dysprosium, terbium, and samarium. These materials are vital not only for the automotive industry but also for military applications, including fighter aircraft and missiles, as well as for electric and hybrid vehicles.
An executive in the automotive sector described the impact of these restrictions as “very painful,” estimating their severity as “7 or 8” on a scale of 1 to 10. He explained that this situation could be seen as a form of retaliation from the Chinese government, which may be aiming to pressure the U.S. into reconsidering its tariffs by creating supply chain challenges.
While rare earth elements are commonly found in the earth's crust, extracting them in a cost-effective and environmentally friendly manner remains a challenge. China currently holds a near-monopoly on the processing of heavy rare earth elements, which further complicates the situation for international manufacturers.
Corey Combs from Trivium Advisory highlighted that while the new restrictions focus on heavy and moderate rare earth elements, lighter rare earths like neodymium and praseodymium, which are used in greater quantities for magnets, have not been targeted. This distinction provides China with a significant leverage point to expand controls if the trade war escalates.
The export controls require exporters to obtain licenses for each shipment of materials leaving the country and have been extended to prohibit re-exports to the U.S. Despite this, the enforcement of these restrictions has not been comprehensive, with some shipments still making their way to international markets.
Chinese suppliers have already declared force majeure on shipments of rare earth materials, withdrawing products from the market and contributing to increased price volatility in an already uncertain commodity landscape. Countries like Japan are looking to mitigate their reliance on Chinese rare earths by exploring alternative sources, including Australian company Lynas, which plans to expand its processing site in Malaysia to produce dysprosium and terbium by mid-2025.
A Japanese government official acknowledged that the existing stocks of heavy rare earth elements are insufficient to prevent potential disruptions in car production, indicating that national reserves might only provide an additional two to three months of supplies. The official emphasized the urgency of establishing a new supply chain to withstand the impending crisis.
As the situation evolves, the critical question remains: How long will it take to process the new export licenses? This uncertainty looms over the automotive industry, which relies heavily on these materials for continued production and innovation.
The interplay between trade policies and supply chain dynamics illustrates the complexities of the global market. With the stakes higher than ever, the automotive industry must navigate these challenges while adapting to the shifting landscape of international trade.
