Potential effects on the U.S. vehicle and wind power sectors of a disruption to rare-earth permanent magnet imports

Rare-earth permanent magnets (REPMs), particularly sintered neodymium-iron-boron magnets, are critical and hard-to-substitute components in clean energy technologies, including electric vehicles (EVs) and wind turbines. Global REPM production is highly concentrated, dominated by production in China, resulting in the United States (U.S.) manufacturers sourcing the vast majority of their REPM supply from imports. This geographic concentration raises concerns about the vulnerability of U.S. clean energy supply chains to trade disruptions. This study evaluates the short-run economic consequences of a disruption to REPM imports on the U.S. EV and wind power sectors. We use a static, single-region (United States), open-economy computable general equilibrium model to simulate an import restriction on REPMs and to assess its sectoral and economy-wide effects. Model results show that a disruption to REPM supply decreases domestic EV production and leads to higher EV imports, as consumers shift toward foreign-manufactured EVs that embed REPMs. In contrast, the U.S. wind power sector does not experience a decline in output; instead, it adjusts primarily through an increase in imports of wind turbines that embed REPMs, rather than through domestic production of REPM-intensive components. Finally, our analysis indicates that a policy mix combining an import tax on REPMs with a production subsidy for domestic REPM output could help stimulate domestic REPM production and partially mitigate the risks associated with heavy reliance on a single dominant supplier country.