Rare Earth Permanent Magnets: The Achilles' Heel of America's High-Tech Industry

On August 25, 2025, US President Donald Trump made a tough statement during his meeting with South Korean President Lee Jae-myung: If China stops exporting Rare Earth Magnets again, the US will impose a 200% tariff on Chinese goods! This strong statement quickly became a hot topic and attracted global attention. Rare earth permanent magnets, a seemingly insignificant material with an import value of only 300 million US dollars for the US, why could it make the "internet-famous president" so high-profile in promoting it and even become the focus of the trade game between China and the US? The answer lies in the fact that it is not only the lifeblood of the US 1.5 trillion US dollar auto market, but also the "Achilles' heel" of the high-tech industry.

$300 million Leverage $1.5 trillion: The Super Leverage of Rare Earth Magnets

In 2024, the United States imported rare earth permanent magnets (mainly neodymium iron boron and samarium cobalt magnets) from China worth approximately $300 million, weighing 7,500 tons, accounting for 10.5% of China's global exports ($2.86 billion). This amount may seem insignificant, but its impact is akin to "moving a thousand pounds with four ounces." Rare earth permanent magnets are deeply embedded in the U.S. high-tech industrial chain, supporting multiple sectors such as automobiles, defense, renewable energy, Consumer Electronics, robotics, and medical equipment, with a total value exceeding $2 trillion.
Take the automotive industry as an example. In 2024, the total value of the U.S. automotive market (including manufacturing, sales, and the aftermarket) was approximately $1.2 to $1.6 trillion, and it is expected to reach $1.4 to $1.5 trillion in 2025. Rare earth permanent magnets are the soul of core components in electric vehicles (EVs), such as motors, braking systems, and sensors. For instance, each EV requires 2 to 4 kilograms of neodymium iron boron magnets, costing only $20 to $50, yet supporting a vehicle value of $30,000 to $100,000. In 2024, the U.S. EV sales reached 1.2 million units, and it is expected to reach 1.5 million units in 2025, with a market value of approximately $75 billion. The shortage of rare earth permanent magnets directly threatens the operation of production lines. In April and May 2025, due to China's export licensing system, the supply of rare earth permanent magnets dropped sharply (global exports were only 1,238 tons in May), causing Ford's Chicago factory to suspend the production of Explorer SUVs, resulting in losses of hundreds of millions of dollars. This is the leverage effect of rare earth permanent magnets: $300 million in imports, leveraging a $1.5 trillion market.
Not only in the automotive industry, rare earth permanent magnets are also widely used in:
Defense: 36 types of weapon systems, including the F-35 fighter jet and Tomahawk missiles, rely on samarium cobalt magnets. The U.S. defense procurement budget in 2024 was $180 billion, and the shortage of rare earths threatens national security.
Renewable Energy: Each wind turbine requires 200 to 600 kilograms of magnets. The U.S. wind power market was approximately $30 billion in 2024.
Consumer Electronics: iPhones and hard disk drives require about 10 grams of magnets, supporting a market worth $400 billion.
Robotics and Medical: Humanoid robots (such as Tesla's Optimus) and MRI equipment respectively account for emerging and high-end demands. The market size in 2024 was $2.5 billion and $10 billion respectively.

The "Achilles' Heel" Power of China's Rare Earth Permanent Magnets

Why does $300 million worth of rare earth permanent magnets make the United States so nervous? The answer lies in China's absolute dominance over the global rare earth supply chain. In 2024, China controlled 90% of the production of rare earth permanent magnets, exporting 58,152 tons with a total value of $2.86 billion. Although the United States has the Mountain Pass mine, it relies almost entirely on China for refining and magnet manufacturing, with domestic production of only 1,000 tons (expected by the end of 2025), which is less than 0.7% of China's production in 2018. The capacity of rare earth permanent magnets in the United States is seriously insufficient. This supply chain crisis has made the United States realize that rare earth permanent magnets are the "Achilles' heel" of high-tech industries - with negligible costs, they can paralyze industries worth hundreds of billions of dollars.

China does not simply "cut off supplies", but exerts pressure through the pace of approval.

In June and July 2025, exports to the United States resumed, and in July, they increased by 660% to 619 tons, demonstrating China's flexible strategy in negotiations. The Ministry of Commerce also stated that it could set up a "green channel" for "trusted" American enterprises, but still strictly controls dual-use products (such as samarium cobalt magnets). This "tight and loose" strategy gives China the upper hand in the Sino-US game.

Trump's "Promotion" and Tariff Threats

Trump's 200% tariff threat, although seemingly tough, is actually a reluctant "promotion" of the strategic value of rare earth permanent magnets. He knows that a shortage of rare earths not only threatens the $1.5 trillion automotive market (about 3-5% of GDP), but also affects 4.5 million workers and voters' support. On September 13, 2024, the United States has determined to impose a 25% tariff on Chinese rare earth magnets starting in 2026, and the 200% threat is more like a negotiating chip to pressure China to speed up the approval of civilian products.

However, tariffs are a double-edged sword. More importantly, the United States cannot break away from its dependence on China in the short term. The chain-building plans of MP Materials and Lynas USA may take 5 to 10 years to completely break away from China's dependence, and alternative materials (such as iron nitride) are not yet mature.

The Future Game: The Chessboard of Rare Earth Permanent Magnets

The value of rare earth permanent magnets does not lie in China's global export volume of 2.86 billion US dollars, but in its "strong correlation" with the 2 trillion US dollar high-tech industry (for the United States). Through the approval process, China can not only ensure civilian demand but also restrain the US military supply chain. While the US is investing in domestic production (expected to reach 1,000 tons by 2025) and international cooperation (with Australia and Vietnam), it has to negotiate to alleviate its dependence. The 2025 ministerial-level consultations between China and the US have reached some consensus, and in the future, it may exchange technology or offer tariff reductions in exchange for stable supply.

Trump's "internet celebrity-style" shouting is ostensibly for the voice of the US industry, but in reality, it is an anxiety over the "choke point" risk of rare earth permanent magnets. The 300 million US dollars worth of rare earth permanent magnets are like the "spark plugs" of the high-tech industry, igniting the 1.5 trillion US dollar automotive market and a broader industrial chain. How can China balance export approval and geopolitical leverage? Can the US break free from its dependence within 5 to 10 years? Or can it be done in 3 to 5 years like the Manhattan Project? This rare earth chess game will continue to define the future of the US-China rivalry.

Rare earths have played a key role in the US-China rivalry. Rare earths can strengthen a country, but can they save a country? China's strategic decision-makers must fully recognize the lifespan of the rare earth card and the determination of the US to break away from its rare earth supply chain from China. We will continue to discuss this issue in the postscript.