February 1942. Washington, D.C.

Japan had just seized Malaya and the Dutch East Indies. In a matter of weeks, the United States lost access to 90% of the world's natural rubber. Every tire on every jeep, every seal on every submarine hatch, every hose on every bomber — all of it depended on a material that now sat behind enemy lines.

Washington panicked. Gasoline rationing began not to save fuel but to save tires. The government launched the largest crash industrial program in American history: a $700 million scramble to invent synthetic rubber from scratch. Fifty-one factories were built in two years. It worked — barely — and only because the entire economy bent around one goal.

Eighty-four years later, the Pentagon faces the same kind of problem. On January 1, 2027, new defense rules take effect that ban Chinese-origin rare earth magnets from every American weapons system. Not just the finished magnets — the ban reaches all the way back to the mine. If any stage of production touched China, Russia, Iran, or North Korea, the magnet is out.

That deadline is now eight months away. And there is not nearly enough supply outside China to fill the gap.

An F-35 fighter jet contains more than 900 pounds of rare earth materials. A Virginia-class submarine needs over 9,200 pounds. Lockheed Martin and Northrop Grumman are already scrambling to trace and certify every magnet in their supply chains. If they can't prove the material is clean, they risk losing their contracts.

The problem is simple math. China controls about 90% of rare earth refining and 98% of heavy rare earth processing. Lynas Rare Earths, the only company outside China that separates heavy rare earths at any scale, produced just 8 tons of dysprosium and terbium in the first quarter of 2026. The world needs thousands of tons a year. McKinsey says countries outside China won't meet even a fifth of heavy rare earth demand by 2035.

The Pentagon knows this. A team of former Wall Street dealmakers — known inside the building as "Deal Team Six" — is racing to hand out billions in equity stakes, price floors, and purchase deals to anyone who can mine or refine outside China. But even their most hopeful forecast says meaningful U.S. production won't come until the end of the decade.

In 1942, America had two years and enough chemistry to solve the rubber problem. In 2026, it has eight months and a supply chain that took China three decades to build. The deadline is real. The supply is not.

A group of former Wall Street dealmakers now works out of an office near the White House. Their job: break China's grip on the metals inside every missile and EV motor. The unit, officially called the Economic Defense Unit, is offering equity stakes, price floors, and long-term purchase deals to anyone who can mine or refine rare earths outside China. Bloomberg reported this week that even their best case says U.S. production won't matter until the end of the decade. One former Biden official called it a "five-alarm fire."

Amanda Lacaze, who runs the biggest rare earth company outside China, said this week that new U.S. and European rules are changing how companies buy. The U.S. brings in procurement rules in January that restrict Chinese-origin magnets. The EU has its own version under its critical raw materials law. Lacaze said customers are already shifting orders to comply — not because they want to, but because they have to. She also called on more governments to set price floors so non-Chinese producers can compete.

Brazil's lower house voted 343 to 97 to pass a sweeping new law covering the full chain of critical minerals — mining, refining, and everything in between. The bill creates up to $1 billion a year in tax credits for domestic processing and a $2 billion guarantee fund for mining projects. Two weeks earlier, USA Rare Earth agreed to buy Serra Verde — the only scaled rare earth mine outside Asia producing all four magnetic rare earths — for $2.8 billion. Brazil has the world's second-largest rare earth reserves. For the first time, it's writing the laws to actually use them.

Michel Van Hoey, Senior Partner at McKinsey, on rare earth supply outside China,
May 2026

DYSPROSIUM

An electric motor gets extremely hot. Without dysprosium, the magnets inside it lose their strength and the motor fails. A tiny amount of this metal goes into nearly every EV, wind turbine, and guided missile on the planet. China controls 98 to 99% of its refining. In Q1 2026, Lynas — the only company outside China that separates it — produced just 8 tons. The world needs thousands. The price has more than doubled this year to $931 per kilogram. Take away dysprosium and the magnets melt. Take away the magnets and the energy shift stops.

The exploration company started trading under the ticker REA on May 6 and immediately caught attention. It holds ionic clay deposits in Brazil and a monazite sands project in Georgia. CEO Donald Swartz said the listing was designed to draw big money focused on Western supply chains.

— Mining.com

Japan has spent more than 10 years and billions of dollars trying to reduce its reliance on Chinese rare earths. It was one of the first countries to take the threat seriously after the 2010 export cutoff. It still depends on China for more than three-quarters of its supply. A reminder of how hard this problem actually is.

— Bloomberg

The Australian miner hit another milestone in March, becoming the first company to produce both light and heavy rare earth oxides at scale outside China. Samarium is used in high-performance magnets for electronics and aerospace. Lynas also renewed its Malaysian operating license for 10 years, removing a long-running source of risk.

— Reuters

The latest federal review is blunt: the United States imports all of its terbium and lutetium. Multiple projects are in development, but none are producing at scale. The report calls out the gap between mine announcements and actual separated, usable metals.

— Rare Earth Exchanges