Today, Chairman John Moolenaar of the Select Committee on China (R-MI) and Ranking Member Ro Khanna (D-CA) introduced legislation that would create tax credits to support American magnet production and a domestic magnet supply chain. The Magnets Value Chain Support Act of 2026 would help reshore the magnet supply chain, from rare earth oxide production all the way through to magnet manufacturing and into the motors and defense systems that depend on magnets. This would reduce America’s dangerous dependence on China for components essential to economic and national security.
“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. 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. This bill creates the market incentives needed to reshore a vital supply chain and helps ensure American manufacturers lead the growing future of magnet production,” said Moolenaar.
“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. It will address a critical chokepoint by rebuilding the entire magnet supply chain here at home and creating incentives for American magnet production that power everything from electric vehicles to military systems. By supporting American workers, this legislation will meet the growing demand for these essential technologies,” said Khanna.
What the Bill Does
- Establishes the Magnet Value Chain Support Credit — a tiered per-kilogram production credit covering each upstream chokepoint in the supply chain: rare earth oxide production ($5/kg), magnet metal metallization ($15–$25/kg), Tier 1 high-performance permanent magnet manufacturing ($20–$30/kg), Tier 2 defense-grade permanent magnet manufacturing ($33–$40/kg), and a technology-neutral rare-earth-free pathway ($20/kg) for qualifying alternative chemistries.
- Establishes the Domestic Magnet Input Usage Credit — a demand-side credit equal to 15 percent of documented purchase price of qualifying U.S.-produced permanent magnets for U.S. motor manufacturers, phasing to zero by 2039 as the domestic industry matures.
- Requires magnet manufacturers claiming production credits to maintain three percent of annual production capacity in an available, unencumbered state for DPAS-rated defense orders — ensuring defense motor manufacturers are not crowded out by commercial demand.
- Bars all credits for any material produced, processed, purchased from, or sold to a Prohibited Foreign Entity at any point in the supply chain.
- Limits credits to U.S. manufacturing activity, with partner country inputs from NATO allies, Japan, Australia, South Korea, Canada, Mexico, and Secretary of Treasury-designated facilities.
Background
Permanent magnets enable the motors, generators, and actuators moving electric vehicles, wind turbines, industrial robotics, unmanned aerial vehicles, guided munitions, and advanced defense platforms. China produces over 90 percent of the world’s rare earth permanent magnets — a position achieved through a decades-long state-directed strategy documented in the Select Committee on China’s bipartisan investigation, “Predatory Pricing: How the Chinese Communist Party Manipulates Global Mineral Prices to Maintain Its Dominance.” In 2025, China escalated that leverage by restricting exports of dysprosium and terbium, the heavy rare earths essential to the highest-performance defense-grade magnets, disrupting U.S. production lines and exposing the fragility of American supply chain dependence.
Global permanent magnet demand is projected to more than double by 2035 — from approximately 260,000 metric tons today to over 600,000 metric tons. Without targeted market-oriented incentives, virtually all of that growth will be captured by Chinese state-backed producers, locking in supply chain dependence for a generation.
A copy of the legislation is available here.
Endorsements for the Magnets Value Chain Support Act
“This is a sensible bipartisan approach to strengthening a critical industry that is central to both America’s economic competitiveness and national security. The policy helps catalyze the momentum already underway to rebuild domestic supply chains while rewarding companies investing in American manufacturing capacity.” — Matt Sloustcher, Executive Vice President of Corporate Affairs, MP Materials
“Vulcan Elements supports the bipartisan introduction of the Magnets Value Chain Support Act of 2026 by Chairman Moolenaar, Ranking Member Khanna, and the House Select Committee on China. The bill represents an important step toward securing a reliable, domestic rare earth magnet supply chain independent of China that ensures the United States has the critical materials and components it needs to win the 21st century’s key technology races. By incentivizing both manufacturers and consumers of rare earth magnets and their upstream suppliers to develop a domestic capability, the Select Committee is advancing U.S. national security and protecting against Chinese economic aggression.” —Vulcan Elements CEO John Maslin
“Rare earth permanent magnets are essential for defense, aerospace, automotive, energy, and industrial applications. The Magnet Value Chain Support Act of 2026 will promote domestic production of these critical rare earth permanent magnet solutions. This legislation is vital to ensuring U.S. national security and a resilient industrial base.” – Scott Pelhank, Vice President, of eVAC Magnetics
“China is trying to lock up the global supply of rare earth magnets that are essential to automotive manufacturing in America. Reps. Moolenaar and Khanna are right: It’s critical to reduce dependence on China. They have a plan to increase domestic production of rare earth magnets with targeted incentives that support investment, innovation and supply chain resiliency here at home. This is a strategy to strengthen American competitiveness and protect our economic and national security.” – John Bozzella, President and CEO, Alliance for Automotive Innovation
“The Magnets Value Chain Support Act of 2026 will help manufacturers of electric motors and other electrical products using permanent magnets diversify their supply chains and enhance domestic manufacturing. As electrical manufacturers ramp up production to meet rising energy demand, legislation like this strengthens the U.S. manufacturing base and builds more resilient supply chains. NEMA appreciates Reps. Moolenaar and Khanna for introducing this critical legislation, and we look forward to working with Congress as the bill advances through the legislative process.” — Spencer Pederson, Senior Vice President of Public Affairs, National Electrical Manufacturers Association (NEMA)
“Niron Magnetics proudly endorses this legislation as a defining moment for America’s permanent magnet supply chain. This bill reflects the kind of comprehensive, forward-looking thinking that our national competitiveness demands. Congress is sending a powerful signal to innovators, manufacturers, and investors: America will back the best technology and ensure that no single point of failure can threaten our industrial capabilities. That is exactly the right approach. We are proud to support this legislation, which will ensure the next generation of permanent magnets is designed, developed, and manufactured right here in the United States.” — Mark Schramek, Vice President of Government Affairs, Niron Magnetics
“Rare earth permanent magnet production is overwhelmingly dominated by China, creating a supply-chain bottleneck and posing a serious national security risk. Through targeted tax credits, the bipartisan Magnets Value Chain Support Act would incentivize greater production of these critical resources and reward manufacturers who use domestically-produced permanent magnets. We thank Chairman Moolenaar and Ranking Member Khanna for their leadership on this important issue.” – New American Industrial Alliance CEO Julius Krein
“FAI Action is pleased to support the Magnets Value Chain Support Act of 2026 and applaud Chairman Moolenaar and Ranking Member Khanna for their leadership in introducing this legislation. This bill recognizes the critical role magnets play in our economy and the urgency of acting now to ensure China cannot lock in a permanent advantage over this critical supply chain. The proposed 45BB Production Tax Credit and 45CC Downstream Manufacturing Tax Credit, coupled with strong FEOC restrictions, will ensure that the United States is positioned to meet surging demand for the technology. We look forward to working with Chairman Moolenaar, Ranking Member Khanna, and the Select Committee to ensure this critical piece of legislation is enacted into law.” – FAI Action
“The American Critical Minerals Association strongly supports this forward‑looking legislation establishing a tax credit for the rare earth and permanent magnet supply chain. Rare earth elements and permanent magnets are essential to advanced manufacturing, clean energy technologies, and U.S. defense systems, yet the nation remains heavily dependent on foreign sources for these critical inputs. China currently controls an estimated 80–90 percent of global rare earth processing and permanent magnet production, creating a strategic vulnerability for the United States and its allies. This bill is a meaningful step toward rebuilding domestic capacity, driving investment, and strengthening resilient supply chains vital to America’s economic competitiveness and national security. We commend lawmakers for advancing policies that restore U.S. leadership in this critical sector.” – Sarah Venuto, Executive Director, American Critical Minerals Association
Supporting Organizations
Securing America’s Future Energy (SAFE)