Multiple Proposals: BDI Urges Action on Resource Shortages to Economic Minister
Economy Minister is alerted in writ by BDI of impending raw material scarcity
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In a letter to Federal Minister of Economics, Katherina Reiche (CDU), the Federation of German Industries (BDI) sounds the alarm on escalating resource shortages. First reported by Reuters and "Handelsblatt," the BDI outlines strategies to combat Chinese export restrictions on rare earths.
The BDI's letter presents suggestions for navigating China's export restrictions, including a streamlined licensing process for EU exports. Licenses should apply to multiple shipments instead of singly, thus minimizing bureaucratic hurdles. The final consumer declaration should avoid demanding sensitive company data to ensure German industry can plan effectively without political coercion.
Moreover, the BDI advocates for creating strategic reserves of rare earths and magnets and promptly channeling the existing raw materials fund. Objecting to its temporary nature, the BDI calls for the fund’s permanence and expansion in capacity.
Rare earths hold significant value for automakers, defense companies, and renewable energy producers. In retaliation to U.S. President Donald Trump's high tariffs on key trade partners, China tightened export controls, affecting the EU as it takes action against low-cost electric cars from China.
Background
China imposed export restrictions on seven rare earth elements and related magnets effective April 4, 2025, citing national security and non-proliferation concerns. China holds 60% of global rare earth production and 90% of refining capacity, making these export restrictions particularly disruptive to global supply chains[1].
BDI's Stance and Recommendations
- BDI is willing to back protective trade measures against China, provided the situation calls for it, signaling a push for equal, fair trade practices[3].
- The BDI champions fair competition and reciprocity in economic relationships with China, advocating for the resolution of export restrictions impacting crucial supply chains[3].
- In sync with Chancellor Friedrich Merz's policy, the BDI is urging the EU and German governments to investigate trade defense instruments such as anti-subsidy measures or tariffs to counteract China's export controls and subsidies[3].
- Amid the crisis, the BDI pushes for emergency diplomatic discussions with Chinese officials to expedite export licenses and mitigate disruptions caused by these restrictions[1].
Impact on German Industry
The restrictions result in a resource crunch essential for EVs, aerospace, and advanced electronics sectors. German car components manufacturers had to temporarily halt operations due to raw material shortages from China, signaling a significant challenge[1]. The instability and scarcity of rare earths lead to increased costs, the pursuit of alternative sources, and complications in long-term planning and innovation for the industry[1][3].
Insight
These proposals reflect Germany's broader strategy under Chancellor Friedrich Merz, which aims to minimize strategic dependencies on China while maintaining strong economic ties, a policy often referred to as "de-risking without decoupling"[3].
The BDI, in line with Chancellor Friedrich Merz's policy, suggests the EU and German governments consider employing trade defense instruments like anti-subsidy measures or tariffs, as part of their effort to combat China's export controls and subsidies on rare earths, which are crucial for various industries including automakers, defense companies, and renewable energy producers. To ensure German industry can plan effectively without political coercion, the final consumer declaration should avoid demanding sensitive company data when processing EU exports. Furthermore, the BDI advocates for creating long-term strategic reserves of rare earths and magnets, and for the permanent expansion of the existing raw materials fund to mitigate the impact of resource shortages on the finance and business sectors within the community.
