(Charlotte Martin’s post from The IDTechEx UK on 15 October 2025.)
US-China Trade War Drives Investment in Domestic
Rare Earth Supply: Rare earth elements and critical minerals are now frequently
featured in global news cycles due to the national security and economic
impacts of increasing supply disruption.
Growing export restrictions placed on
defense-related rare earth materials from China at a time of multiple
international conflicts underscores growing demand in the US and Europe to
develop alternative supply.
2025 is set to be an inflection point, as a year of tariffs and trade wars drive record investment into strategic Western rare earth supply chains. IDTechEx’s latest research, ‘Rare Earth Magnets 2026-2036: Technologies, Supply, Markets, Forecasts’ explores rare earth investment and supply chain partnership trends driven by increasingly restrictive global rare earth supply.
Critical rare earth magnet production capacity
growth forecast
China’s latest export restrictions on critical rare
earth elements applies yet more pressure to what are already tightly controlled
materials. The latest round of restrictions extends to erbium, europium,
holmium, thulium, and ytterbium, targeting defense and semiconductor chip
applications.
This announcement follows controls placed on
neodymium magnet materials in April 2025, which sent the automotive industry
scrambling for alternative supply and notably caused Ford to temporarily shut
down some of its production plants.
Market disruption caused by export restrictions is unavoidable due to a lack of alternative rare earth sources and an absence of viable alternative materials in many integrated applications. China mines 69% of rare earth minerals, processes 88% of rare earth concentrates, and refines 90% of rare earth metals globally, with limited additional capacity available from other regions.
On the demand side, rare earth magnets remain a
dominant technology in applications such as high performance electric motors.
Despite developments in rare earth-free motor technologies, IDTechEx forecasts
that over 70% of electric vehicle motors will rely on rare earth permanent
magnets over the next decade.
The US is the first (and best positioned) player
addressing rare earth supply risks, announcing significant public investment
into domestic production. In July 2025, the US Department of Defense (DoD)
entered a public-private partnership with MP Materials, North America’s only
major rare earth mine. The partnership includes capital investment of over
$400M and important rare earth purchase price commitments to ensure the mine’s
profitable operation.
The US is in a strong position to leverage its
established rare earth mining base to expand downstream refining and production
capacity, with investment and partnership trends beginning to reflect this. USA
Rare Earths announced it will acquire UK-based rare earth refiner Less Common
Metals for approximately $220M, securing supply of crucial feedstock for its
planned 5,000 tonne magnet production facility in Stillwater, Oklahoma.
In August, Noveon Magnetics also announced a multi-year supply agreement with General Motors to deliver rare earth magnets for its SUVs and trucks. The US rare earth ecosystem is moving fast to capitalize on its key advantage: the potential to insulate every supply chain stage from external dependence on China and mitigate the impact of future export controls.
The European rare earth market looks to be keeping
pace with the US, despite the absence of established domestic rare earth
mines. French-based Carester has secured
€216M in financing from the French government and Japanese investors to build
its separation plant capable of processing 5,000 tonnes of mineral concentrates
and 2,000 tonnes of recycled magnets annually.
Carester will join Solvay to offer separated rare
earth products to European magnet producers Vacuumschmelze and Neo Performance
Materials Silmet, the latter of whom began magnet production at its site in
Estonia in 2025. Without primary mineral supply within Europe, the key to
success will be securing offtake agreements with external partners while
developing new secondary rare earth sources, such as recycled waste magnets and
mining tailings.
Despite investment flowing into US and European rare earth markets, familiar risks remain. Price uncertainty continues to threaten the profitability of both suppliers and rare earth customers alike, with prolonged periods of depressed or inflated rare earth prices carrying historically demonstrable bankruptcy risks.
More government-backed price agreements are likely
to be required in the short-term to support companies through scale-up and
operation as new domestic supply chains are established.
Another critical challenge remains the low
availability of heavy rare earths outside of China and Myanmar. Technology
innovations in reducing dysprosium and terbium content in magnets, as well as
recycling from heavy rare earth-rich NdFeB magnet waste will be play a central
role in mitigating remaining supply risks.
IDTechEx’s latest research report evaluates
emerging technologies for reducing heavy rare earth content in magnets,
including grain boundary engineering and novel strip casting technology, in
addition to benchmarking short- and long-loop recycling technologies.
IDTechEx forecasts that global rare earth magnet demand will increase 69% by 2036, surpassing 332,000 tonnes per year. While military and defense applications of rare earth elements have driven government support for strategic supply chains, electric mobility, robotics, and energy generation applications will drive most of the growth in demand over the next decade.