The future of everything from smartphones, to military equipment, to electric vehicles hangs on 17 rare earth minerals and the magnets that they’re made into. And China, the world’s largest refiner and producer, is tightening its grip and threatening the US’ largest automakers.
Over the last 30 years, China has methodically cornered the market on mining and refining rare earth minerals, which are used to produce a variety of common items like passenger vehicles and everyday electronics. In the wake of US President Donald Trump’s increasingly aggressive trade war, China is leveraging its position as the world’s largest producer, at the expense of the American auto industry.
“We’re within 90 days of this becoming a critical problem for everybody,” say Ambrose Conroy, founder of Seraph Consulting and a major investor in Democratic Republic of Congo mining operations.
“We’re within 90 days of this becoming a critical problem for everybody.”
According to analysts, more than 90 percent of the world’s supply of those 17 elements at the bottom of the periodic table are mined, refined, and turned into rare earth magnets in China. After Trump announced tariffs of up to 145 percent on Chinese imports, the country retaliated with a number of tariffs and export controls of its own. And, more importantly, it revised its export rules for rare earths.
As of early April, China requires companies to obtain special licenses to export rare earths, particularly neodymium, dysprosium, and terbium, as well as rare earth magnets, which are critical to nearly every technology on the market. They’re also vital to the automotive industry. Rare earth magnets are used in hybrid and EV motors, but they’re also used in internal combustion vehicles for catalytic converters, LiDAR and radar systems for advanced driving systems, audio systems, power steering, fuel and cooling systems, transmission components, and more.
As The New York Times recently reported, China has just started to set up the controls for these new export rules, which could cause stockpiles to run low. Companies like Tesla, GM and Ford have already said they are feeling the pinch as supplies tighten and prices spike, and the pain could get much worse, though some relief came about following the recent talks between the US and China.
On the heels of this agreement, the US should get access to the rare earth permits “more easily,” according to a Reuters report this week. Applications for export licenses should take 45 days to process and could include agreements for US exporters “soon.”
The threat to EVs and automakers
While the name “rare earths” may make you think that these minerals are scarce, they aren’t. Rather, they’re found everywhere in very low concentrations. Rare earth ores are easy to extract. They’re available all over the world, but they are very difficult to separate, says Tim Worstall, an economist, freelance journalist, and former rare earth trader. He explains that refiners have to extract each rare earth mineral higher up in the periodic table to get to neodymium, praseodymium, dysprosium, and terbium — the minerals used in the strongest and most durable kinds of permanent magnets today.
“That costs about $20 per kilo of material, and the plants that do it — the billion-dollar refineries — are all in China,” he says.
Dysprosium is particularly crucial because it makes permanent magnets that are resistant to higher temperatures, like those you’d find in an EV motor. Dysprosium is also used in nuclear reactors to absorb excess neutrons and prevent the fission reactions from getting out of control.
“Magnets are so integral to the performance of motors and the conversion of energy into motion,” says Matt Sloustcher of MP Materials, the company working to revitalize the Mountain Pass rare earths mine in California. “It impacts performance, range — everything.”
“Magnets are so integral to the performance of motors and the conversion of energy into motion.”
And the supply chain is precariously situated. GM sold off the last rare earth magnet manufacturer in the US back in the mid-1990s, and the Chinese buyer shipped the specialized equipment back overseas. Rare earth refining and magnet production also create a lot of pollution, and Western nations are loath to get their hands dirty.
Automakers, who have been notably quiet about the tariffs hitting their bottom lines, are starting to speak out about the rare earths trade war. During an interview on Fox Business News, Rivian CEO RJ Scaringe called the export restrictions in China “really challenging.” And the company mentioned the issue in documents filed with the SEC as a potential risk to its future business.
Tesla CEO Elon Musk has also been outspoken about the rare earth issue, stating that the new export rules hurt his company’s Optimus robot production. “We’re working through that with China. Hopefully we’ll get a license to use the rare earth magnets,” Musk said on Tesla’s earnings call last month. “China wants some assurances that these are not used for military purposes, which obviously they’re not. They’re just going into a humanoid robot, so it’s not a weapon system. But that is certainly an example of a challenge there.”
Ford also recently mentioned the significant impact that the rare earths restrictions will have on its on business, saying that the restrictions “could profoundly impact the auto sector as a whole.”
While Trump touts his tariffs as a way to reshore manufacturing jobs, in truth, they’re creating a negative drag on both the global and the American economy. The heightened trade war with China will only make things worse for automakers, though some like GM have made efforts to reduce their exposure to supply shortages for rare earth materials since the pandemic. Companies like Niron Magnetics, backed by GM, are developing alternative magnet chemistries that use iron nitride instead of rare earths. Meanwhile, material scientists are aggressively researching how to “thrift” dysprosium out of old magnets without sacrificing performance.
Part of GM’s work to shore up its supply chain started back in 2021, when the company entered a partnership with MP Materials. That partnership is only just starting to bear fruit, four years later, as MP Materials is beginning to pilot automotive-grade magnets at a facility in Fort Worth, Texas. MP Materials and GM expect the facility to start mass production by the end of the year, according to spokespeople at both companies – but the refining process for the rare earth materials used in those magnets is still an issue. Just last week, MP Materials stopped shipping its raw rare earths to China for refining and it’s working to increase processing in California.
Companies like Niron Magnetics are developing alternative magnet chemistries that use iron nitride instead of rare earths.
An even bigger stumbling block is finding engineers and scientists who have experience in materials sciences, rare earths, and magnetic engineering here in the US, especially as the Trump administration wages war on science and makes America hostile for immigrants. As Conroy notes, finding materials scientists for overseas operations is much easier because of more friendly immigration policies in other countries.
“We haven’t made sintered magnets at scale in the US in decades,” Sloustcher says. “There aren’t many people who can say, ‘I’m a magnetic engineer,’ or ‘I’m a magnetics technician and I’m going to move over here.” There are very few American universities that offer programs in magnetic science and, according to a 2024 report by the National Academies of Science, the “strength of the US high magnetic field science is waning.”
While the changes are making automakers nervous, there are even more significant issues at play in this new trade war. According to Worstall, China has designated rare earths and rare earth magnets as “dual use,” both for consumer (like those in your headphones) and military (like those you find in a fighter jet). Under this new designation, exporters have to disclose end-user data for any rare earth mineral or magnet they export.
“That means that your entire production chain has to be disclosed to the Chinese government,” Worstall says. “Somebody in my position who was wholesaling metals, that’s the thing you never want to tell anybody: who are you selling to and so on. You don’t want people to know this, because that’s how you make your living.”
The effect is chilling, especially when some of those rare earths are used in military equipment like planes and drones. Disclosing the information would mean disclosing to a foreign country how US military technology is made.
The US Department of Defense and Department of Commerce have repeatedly warned that rare earths and rare earth magnets are a national security problem for the US. In April, the Trump administration initiated a Section 232 investigation into rare earths in the US. More recently, a Center for Strategic and International Studies report noted that the US’ inability to replace China’s supply of rare earths poses a significant defense risk.
Just recently, the US and Ukraine signed an agreement for the future mining of critical minerals, including rare earths, after some testy negotiations. The deal still requires ratification by Ukraine’s parliament, but under the terms, Ukraine retains full ownership of its resources and profits from the mining, and the US gets preferential access (and rights) to extract rare earths and other critical minerals like titanium, lithium, and uranium.
This isn’t the first time that the US has faced this issue. Back in 2010, China restricted rare earth exports to Japan following a maritime dispute. The dispute caused a global panic and increased prices for materials and magnets. But, as Worstall points out, it didn’t matter much as Western nations built new factories and found new sources for rare earths.
This time is different. The global demand for rare earths and rare earth magnets is significantly higher than it was in 2010, according to the International Energy Agency. The US is much more dependent on China for rare earth minerals and magnets, and it currently lacks the equipment, infrastructure, and workforce to replace what comes from overseas and meet demand. The investment and massive environmental sacrifices required to onshore these kinds of processes is a hefty one, too.
According to Worstall, the US could produce and refine its own dysprosium with a $200 million investment from the government and if projects were permitted quickly, environmental regulations were scrapped, and the American public was willing to make the sacrifice — which feels nearly impossible in this political and cultural environment.
The US could produce and refine its own dysprosium with a $200 million investment from the government
Even if the US was willing to make that kind of investment and sacrifice, it could still take anywhere from seven to 10 years to study and then permit a new mine, according to a 2021 report from the National Mining Association. If a new mine came online today, it wouldn’t really matter, either. The US no longer possesses the equipment to turn rare earths into rare earth magnets — those largely are made in, and come from, China.
“China takes this 1,000-year view on things, and they have captured everything,” Conroy says. “They’ve vertically integrated, they’ve brought it all in. They’ve state subsidized everything, and they’ve created this marketplace where they control it, and they and the economy has shifted, and they’ve used what they have built, and they’ve optimized processes and products to use the the amazing materials that they have developed, but they make the machines that make it, they refine it, they manufacture it. So we in the West have a tremendous amount of work to do, to catch up.”
Conroy suggests that the impact, at least on the automotive industry, could be a shift back toward internal combustion vehicles while the supply chain works itself out. “We’ll move away from EVs for a short period of time,” he says. Conroy predicts that automakers (both ICE and EV makers) could face roughly 18 to 24 months of severe pain and restriction as a result of the Chinese export changes, but he warns that that’s only if the West is willing to make some big changes very quickly.
“We’re going to, as a country, as the West, have to make a decision that this is an absolute priority and treat it like the space program where we try to get a man on the moon,” Conroy says. “I think we’re going to have to figure it out, because from a national defense perspective, if you look at where these things are, that’s going to be the driver.”
