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In addition to the growing economic tensions between the USA, Russia and China, growing tensions could affect the auto industry and others. Both U.S. and foreign car manufacturers are urging the U.S. Commerce Department to rethink their plans regarding imposing tariffs and other import restrictions on neodymium magnets.

In late September, the Department of Commerce launched a Section 232 investigation “to determine the effects on U.S. national security from imports of Neodymium-iron-boron (NdFeB) permanent magnets.” The Bureau of Industry and Security has been given 270 days to conduct the investigation, ending on the 18th of June 2022. By that time, the Secretary of Commerce Gina Raimondo will need to present the department’s findings and recommendations to the President. 

Since neodymium magnets play an important role in national defense, being used in fighter aircraft, ships and missile systems, implementing tariffs on imports of the rare-earth magnets could help to strengthen domestic production and supply chains. 

However, neodymium magnets have many uses outside of defense, with applications in electric vehicles, wind turbines, computer hard drives, MRI devices and more. With so many applications, import tariffs on neodymium magnets could affect a wide range of American industries that rely on foreign-imported magnets. 

Potential tariffs for rare-earth neodymium magnets would be directed squarely at China in the hopes of creating strong financial incentives to build up the U.S. domestic supply of rare-earth magnets. China produces around 88 percent of the world’s rare-earth magnets and has indicated in the past that they may limit their export and that of other related materials necessary for the construction of F-35 fighter jets in the USA. 

Western automakers, including General Motors and Tesla, have voiced concern that tariffs on the importation of rare-earth magnets and disruptions to the supply chain could bring about substantial price swings for the material. E.V.s made using less neodymium or from alternative materials could also suffer from reduced driving ranges, severely impacting the USA’s national target to have 50 percent of all new vehicles sold by 2030 be electric.

The E.U., Japan and other American allies submitted comments to the Section 232 investigation, voicing their opposition to any tariffs on neodymium magnets. “The current U.S. administration continues to launch U.S. Section 232 national security investigations, for what appears to be industrial policy reasons,” the bloc wrote in its statement. “The proliferation of such investigations and possible actions under the guise of national security to protect certain industrial sectors against foreign competition is of great concern to the E.U.” 

In the E.U.’s submission, they pointed out that “to our knowledge, the U.S. industry is not yet in a position to manufacture neodymium magnets at a commercial scale.” Developing a complete and resilient U.S. national supply chain may take years, with U.S. firms having to pay higher prices in the meantime.