Tariff Tempest Troubles Trusted Ties

Daido Steel, a key supplier to Honda and other Japanese automakers, is confronting profound disruption from the U.S.-China trade escalation. New U.S. tariffs, including a 50 % levy on imported steel and 25 % duties on auto parts, have disrupted intra-company contracts and raised costs sharply. Tetsuya Shimizu warns that such measures reflect a broader trend of "putting up walls," threatening global economic harmony and supply chain cohesion.

Monopoly Menace in Magnet Minerals

China's dominance in rare earths, producing nearly 70 % of mined elements and 90 % of refined output, has emerged as a strategic leverage point. Export restrictions, especially on heavy rare earths like terbium and dysprosium, now require license approvals that may take 45 working days, leading to shortages and manufacturing slowdowns worldwide

Spiking Prices & Squeezed Suppliers

Market signals reflect disruption: neodymium prices have surged approximately 30 %, from $68 to near $90 per kilogram, while dysprosium rose similarly from $220–$270 to higher levels. These increases are squeezing margins across industries, from electric vehicles to consumer electronics, and escalating production costs for suppliers like Daido Steel.

Strategic Shifts & Supply Diversification

In response, Daido Steel is accelerating its efforts to secure rare earth sources outside China. They are exploring partnerships in Australia, Canada, Brazil, and the United States, though scaling non-Chinese supply chains remains slow and expensive. Japan’s overall dependence on Chinese rare earth has fallen from 90 % to 60 %, but volatility persists .

Innovation in Materials: Magnets Without Heavy Metals

To reduce scarcity risks, Daido has developed neodymium magnets without heavy rare earths like dysprosium or terbium. Used by Honda since 2016, and also indirectly manufactured for Aisin and Denso, these magnets reduce strategic vulnerability. This technical pivot offers resilience, though it may command higher production costs.

U.S. Plant Prospects & Nearshoring Drive

Daido Steel plans to build a manufacturing facility in the U.S., aiming to bring production closer to its largest markets and insulate from tariffs and export constraints. Though details remain under wraps, the move is part of a broader “nearshoring” trend among Japanese industry leaders seeking stable, tariff-free operations in North America.

Geopolitical Gridlock & Global Domino Effects

Despite a U.S.–China trade détente, China maintains its rare-earth export control regime, citing national security and dual-use concerns. This creates uncertainty for hundreds of Japanese suppliers needing export licenses. Delays and restrictions threaten to reverberate through sectors such as automotive, electronics, and defense globally.

Nationalism vs. Globalism: A Balancing Brinkmanship

Shimizu cautions that expecting a complete domestic reshoring, “produce everything in America for America”, is unrealistic, given time constraints and infrastructure gaps. He warns against authoritarian overtones and advocates for balanced strategies that preserve economic connectivity without compromising security or supply diversity.

Key Takeaways::

• China’s rare-earth export curbs and U.S. tariffs threaten Daido Steel’s supply stability and financial forecasts.

• Technological innovation through rare-earth-free magnets helps reduce reliance on Chinese materials.

• Daido is pursuing foreign supply chains and U.S. manufacturing to mitigate geopolitical risks and stabilize production.