The US currently has no industrial capacity to produce a key permanent rare earth magnet, so it must import them in large quantities, overwhelmingly from China. But does this heavy import dependence pose a threat to American national security?
That question will drive a newly launched US commerce department investigation, announced last Friday (Sep. 24), to determine the impact on national security from imports of neodymium-iron-boron (NdFeB) permanent magnets, the most widely manufactured rare earth magnet.
“I think [the investigation] does reflect, on the US part, the emergence of a whole-of-government approach to critical minerals and rare earth issues,” said Dan McGroarty, advisory board member of USA Rare Earth, a firm that’s developing a rare earth mine in Texas and a separation facility in Colorado, and owns NdFeB manufacturing equipment.
The probe comes against the backdrop of heightened US government attention on critical minerals. The Pentagon is similarly investing resources in rare earths, as is the department of energy, and Congress is considering using tax tools to boost the rare earth sector. At the same time, China is seeking to reinforce its own rare earths dominance, with rumblings that the central government will merge all rare earth companies into two giant firms to maximize control and leverage.
“There’s a lot of activity on the Chinese government side, and there’s now an increased amount of activity on the US side, of which the Department of Commerce’s [Section] 232 inquiry is just one piece,” said McGroarty.
As their name suggests, permanent rare earth magnets have permanent magnetic fields, and contain rare earths because the metals’ magnetic properties dramatically increase the strength of the magnet. Rare earths are a group of 17 metals used to produce many important technologies.
NdFeB magnets have a broad range of applications, spanning military and civilian industrial. They are used in electric vehicles and wind turbines, making them critical to the climate economy. They are also used in fighter aircraft and missile guidance systems, as well as consumer electronics like smartphones and fridges.
In a nod to NdFeB magnets’ importance to the US military, the Department of Defense in 2019 ordered a stockpile to be established to ensure a rotating six-month supply of the specialized magnets. Some saw it as at best a short-term remedy, however, since the stockpile didn’t actually solve the problem of the US having zero NdFeB production capacity.
But it’s not only in the military realm where NdFeB magnets can hold sway over national security. The global transition from fossil fuels to clean energy also entails national security risks. For example, as the future global economy is increasingly powered by electricity from low-carbon sources like wind and solar, the ability to source raw materials to manufacture and deploy solar panels and wind turbines at scale will be a foremost priority in ensuring energy security and national security.
A White House review of the nation’s critical supply chains, published in June (pdf), found that only China has active capacity across all supply chain tiers of the NdFeB industry. Meanwhile, though the US currently has a single active rare earths mine at Mountain Pass in California, it has no industrial capacity to separate and process the mined materials into metals and alloys for use in making magnets. As part of the report’s recommendations, it was suggested that a Section 232 probe (pdf) be launched. Now, less than four months later, that’s happening.
Under the Trade Expansion Act, Section 232 empowers the president to impose tariffs on products that the commerce department deems to be imported “in such quantities or under such circumstances as to threaten to impair the national security.” It was a tool that former president Donald Trump used not infrequently: he ordered eight such investigations (pdf) during his time in office, and acted on five of them, imposing tariffs on goods including steel, aluminum, automobiles, and automotive parts.
As part of the probe, the commerce department is inviting industry players to submit relevant information that can help with the inquiry. The information gathered can provide a detailed map of the industry landscape: for example, how many NdFeB magnets are imported as standalone products, and how many are already embedded within finished products?
For its part, MP Materials, the operator of the Mountain Pass rare earths mine, has already expressed in a statement that it “look[s] forward to participating in the formal process carried out by the Department of Commerce,” while also emphasizing the importance of a”whole-of-government approach to establish a free and fair marketplace for domestic participants.”
If tariffs are ultimately imposed on NdFeB magnets, they may be slapped on imports from certain countries (say, China) while exempting others in a bid to reduce reliance on a strategic competitor and diversify sources. But there are other complexities as well. For example, if a US company imports products with embedded NdFeB magnets, will their suppliers be able to tell them where those magnets are from?
“The complexities are quite significant,” said one person with knowledge of the US rare earth industry. “The magnets are embedded [in the technology], and therefore the dependencies themselves are quite imbedded in the technology economy of the US.”
But an investigation can be valuable even if it doesn’t ultimately lead to tariffs.
“A [Section] 232 inquiry really does sharpen the issue,” said McGroarty of USA Rare Earth. It can encourage industry players to gather and share useful information with the government, whether because they want more supportive policies or fear that policies could be unintentionally counterproductive. “So everyone comes out of the woodwork…it’s a heightened level of attention.”
Correction, Sept. 29: This article has been updated to clarify that the US currently has no industrial capacity to produce neodymium-iron-boron permanent rare earth magnets. However, it has the capacity to manufacture another rare earth magnet, the samarium-cobalt (SmCo).