In 2024, China supplied 35.6% of the EU’s imports of rare-earth metals and compounds. The same figure for the US was 66.6%. Korea, 50%. Japan, 38%. At a glance, Europe is the least China-exposed major auto-producing bloc in the West. 

The picture changes one step downstream in the supply chain. Seraph’s analysis of the CEPII BACI trade database puts EU imports at about $100 million in 2024, against $1.2 billion of permanent magnets, the form in which most rare-earth value arrives. China supplied 88% of those magnet imports, up from 86% in 2022, and the next-largest source was 3%. The material arrives embedded in finished products, and that is where the supply chain risk sits. 

Three numbers, one country 

China accounts for roughly 17% of world rare-earth compound export value, down from 25% in 2022. It holds roughly 90% of global refining capacity. And it supplies 88% of Europe’s magnet imports, a figure the European Parliament Research Service puts at 98% once the scope widens beyond the single HS code to include Chinese-origin magnets re-exported within the EU. 

The three figures describe the same country because the supply chain becomes more Chinese the further downstream it is measured. Several of the biggest compound exporters in the data, Japan, Malaysia, Estonia, and France, refine or re-export feedstock that is itself China-linked upstream. 

Europe has the ore. It walked away from the refining. 

Europe’s deposits are large but none are developed. Norway’s Fen Complex raised its resource estimate in March 2026 to 15.9 million tonnes of rare-earth oxides, more than total US reserves. Sweden’s Per Geijer holds over 1.3 million tonnes, and Norra Kärr, rich in the heavy rare earths magnets need most, received its mining permit only in June 2026. Greenland has two large deposits: Tanbreez and Kvanefjeld, the latter holding roughly 11 million tonnes and frozen since 2021, when Greenland banned mining ore with more than trace levels of uranium. Not one tonne of European ore is being extracted today, and until 2025 the continent had essentially one commercial separation site.  

Permitting the mine and hosting the refinery are what Europe finds difficult, and the examples above already show the first half: a decade of environmental objections at Norra Kärr, a uranium ban at Kvanefjeld. 

It hasn’t always been this way. Through the 1980s, Rhône-Poulenc’s La Rochelle plant was the world’s leading rare-earth separator, with roughly half the global market.  

Separation is messy work: mixed rare earths pass through hundreds of solvent-extraction stages, consuming acids and solvents in volume and leaving acidic wastewater. When French regulators refused to renew its radioactive-waste license around 1990, the company wound down ore processing and moved separation into Chinese joint ventures. China took the industry the West gave up. State support of $9 to 10 billion between 2010 and 2019, looser environmental rules, and price collapses like the one that bankrupted Molycorp in 2015 kept Western projects impossible to finance. By 2019, China held 85 to 90% of global refining capacity. Since 2023, it has banned exporting the separation technology itself. 

Rebuilding runs into the same headwinds. Swedish permitting takes 10 to 15 years by LKAB’s account. Industrial power costs more than twice US levels, per the IEA. The expertise sits in China.  

Above all, no European OEM has signed the long-term purchase agreements a separation plant needs to raise financing. Solvay’s La Rochelle expansion waits on customer commitments, and its binding deals so far are with US magnet makers. The one separation project under construction in Europe, Caremag at Lacq, is funded largely by France and Japan, with half its heavy rare-earth output committed to Japanese buyers.  

China’s controls follow the value chain 

China’s export controls track the value chain it dominates. Each escalation has moved one step further downstream, toward the layer where the concentration sits. 

First, the elements. On April 4, 2025, MOFCOM’s Announcement No. 18 imposed export licensing on seven medium and heavy rare earths and their derived magnets. The automotive impact was immediate: magnet shipments to Germany halved between March and April 2025, Ford idled its Chicago Explorer plant for a week in May, and CLEPA reported European supplier lines halting as stockpiles ran out. Approval rates for European license applications climbed from roughly 25% in early June 2025 to about 60% by July, per CLEPA, with reviews commonly running 60 to 120 days. 

On October 9, 2025, Beijing added five more elements, extended controls to processing equipment, and introduced a rule requiring a Chinese export license for any magnet made anywhere in the world containing 0.1% or more Chinese-origin rare-earth content by value.  Almost every magnet traces back to China at some point, so in practice the rule asserts licensing authority over most of the world’s magnet production. 

The rule is currently paused. Following the Trump-Xi meeting in Busan, China suspended the October measures on November 9, 2025, for one year, until November 10, 2026. Since then, conditions have eased selectively. In December 2025, China issued the first year-long general licenses to major magnet producers, and Volkswagen’s suppliers were among the early beneficiaries. Enforcement against the US has moved the other way: 17 tons of yttrium shipped to the US between April and December 2025, against 333 tons in the prior eight months; in May 2026, Chinese exports of controlled compounds to the US fell to zero; and on June 22, 2026, Beijing added MP Materials and USA Rare Earths to its own entity list. 

November 10 is the date to plan around. If the suspension lapses, the 0.1% rule reaches magnets already inside Western-made motors and subassemblies, regardless of where they were manufactured. 

The policy response is aimed one layer upstream 

The EU’s response is real and moving, but much of it is aimed upstream of the chokepoint. The Critical Raw Materials Act, in force since 2024, sets 2030 benchmarks for extraction (10%), processing (40%), and recycling (25%), plus a 65% cap on any strategic raw material from a single third country.  

The benchmarks cover all 17 strategic materials as a class, so progress on lithium or nickel can flatter the headline numbers while rare earths stand still. Rare earths are furthest from every one: extraction today is zero, processing a few percent, recycling below 1%. Of the 47 strategic projects designated in March 2025, five cover rare earths, and Caremag is the only one under construction. 

The operational measures arrived on December 3, 2025, when the Commission adopted the RESourceEU Action Plan: a European Critical Raw Materials Centre for joint purchasing and stockpiling, proposed export restrictions on magnet scrap (Europe currently ships out the feedstock its own recyclers would need), and mandatory recycled-content shares in magnets. The G7’s June 2026 Evian summit added stockpile coordination and an IEA-linked monitoring platform, but a US-drafted price-floor scheme found no European backing.  

Capacity is still arriving, unevenly. Neo Performance Materials opened Europe’s first commercial EV-magnet plant in Narva, Estonia in September 2025 and commissioned a small-scale heavy rare-earth separation line in April 2026. Solvay’s La Rochelle site has produced magnet-grade NdPr since April 2025, with an ambition of 30% of European demand by 2030. Analysts put the combined Western pipeline at 30 to 50% of OECD magnet demand by 2028. In the meantime European buyers pay heavily: the IEA noted in October 2025 that European prices for some rare-earth materials reached up to six times Chinese domestic levels. 

What this means for manufacturers 

The data, the history, and the policy record point the same way: the risk sits downstream of where most companies look for it, and the fix sits downstream of where most policy is aimed. At 88% import concentration the exposure is close to universal and rarely appears under its own name. Treat November 10, 2026 as a hard date for inventory positioning and license documentation. And consider long-term supply agreements with the new Western producers.  

One year into the tariffs, supply chains are reorganizing. They aren’t coming home. 

In our May 2026 survey, we asked automotive leaders where they stood on reshoring, on a scale running from evaluating to completed. Roughly 2% reported it complete. 38% weren’t considering it at all. The rest sat in evaluating, planning, or early implementation. Our analysis of automotive-sector financial disclosures shows talk of reshoring and nearshoring up 23x since 2019.  

Their verdict was that reorientation of supply chains is greater than reshoring. The automotive picture, in real terms, says the same thing more sharply. 

For the automotive sector, import penetration sat around 44% throughout 2024, and fell to 39.6% in Q4 2025. The share fell because imports collapsed under the tariffs and the market itself shrank, not because domestic production rose to fill the gap. In 2025, under the full weight of the tariffs, both imports and domestic production fell together: real output down 1.3% compared to 2024, real imports down 10%.  

After stripping out inflation, real domestic output of vehicles and parts is up 2.2% since 2019, and real output tracks real imports almost exactly: real output and imports are tightly correlated1, rising and falling in step. Most pertinently, domestic output in the automotive sector has not risen to fill the space left by falling imports, which is exactly what reshoring would look like in the data.  

The import mix tells the same story. Auto imports fell 13% in 2025, and they fell from every major source: Mexico down 6%, Canada down 8%, Japan down 11%, South Korea down 16%, Germany down 20%, China down 25%. Not one major nation grew its share in the US market.  

The one shift worth noting is a relative one. Even though imports fell across the board, North America’s share of auto imports rose from 41% to 44%. The rest of the world just fell faster, by about 18% in comparison to Mexico and Canada’s collective 7%. The tariffs hit distant suppliers hardest and the integrated North American base least. That is reorientation toward the lowest-tariff, most-connected suppliers inside a shrinking total, with no sign yet of production coming home. 

The May numbers confirm what our survey base signaled more than a year ago. Back in December 2024, when we asked how operational footprints would shift, the answer was not expansion. A plurality of respondents expected to shrink or consolidate, and in the US specifically, consolidation intent ran well ahead of growth. The drivers were underutilized factories from soft demand, and tariffs that made the current footprint undesirable and uncertain. Where leaders did see opportunity, they pointed away from the US industrial Midwest, with Mexico drawing the most optimism. 

Policy uncertainty makes delay the rational choice. Footprint decisions run on a multi-year horizon; and an announcement comes in the form of a press release. Reshoring means a qualified supplier base, a hired skilled-trades workforce, and access to utilities.  

Only 8% of the leaders we surveyed expect a clean USMCA extension. A target that keeps moving is a reason to wait rather than build, and our respondents have tied their capital-expenditure delays directly to that uncertainty, deferring program launches, new equipment, and new facilities through 2026. 

Waiting to build is not the same as doing nothing. The OEMs have reacted where they can. Most are pursuing local-for-local, reducing China dependency while accepting that full independence is not available. Jim Farley has declared the era of the auto industry as a global business over, with localization accelerating. The intent is there; the capability is the constraint. Under new policy regimes, nearshoring may well be a strategic imperative. But there is an execution bottleneck – and until it clears, the data will keep showing reorientation, not reshoring.  

Automotive leaders are signaling that they are getting serious about reshoring. A look at mentions of reshoring and nearshoring across earnings calls and corporate filings since 2020 tells a clear story. Between mid 2020 and early 2025, the topic was barely raised by executives. The second half of 2025 saw talk of reversing offshoring hit record heights. So far in 2026, frequencies have stayed near those elevated levels. The inflection wasn’t noise. It was spurred by “Liberation Day” and China’s new protectionist trade policies affecting rare earth mineral exports. 

The dollar commitments have followed. Over $1.5 trillion in private sector commitments have been announced since January 2025, spanning 131 companies and 32 states. Automotive sits at $64.6 billion pledged – the third largest sector behind semiconductors and pharmaceuticals. 

The intent is real, and the capital is increasingly behind it. The execution is not. US manufacturing construction spending has fallen for five consecutive months and is down 9.6% year over year, ~16% below the August 2024 peak. Consensus forecasts project another 3.9% decline in 2026. Mexico’s industrial sector contracted 1.1% across 2025 despite record FDI inflows, and Manufacturing Purchasing Managers’ Index readings have stayed in contraction territory through Q1 2026. Tesla’s and BYD’s flagship Mexican gigafactory plans appear to have quietly stalled. Bloomberg separately tracks roughly $7 trillion in “pending” projects that companies have planned but not committed to. 

Manufacturing capex doesn’t move on quarterly news cycles, and policy uncertainty is the immediate trigger for executive’s caution. Tariffs have seen three record breaking changes in the last twelve months, and automotive leaders are rationally hesitant about breaking ground on a five year plant commitment under those volatile conditions. That part of the story is real. But it is incomplete. Policy uncertainty is the trigger. Operational unreadiness is the binding constraint. 

When the Reshoring Initiative asked 500 US manufacturers what would bring production home, the answer wasn’t tariffs. OEMs said they would reshore 30% of offshore products if a skilled workforce existed domestically. Skilled labor was the top constraint – and it isn’t the only operational gap defining the investment cycle. 

Qualifying a new supplier for a single critical part takes 18 to 36 months, and most OEMs announcing US plants haven’t yet identified the domestic supply base that will feed them. Existing plants being asked to absorb more volume usually have less spare capacity than leadership assumes, and without targeted efficiency improvement, the capacity gap does not close on its own.  

This is the real opportunity in the pause. Companies that use it to do the operational work –total cost management, building workforce capability – will be ready when policy steadies. Every quarter spent waiting raises the cost and compresses the timeline of the work that still must be done. 

Under new policy regimes, reshoring is a strategic imperative. But there is an execution bottleneck. Disciplined planning and controlled execution are what separate the announcements that become plants from the announcements that become headlines. 

Stay ahead of the curve with key insights from the latest Manufacturing Economic Report, an in-depth look at the current state of the industrial sector and the forces shaping its future.

This executive briefing offers critical intelligence for decision-makers navigating today’s economic pressures, regulatory changes, and shifting market dynamics.

What’s Inside the Briefing:

Financial Health

• A breakdown of margin trends, capital expenditures, and inventory turns across the sector.

Input Costs

• Detailed analysis of labor, energy, and commodity pricing—and how input cost volatility is influencing operational strategies.

Macro Indicators

• A review of leading indicators including consumer sentiment, manufacturing indices, and global trade flows.

Regulatory Shifts

• Insights into recent U.S. and global regulatory developments and their impact on compliance, operations, and cross-border activity.

Voices from the Industry

• Real-world perspectives from manufacturing executives on margins, capex, debt management, and supply chain challenges.

Get the Full Report

For deeper insight and access to the full set of data and executive commentary:

Fill out the form below to download the complete Manufacturing Economic Report.

China’s economic challenges are impacting global supply chains, causing concerns for businesses that rely on it for manufacturing. Factors such as labor shortages, production delays, increased demand, and ongoing lockdowns in China have disrupted supply chains since 2020. This has led to rising prices and longer lead times for many products.

China faces economic challenges, including higher wages for factory workers, a trade war with the U.S., and record-high youth unemployment. President Biden has referred to China as a “ticking time bomb.”

Businesses are advised to:

1. Understand the issues at play, including rising labor costs, labor shortages, and the trade war’s impact on sourcing from China.
2. Consider diversifying their manufacturing and sourcing from countries like India, Vietnam, and Mexico, though diversification can introduce complexities and potential quality concerns.
3. Focus on customer satisfaction and delivering products despite supply chain challenges. Some businesses are adjusting their cash flow strategies and working closely with customers to plan for supply chain disruptions.
4. If necessary, raise prices but offer higher-quality products to maintain customer loyalty.
5. Start planning for supply chain diversification and building relationships with alternative suppliers to mitigate risks.

The evolving situation in China requires businesses to adapt and find creative solutions to maintain their supply chains and customer satisfaction.

For further insights on China’s economic woes are impacting small businesses and recommendations from Seraph’s founder and CEO Ambrose Conroy, you can refer to the Inc. piece following the link below. 

Go to the article

INDUSTRY: Automotive Manufacturing

SERVICES: Health Assessment. Logistics. Staffing Assessment. Operations.

Situation.

A wire harness manufacturer was struggling to meet the required production volumes for its automotive Tier-1 customer. To identify key bottlenecks across warehouse readiness, manpower and industrial processes, Seraph was engaged to conduct a plant assessment across their operations.

Actions.

3 key work packages were identified:

WORK PACKAGE 1

Logistics

Objective:
Defined physical space and layout needed to achieve ramp-up targets.

Deliverables:

• Developed logistic processes from receiving material to booking, inventory management, and material flow to the line.
• Ensured sequence adherence was followed.
• Moved marriage process from Plant 2 to external warehouse.

WORK PACKAGE 2

Manpower

Objective:
Evaluated current staffing and action planning.

Deliverables:

• Defined headcount requirements by area.
• Monitored hiring curve to evaluate operator skill level.
• Supported training plan
• Established training process

WORK PACKAGE 3

Industrialization

Objective:
Developed process to track safe launch, including pre-standard operating procedures (SOP) requirements.

Deliverables:

• Ensured industrialization activities for upcoming standard operating procedures (SOP).
• Tracked production schedule status, and shipment follow-up.
• PFEP calculation and validation to support ramp-up to 600 vehicles per day.

Results.

Key Improvements:

• Upstream improvements impacted key inventory metrics which protected the customer.
• Despite increased demand from OEM, days on hand (DOH) inventory improved while achieving increased performance output.
• Demonstrated leadership across the facility by strengthening shop floor management which drove higher sub-assembly output.
• Improved downtime tracking and control, driving increased OEE and output.
• Enhanced quality performance with strong problem-solving discipline.
• Facilitated knowledge transfer, through a smooth handover, enabling business sustainability.

Seraph developed visual tools to ensure WIP preparation to avoid subassembly disruptions.

Seraph mapped current state and defined future state warehouse layout. Validating PFEP calculations set a clear picture for strategy development and execution.

WORK PACKAGE 1

Logistics

• 153% increase in finished goods (FG)
• 133% increase in marriage process output over a 16-week period
• 221% increase in days on hand (DOH) on-site
• Created visualization tool: expanded from 1-day foresight covering 240 vehicles to 3-day foresight covering 945 vehicles, which positively affected finished goods and marriage process output.

WORK PACKAGE 2

Manpower

• Increased jobs per week capacity from 1,875 to 3,000
• Lean-Six Sigma Project: reduced process variation and fostered an awareness culture
• Line output enhancement: achieved increased output by minimizing downtime
• SWAT Team Formation: skills and

knowledge for on-floor operations.

WORK PACKAGE 3

Industrialization

• 38% reduction in downtime
• 56% quality increase in initial 8 weeks of project
• 25% quality increase in weeks 10 and 12 of project
• Material warehouse: created clear plan for expansion from 320 to 600 vehicles

• Seraph increased schedule attainment from 72% to 87% while the customer demand increased from 150 to 315 vehicles per day.
• Output increased by 28%.
• Downtime for subassemblies decreased 38%.