On Tuesday, the Chairman of the “Committee on China Issues” in the U.S. House of Representatives, John Moolenaar (Republican from Michigan), and the Chief Democratic Member, Ro Khanna (California), introduced a bipartisan bill aiming to support domestic magnet production and supply chains in the United States through tax credits and reduce reliance on rare earth minerals from China.
Electric vehicles, wind turbines, industrial robots, drones, guided munitions, and core components such as motors, generators, and actuators in advanced defense platforms all rely on permanent magnet drives. It is projected that global demand for permanent magnets will more than double by 2035, but currently, over 90% of global rare earth permanent magnets are controlled by China.
Therefore, Moolenaar and Khanna proposed the “Magnets Value Chain Support Act of 2026” to “reshape a fair competitive environment.” The bill aims to rebuild a complete magnet supply chain domestically in the U.S. and provide incentives for American magnet production to address this critical bottleneck.
The bill is currently in the proposal stage and requires approval through votes in both the U.S. House and Senate and signature by the President to become effective, so there may be adjustments to the details of the bill in the future.
The “Magnet Value Chain Support Credit” clause involves a production credit calculated by increments along the supply chain, covering key bottlenecks including rare earth oxide production, magnet metal metallurgy, first-tier high-performance permanent magnet manufacturing, second-tier defense-grade permanent magnet manufacturing, and “technologically neutral rare earth-free alternatives” (applicable to qualified alternative chemical systems).
The “U.S. Produced Magnet Deployment Subsidy” section entails a demand-side credit equivalent to 15% of the actual purchase price of “U.S. produced permanent magnets” for American motor manufacturers. As the domestic industry matures, this credit will gradually decrease to zero by 2039.
The “Defense Demand Assurance” provision mandates that magnet manufacturers applying for production credits must retain 3% of their annual capacity in an available and unrestricted state for use by defense orders at a “Defense Priorities and Allocations System” (DPAS) level, ensuring that defense motor manufacturers’ capacity is not crowded out by commercial demands.
The “Magnets Value Chain Support Act of 2026” specifically prohibits providing credits to any material involving a “Prohibited Foreign Entity,” and any material in the supply chain that has been: produced, processed, purchased, or sold to a “Prohibited Foreign Entity” may not apply for any credits.
Additionally, credits are only limited to manufacturing activities within the U.S., but allow the use of input materials from partner countries including NATO allies, Japan, Australia, South Korea, Canada, Mexico, and facilities designated by the U.S. Secretary of the Treasury.
Moolenaar stated that technology products relied on daily by Americans contain magnets, and China controls over 90% of the critical magnet component supply chain. He emphasized that the bill creates necessary market incentives to bring back this important supply chain to the U.S., ensuring that American manufacturers can continue to develop and maintain a leading position in magnet production.
Khanna pointed out that for too long, the U.S. has watched this critical industry move abroad, leading to a heavy dependence on China. He highlighted that the bill will provide incentives for domestic magnet production in the U.S., ensuring capacity to meet a wide range of applications from electric vehicles to military systems.
Following the proposal of the bill, it immediately garnered support from various key U.S. businesses and industry associations.
Matt Sloustcher, Executive Vice President of MP Materials, a major U.S. rare earth facility, viewed this as a wise bipartisan move to strengthen critical industries, effectively rewarding companies investing in American manufacturing capacity and speeding up the reconstruction of domestic supply chains.
John Maslin, CEO of Vulcan Elements, and Scott Pelhank, Vice President of eVAC Magnetics, believed that the bill is crucial for safeguarding national security and establishing a robust industrial foundation. Permanent magnets manufactured from rare earths have become an indispensable part of defense, aerospace, automotive, energy, and industrial applications.
John Bozzella, President and CEO of the Alliance for Automotive Innovation, stressed that China is attempting to monopolize the supply of rare earth magnets, making it crucial to reduce reliance on China.
Spencer Pederson, Senior Vice President of the National Electrical Manufacturer’s Association (NEMA), stated that with rising energy demand, the bill will help U.S. electrical manufacturers achieve supply chain diversification, strengthen domestic manufacturing standards and infrastructure, and establish a more resilient supply chain.
Organizations such as the American Critical Minerals Association, New American Industrial Alliance, Securing America’s Future Energy (SAFE), FAI Action, and Niron Magnetics all expressed their support for the bill.
They unanimously believe that the precise design of tax credits in the bill will effectively prevent China from reutilizing the threat of rare earth permanent magnets and incentivize U.S. companies to establish a domestic magnet supply chain.