Rare Earth Magnets Framed as New US-China 'Battlefield'
While rare earth shortages are known, new analysis frames rare earth magnets as the true “battlefield” in the U.S.-China industrial rivalry. China’s near-monopoly on processing and magnet manufacturing presents a critical vulnerability for U.S. automotive, electronics, and defense sectors that goes beyond the raw materials themselves.
China accounts for approximately 90% of rare earth magnet manufacturing and 91% of the technically complex separation and refining processes. This dominance is not just in raw material extraction, where it holds about 70% of mining, but in the entire value-added process of turning oxides into the powerful neodymium-iron-boron (NdFeB) magnets essential for modern technology. NdFeB magnets are critical components in F-35 fighter jets, Tomahawk missiles, and Virginia-class submarines. Beyond defense, about 95% of electric vehicle traction motors rely on these magnets for their efficiency, which translates directly to driving range. The global market for these magnets was valued at over $20 billion in 2025 and is projected to grow significantly. In response to U.S. tariffs, Beijing has implemented export controls on rare earth technologies and magnets. Recent regulations require foreign firms to get Chinese approval to export magnets containing even trace amounts of Chinese-origin rare earths or those produced with Chinese technology, creating potential supply chain disruptions. The U.S. is countering with a "mine-to-magnet" strategy, backed by over $439 million in Department of Defense (DOD) funding since 2020 to build a domestic supply chain. This includes a 25% tariff on Chinese permanent magnets scheduled to begin in 2026. Key private sector initiatives are underway, bolstered by government support. MP Materials is developing a $1.25 billion magnet manufacturing campus in Texas, supported by a 10-year offtake agreement with the DOD. Additionally, USA Rare Earth received a non-binding letter of intent for up to $1.577 billion in federal funding and loans to establish a vertically integrated supply chain in Texas and Oklahoma. For manufacturers, this signals a need for enhanced supply chain diligence. The SEC's climate disclosure rules, although currently stayed, indicate a broader regulatory push for transparency in critical material sourcing. Companies may face increasing pressure to disclose their reliance on materials from specific geopolitical regions and their strategies for mitigating those risks.
