Global car production could shut down in the near future as experts warn that a shortage of rare-earth magnets from China could force the closure of factories.
A letter seen by Reuters from the leading bosses at General Motors, Toyota, Volkswagen, Hyundai and others contained a warning to President Donald Trump's administration.
It warned that car factories could close "within weeks" as a result of a lack of rare-earth metals from China, which are critical in the development of new vehicles.
Writing to the Trump administration, the Alliance for Automotive Innovation issued a dire outlook for the near future if a deal cannot be arranged.
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Industry leaders have warned that car production could grind to a halt amid ongoing tensions between China and the US
REUTERS
The letter, which was also signed by MEMA, the Vehicle Suppliers Association, stated that without certain elements and magnets, the manufacturing sector could be plunged into chaos.
It warned that factories would be unable to produce automatic transmissions, throttle bodies, motors, sensors, seat belts, lights, cameras and power steering technology.
Reuters reported that the letter stated: "In severe cases, this could include the need for reduced production volumes or even a shutdown of vehicle assembly lines."
At present, China controls over 90 per cent of the world's magnet processing capacity, with US manufacturers potentially losing out amid fresh restrictions.
New rules introduced in China require exporting companies to obtain licences from Beijing, which has caused concerns in the United States.
Following the imposition of these new restrictions, China saw the exports of rare-earth magnets halve in April.
Posting on social media site Truth Social last week, President Trump took aim at China for "violating" a new deal designed to mitigate the impact of trade restrictions.
He wrote: "China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US."
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Some Volkswagen suppliers have received an export licence from Beijing, although Indian manufacturers have not received any, warning that this could force production to stop in early June.
Speaking to Reuters, a US official confirmed that the US and China met in Geneva to discuss tariffs and possible countermeasures.
However, they claimed that China was "moving slowly on promises to issue rare-earth export licences".
Some industry experts fear this could lead to Washington introducing retaliatory measures if manufacturers continue to be impacted.
China controls over 90 per cent of the world's magnet processing capacity
REUTERS
It comes as China's Ministry of Commerce accused the United States of "severely violating" a trade truce, noting that it would respond in a strong manner.
A previous meeting led to the US lowering tariffs on goods from China, from a staggering 145 per cent to just 30 per cent, prompting China to also drop tariffs on US goods.
US Trade Representative Jamieson Greer spoke to CNBC about China's delay in issuing new licences for rare-earth exports.
He stated: "We haven't seen the flow of some of those critical minerals as they were supposed to be doing."
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