The United States is facing severe economic disruption due to its dependence on China for rare earth magnets, crucial supplies that are now limited by China’s trade war with the US.
In 2009, the US allowed its rare earth metals industry to move to China as demand for magnets soared. However, American officials had expected China to relax restrictions on exports as part of a proposed trade truce in mid-May. Instead, President Trump suggested that China continued to limit access to these critical supplies.
As a result, American and European companies are running out of rare earth magnets, with automakers being the hardest hit. Executives warn that production at factories across the Midwest and South could be cut back in the coming days and weeks due to the lack of these essential components.
The Chinese government has imposed strict export controls on rare earth magnets, requiring separate licenses for future shipments. However, the process is slow, and world supplies are dwindling fast.
“This is America’s Achilles’ heel, which China continuously exploits,” said Nazak Nikakhtar, assistant secretary of commerce overseeing export controls. The US produces no rare earth magnets, with Japanese companies producing most of the rest in Japan and Vietnam for Japanese manufacturers.
China has a formidable competitive advantage due to its state-owned industry, which has few environmental compliance costs and an unlimited government budget for building processing refineries and magnet factories. Rare earth chemistry programs are offered in 39 universities across China, but not in the US.
The lack of access to these critical supplies is causing significant disruptions to supply chains, with some Chinese rare earth magnet makers having stopped producing while waiting for permission to resume exports. The US government has responded by investing $1 billion in a Pentagon-backed program to improve environmental compliance and expand a rare earths mine in California. However, the complex was unable to compete when it briefly reopened in 2014.
A start-up company called Phoenix Tailings is addressing the bottleneck of transforming separated rare earths into chemically pure metal ingots. The company has taken over equipment from another failed start-up and is installing new equipment at a larger site in New Hampshire to produce metal at a rate of 200 tons a year.
Source: https://www.nytimes.com/2025/06/02/business/china-rare-earths-united-states-supplies.html