The rare earth magnet market is under extraordinary pressure, and the cause is not just tariffs.
On April 4, 2025, China’s Ministry of Commerce (MOFCOM) issued new export restrictions (Announcement No. 18), requiring licenses for several key rare earth elements including samarium, dysprosium, terbium, and neodymium. While these are not outright bans, the licensing system is slow to approve export applications and is providing little product into the global marketplace. As a result, magnet shipments from China, where nearly all refined heavy rare earths originate, have effectively stalled. Industry observers now refer to this situation as a de facto embargo caused by market paralysis.
In July, the U.S. Department of Defense (DoD) announced it will become the largest shareholder in MP Materials by purchasing 400 million dollars in stock and extending 150 million dollars in loans. MP operates the only rare earth mine in the United States, located in Mountain Pass, California.
It is worth noting that prior to April 17, 2025, MP Materials shipped approximately 90 percent of its rare earth minerals to China. As tariffs escalated and geopolitical tensions rose, MP publicly stated that continuing to sell into China under such high tariffs was no longer commercially viable and did not align with U.S. national interests. Whether this decision was primarily financial or policy-driven remains a subject of debate, but the outcome is clear: MP’s production is now intended to support domestic supply chains.
The DoD’s investment underscores the urgent need to reduce U.S. dependence on foreign-controlled supply chains, particularly for defense programs subject to DFARS 225.7018 and DFARS 252.225-7052 under the 2019 National Defense Authorization Act (NDAA). These regulations restrict the use of magnets and tungsten from countries such as China.
MP Materials’ new facilities will support domestic magnet production, but much of that output is expected to be reserved for defense applications that must meet DFARS compliance. This is especially significant because the temporary allowance for sourcing rare earth minerals from China is set to expire in 2027. After that date, even the raw material inputs used in DFARS-compliant alloy must come from approved, non-Chinese origins.
While MP Materials plays a key role in building a secure U.S. magnet supply chain, its current and near-term output will not be sufficient to replace China’s scale. Most of MP’s production will likely be consumed by military and strategic programs, leaving commercial manufacturers with limited benefit and continued exposure to pricing and sourcing volatility.
In contrast, Dura Magnetics is working with established DFARS-compliant alloy producers who are accelerating the development of alternative mineral sources ahead of the 2027 deadline. These producers, already qualified under the 2025 version of DFARS 225.7018 and 252.225-7052, are now taking proactive steps to secure compliant feedstock. Dura is aligned with this effort to ensure continuity of supply and support for both current and future customer requirements.
Customers should be aware of the following:
Chinese exports remain delayed. Export licenses may take 45 to 60 days or longer to obtain, and there is no guarantee of approval.
In parallel with export delays, the tariff environment has also become increasingly unpredictable. As of July 2025, the effective U.S. tariff on Chinese-origin permanent magnets is 32.1 percent, composed of a 30 percent punitive tariff and a 2.1 percent duty. This rate was set under a 90-day reciprocal de-escalation agreement between the United States and China, which is scheduled to expire on August 12. A new tariff framework has been proposed but not yet formally approved or implemented by either government. The proposed structure includes a 10 percent baseline tariff, a 20 percent penalty tariff tied to fentanyl enforcement policy, and the existing 2.1 percent duty. Additionally, a 25 percent Section 301 tariff, authorized under the Biden administration to address Chin’s unfair trade policies, is scheduled to take effect in January 2026 unless revised. If all components proceed as currently outlined, the cumulative tariff rate could rise to approximately 57.1 percent in early 2026.
DFARS compliance requirements will tighten. The current allowance for Chinese-sourced minerals expires in 2027. After that, DFARS-compliant alloys must use only non-Chinese minerals, which will further constrain global supply and increase competition for compliant material.
This is a transitional period for the global magnet market. The DoD’s investment is a significant milestone, but meaningful impact for the broader market—particularly commercial buyers—will take time.
Dura Magnetics continues to monitor these developments closely and remains committed to supporting customers with transparency and reliability.
If your sourcing strategy could be affected by these changes, or if you would like to discuss how DFARS compliance may impact your programs, we invite you to contact us. Planning ahead now will help protect against future disruptions.
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To discuss your sourcing roadmap or DFARS compliance considerations, contact your Dura Magnetics representative or send us a message.
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