A bipartisan pair of influential US lawmakers introduced the Magnets Value Chain Support Act of 2026 on Tuesday, 10 June, seeking to rebuild America's domestic permanent magnet supply chain and reduce what they describe as a strategically dangerous dependence on China, which currently controls more than 90 per cent of global rare earth permanent magnet production.

What the Bill Proposes

The legislation was jointly introduced by House Select Committee on China Chairman Rep. John Moolenaar, a Republican from Michigan, and Ranking Member Rep. Ro Khanna, a Democrat from California. The bill establishes a tiered system of tax credits covering every stage of domestic magnet production — from rare earth oxide processing to advanced magnet manufacturing.

Production credits would range from $5 per kilogram for rare earth oxide output to as much as $40 per kilogram for advanced defence-grade permanent magnets produced with high levels of US or partner-country inputs. The bill also creates incentives for US motor manufacturers to source domestically produced permanent magnets.

Key Restrictions and Eligibility

Credits would be limited to manufacturing activities in the United States and approved partner countries, including NATO allies, Japan, Australia, South Korea, Canada, and Mexico. Manufacturers receiving production credits would be required to maintain a portion of capacity for defence-related orders. Crucially, the bill bars credits for any materials linked — at any stage — to entities defined as prohibited foreign entities.

What Lawmakers Said

Rep. Moolenaar framed the bill as a direct response to China's deliberate industrial strategy. 'Magnets are in the technology Americans rely on every day, and right now, China controls over 90 percent of the supply chain for these critical components,' he said. He added that 'China spent decades deliberately cornering the magnet market, and last year it weaponized that leverage to restrict rare earth exports essential to our defense systems and broader economy.'

Rep. Khanna argued that the US had allowed a critical industry to migrate offshore. 'For too long, the United States has watched an essential industry move overseas, leaving us woefully dependent on China. The Magnets Value Chain Support Act will level the playing field,' he said, adding that it would 'address a critical chokepoint by rebuilding the entire magnet supply chain here at home.'

Industry Support and Strategic Context

John Bozzella, President and CEO of the Alliance for Automotive Innovation, said China was 'trying to lock up the global supply of rare earth magnets that are essential to automotive manufacturing in America,' and welcomed the bill's 'targeted incentives that support investment, innovation and supply chain resiliency here at home.'

Permanent magnets are critical components in electric vehicles, wind turbines, robotics, drones, guided munitions, and advanced defence systems. Lawmakers pointed specifically to China's 2025 restrictions on exports of dysprosium and terbium — two heavy rare earth elements used in high-performance defence-grade magnets — saying the move disrupted US production lines and exposed the depth of supply chain vulnerability. This comes amid a broader US legislative push to decouple critical mineral supply chains from Chinese dominance, a trend that has accelerated since China's export controls on gallium and germanium in 2023.

The bill now moves to committee review, with its prospects bolstered by rare bipartisan consensus on China-related economic security legislation in the current Congress.