A new bipartisan bill introduced in the US Congress seeks to revive the domestic supply chain for permanent magnets, a crucial technology used in electric vehicles, defense systems, and various advanced industries. The proposed Magnets Value Chain Support Act targets China’s overwhelming control of over 90 percent of the global supply of these critical components, aiming to reduce America’s strategic dependence and bolster national security.
The legislation, presented by House Select Committee on China Chairman Rep. John Moolenaar and Ranking Member Rep. Ro Khanna, proposes extensive tax credits to encourage domestic production at every stage of the magnet supply chain. These include rare earth oxide processing, magnet manufacturing, and incentives for US motor manufacturers to purchase domestically produced permanent magnets.
Credits would vary by production type, ranging from $5 per kilogram for basic rare earth oxide manufacturing to as much as $40 per kilogram for advanced defense-grade magnets made primarily from US or approved partner-country inputs. The bill also stipulates that companies benefiting from these incentives maintain part of their manufacturing capacity for defense purposes and excludes any materials connected to entities the legislation deems prohibited.
To ensure supply chain security, the legislation limits support to manufacturing activities within the US or allied countries, including NATO member states, Japan, Australia, South Korea, Canada, and Mexico. This measure aims to create a reliable and diversified magnet supply network critical for both civilian and military applications.
Industry leaders have voiced support, highlighting the risks posed by China’s near-monopoly on rare earth magnets. The President of the Alliance for Automotive Innovation emphasized that China is leveraging its dominance to control supplies vital to US automotive manufacturing and called the bill a necessary step to prevent future vulnerabilities.