China trade war risks stifling America's electric car movement

• "We do forecasts out to 2040, and China is going to remain dominant in that time frame across all stages of [the] supply chain," said Adam Webb, head of battery raw materials at Benchmark Mineral Intelligence.
• In the meantime, the U.S. remains dependent on China for key inputs and technologies to produce electric vehicles — and those are getting tougher and more expensive to access.

Driving the news: China isn't just hitting back with higher tariffs to match U.S. taxes on Chinese imports.

• It's also using its control of critical minerals and refining technology to disrupt American supply chains for everything from cars and electronics to missiles and robots.
• For example, Beijing this month made it harder to export rare earth minerals and magnets that are essential for electric motors.
• The move follows earlier restrictions on minerals such as germanium and gallium, which are used in semiconductors and defense, as well as stricter controls on graphite, a critical material for battery anodes.

Where it stands: Higher tariffs on imported vehicles and components means the U.S. will likely sell 2 million fewer cars and trucks annually, many forecasters agree.

• A shortage of batteries or electric motors for EVs could also choke off the transition away from gasoline cars that's just getting started.
• U.S. sales of battery-electric vehicles grew 11.4% in the first quarter, accounting for 7.5% of total car sales, according to Cox Automotive.
• Cox had been forecasting sales of all electrified vehicles — including hybrids, plug-in hybrids and battery-only cars — could reach 25% by the end of 2025, but the latest trade turmoil makes that less likely.

The big picture: China is the world's top miner and processor of rare earths, a group of 17 elements used to make such things as cars, weapons, smartphones and wind turbines.

• It has also acquired mines in other countries with large deposits of other key minerals for EV batteries, including lithium, nickel, cobalt and graphite.
• China also produces most of the cathode active materials needed to make lithium-ion batteries and is home to CATL, the world's leading manufacturer of lithium iron phosphate (LFP) batteries, a lower-cost alternative.

Zoom in : None of this is accidental.

• China has spent decades crafting a comprehensive industrial policy to protect its national security and to ensure its control of future energy and transportation technologies.

• The closest thing the U.S. has to an industrial policy is the 2022 Inflation Reduction Act, which provided tax incentives to build EV and battery plants in the U.S.

The Trump administration is scrambling to source these minerals from elsewhere, but it doesn't help that the U.S. has alienated many of its trading partners.

• The U.S. has plentiful lithium deposits. But extracting such metals from the earth is an expensive, time-consuming process that can harm the environment.

Between the lines: Even if the U.S. can secure raw minerals, it's still reliant on China, which manufactures virtually all of the world's rare earth magnets and dominates the refining process that turns other metals into battery-grade materials.

• Even MP Materials' Mountain Pass mine in California, the only rare earths mine operating in the U.S., has sent a portion of its unrefined materials to China for processing into magnets.
• Longer term, MP Materials is scaling its own fully integrated supply chain in the U.S., including producing rare earth magnets in partnership with GM.

What they're saying: "We can have all the rare earths in the world but if we don't refine and make magnets, we don't have anything," MP Materials' CEO James Litinsky, tells Axios.

• Webb adds: "The reality is you're not going to be able to do that overnight. It's a long game."

The bottom line: China's grip on the EV supply chain is not easily broken.