From EVs to Fighter Jets: The Rare Earth Crisis Unveiled!
In 2025, the global supply chain for rare earth magnets, vital components in everything from electric vehicles (EVs) to advanced military systems, faces unprecedented disruption. China, which dominates 70% of global rare earth mining and 90% of processing, has tightened its grip on the export of these critical materials, particularly targeting finished magnets. This strategic move, initiated in April 2025, has sent shockwaves through industries in the United States and beyond, threatening production lines and national security. With exports of rare earth magnets to the U.S. plummeting tenfold from 460 tons in March to just 46 tons in May, and global magnet exports dropping to a decade-low of 1,238 tons, the implications are profound.
The Rare Earth Magnet Crisis: A Targeted Squeeze
China’s export restrictions, introduced as a response to escalating trade tensions with the United States, focus specifically on rare earth magnets rather than raw rare earth elements (REEs). While total rare earth exports from China rose by 23% year-on-year in May 2025 to 5,864.6 tons, magnet exports plummeted, signaling a deliberate strategy to control the supply of high-value, processed components. These magnets, made from elements like neodymium, dysprosium, and samarium, are indispensable for high-tech applications. For instance, a single electric vehicle can require 1–2 kilograms of rare earth magnets, while a wind turbine may contain up to 600 kilograms. In military applications, samarium-cobalt magnets are critical for fighter jets like the F-35, which uses approximately 50 pounds per aircraft, and missile guidance systems.
The restrictions, which began on April 4, 2025, require exporters to obtain special licenses, a process that has proven cumbersome and opaque. For U.S. companies linked to the Pentagon, applications are outright ignored, effectively halting supplies critical for defense systems. Civilian industries, particularly automakers, face temporary reprieves with six-month licenses, but the uncertainty disrupts long-term planning. The U.S. auto industry, already grappling with supply chain challenges, faces production stoppages, as seen with Ford’s week-long shutdown of its Explorer SUV plant in Chicago in May 2025 due to magnet shortages.
The Impact on the U.S. Auto Industry
The U.S. automotive sector, a cornerstone of the economy, is reeling from the magnet shortage. Rare earth magnets are essential for both electric and gasoline-powered vehicles, powering components like electric motors, steering systems, and sensors. The Alliance for Automotive Innovation, representing major automakers like General Motors, Toyota, and Volkswagen, warned in a May 2025 letter to the Trump administration that without reliable access to these magnets, production of critical components—such as transmissions, alternators, and power steering systems—could grind to a halt. The letter underscored the risk of widespread factory closures and layoffs, with a single luxury car seat requiring up to 12 rare earth magnets for its motors.
The data paints a grim picture. China’s magnet exports to the U.S. dropped 58.5% year-on-year in April 2025 to just 246 metric tons, and by May, the figure had fallen further to 46 tons. This sharp decline has forced automakers to explore costly and less efficient alternatives, such as older magnet technologies or removing features like adjustable seats and high-end audio systems. Some companies, like BMW, have developed magnet-free motors for certain EV models, but these are not yet scalable for widespread adoption. Others are considering relocating parts production to China to bypass export restrictions, a move that risks clashing with U.S. trade policies under the Trump administration, which has threatened punitive measures against such strategies.
The economic stakes are high. The U.S. auto industry employs over 1 million workers and contributes approximately 3% to the nation’s GDP. A prolonged disruption could lead to billions in losses, with ripple effects across supply chains and consumer markets. For instance, a 2024 report by Adamas Intelligence projected that global demand for rare earth magnets would grow by 8–10% annually through 2035, driven by the EV boom. With China supplying 92% of refined rare earths for electronics and vehicles, the U.S. faces a critical bottleneck.
The Pentagon’s Vulnerability: A National Security Concern
The Pentagon is equally, if not more, vulnerable to China’s export controls. Rare earth magnets, particularly those made with samarium and dysprosium, are critical for advanced defense technologies, including radar systems, missile guidance, and propulsion in submarines and fighter jets. The F-35 program, for example, relies heavily on samarium-cobalt magnets, which can withstand extreme temperatures without losing magnetic strength. China’s monopoly on samarium—producing 100% of the global supply—gives it unparalleled leverage over U.S. military capabilities.
The Department of Defense (DOD) has invested over $439 million since 2020 to build a domestic rare earth supply chain, with projects like MP Materials’ facilities in California and Texas aiming to produce 1,000 tons of neodymium-iron-boron (NdFeB) magnets by the end of 2025. However, this output represents less than 1% of the 138,000 tons China produced in 2018, highlighting the scale of the challenge. The DOD’s 2024 National Defense Industrial Strategy set a goal of achieving a complete mine-to-magnet supply chain by 2027, but experts warn that this timeline is optimistic. Developing mining, processing, and manufacturing capabilities requires significant investment, environmental compliance, and skilled labor—areas where the U.S. lags behind China.
The strategic implications are dire. A 2025 CSIS report noted that China’s export restrictions could delay production of critical defense systems, including Tomahawk missiles and Predator drones, at a time when China is expanding its munitions production five to six times faster than the U.S. The Pentagon’s limited stockpiles of rare earths are insufficient for sustained operations, and the inability to replenish inventories threatens U.S. military readiness, particularly in potential conflicts involving Taiwan or other Pacific regions.
Global Ramifications: Vietnam, Germany, and the EU’s Response
China’s restrictions extend beyond the U.S., affecting allies like Vietnam and Germany. In Vietnam, magnet exports dropped due to concerns over re-exports to the U.S., while Germany’s declining demand reflects its struggling auto industry. The European Union, heavily reliant on Chinese rare earths, is responding with urgency. In June 2025, EU Commissioner Stefan Szefer announced plans to create joint strategic reserves of rare earth metals to mitigate supply chain risks. The EU’s European Raw Materials Alliance is exploring alternative sources, but projects remain in early stages, with no immediate solution to China’s dominance.
Globally, the rare earth market is tightening. According to a 2025 Reuters report, China’s magnet exports fell by 14.5% from January to May compared to the previous year, reaching the lowest level since 2021. This has prompted countries like Japan, which maintains stockpiles of up to 18 months for some rare earths, to accelerate efforts to diversify supply chains. However, Japan and Germany still rely on China for raw materials, underscoring the global challenge of breaking Beijing’s grip.
Why China Holds the Upper Hand
China’s dominance in rare earths stems from decades of strategic investment. In the 1980s, the U.S. was a leading producer, but China’s lower costs, lax environmental regulations, and state-backed consolidation allowed it to capture the market. By 2023, China controlled 99.8% of heavy rare earth production, with only minimal output from Myanmar and Laos, both of which are closely tied to Chinese supply chains. The closure of a Vietnamese refinery in 2024 further solidified China’s monopoly.
Beijing’s export controls are not new. In 2010, China halted rare earth exports to Japan during a territorial dispute, prompting Japanese companies to stockpile materials. The 2025 restrictions, however, are broader and more targeted, leveraging China’s control over finished magnets to maximize disruption. The Ministry of Commerce’s licensing system, which requires detailed business information from Western companies, has raised concerns about economic espionage, further complicating trade relations.
The U.S. Response: A Race Against Time
The U.S. is scrambling to reduce its dependence on Chinese rare earths, but the path to independence is fraught with challenges. The Mountain Pass mine in California, operated by MP Materials, is the only active rare earth mine in the U.S., producing about 15% of global supply. However, it relies on China for processing, highlighting a critical gap in the domestic supply chain. Startups like Phoenix Tailings are innovating by recycling rare earths from electronic waste, aiming to scale production to 4,000 metric tons by 2027, but this remains a drop in the bucket compared to global demand.
The Trump administration has pushed for alternative sourcing, including potential deals with Ukraine and Greenland, which hold significant rare earth reserves. However, geopolitical tensions and environmental concerns complicate these efforts. For instance, Greenland’s autonomy under Denmark and its environmental regulations make large-scale mining politically contentious. Meanwhile, the U.S. has imposed tariffs and export bans on Chinese tech firms, escalating tensions and risking further restrictions on rare earths.
To counter China’s dominance, the U.S. and its allies must adopt a multifaceted approach:
Diversify Supply Chains: Investing in alternative sources, such as Australia’s Lynas Corporation or Canada’s rare earth projects, could reduce reliance on China. However, these projects require years to scale up.
Innovate Technologies: Developing magnet-free motors, as BMW and Renault have done, could lessen dependence on rare earths. Research into alternative materials, like iron-based magnets, is also critical.
Build Domestic Capacity: Expanding U.S. mining and processing facilities, supported by government incentives, is essential. Tax breaks and streamlined environmental regulations could accelerate progress.
International Cooperation: The EU’s strategic reserves initiative and Japan’s stockpile strategy offer models for collaboration. A coordinated Western approach could counter China’s leverage.
Diplomacy: De-escalating trade tensions through negotiations, as seen in the June 2025 London talks, may provide temporary relief, but long-term solutions require structural changes.
China’s rare earth magnet restrictions are a stark reminder of the vulnerabilities in global supply chains. The U.S. auto industry faces immediate production risks, while the Pentagon grapples with threats to national security. With China controlling the vast majority of rare earth processing and magnet production, the West’s reliance on Beijing is a strategic liability. While efforts to build domestic capabilities and diversify supply chains are underway, the timeline for independence stretches years into the future. For now, industries and governments must navigate a delicate balance of diplomacy, innovation, and investment to mitigate the crisis. The rare earth saga underscores a broader truth: in the race for technological and military supremacy, control over critical resources is a decisive factor.
