US-China Tussle Over Rare Earth Magnets
The geoeconomic rivalry between the U.S. and China is increasingly focused on rare earth magnets, components described as a new battlefield for technological and military supremacy. These magnets are critical for advanced military hardware, EVs, and green energy systems. The U.S. is now intensifying efforts to build domestic supply chains to reduce its heavy dependence on Chinese exports.
China's stranglehold on the rare earth magnet supply chain is most acute in the processing stage. While China accounts for roughly 70% of rare earth mining, it controls nearly 90% of the complex processing and refining needed to transform raw ores into materials for magnets. This dominance gives Beijing significant leverage over global high-tech and defense industries. The dependency is stark: in 2025, 71% of all U.S. rare earth imports came from China. For some specific heavy rare earths crucial for defense applications, like dysprosium and terbium, China's processing control is estimated to be as high as 99%. This vulnerability was highlighted by new Chinese export controls in late 2025, targeting products containing even trace amounts of Chinese rare earth materials or technology. In response, the U.S. government is funding a "mine-to-magnet" strategy. Key projects include MP Materials' facilities in California and Texas, with a smaller magnet plant expected to come online in 2026 and a larger one in 2028. Another company, USA Rare Earth, is developing the Round Top deposit in Texas and aims to begin commercial production in late 2028. The stakes are rising as demand for these powerful magnets is projected to triple by 2035, largely driven by the boom in electric vehicles and wind turbines. The automotive sector is already the largest end-user of rare earth magnets, a trend expected to accelerate. Without a significant increase in non-Chinese supply, a global shortage of up to 30% of projected demand could emerge by 2035.
