Highlights
- Peter Škurla’s thesis reveals the U.S.’s dangerous dependence on China for rare earth permanent magnets, particularly in high-stakes sectors like missile and space manufacturing.
- China controls nearly 100% of global dysprosium processing, creating a strategic chokepoint that threatens U.S. industrial and defense capabilities.
- The research estimates a potential $38.4 billion economic loss if the Guided Missile and Space Vehicle Manufacturing sector were disrupted.
- The findings highlight systemic vulnerabilities in U.S. industrial and defense sectors.
Rare Earth Exchanges (REEx) reviewed the 2025 bachelor’s thesis titled “US Dependence on Rare Earth Elements from China: The Case of Permanent Magnets (opens in a new tab)” by Peter Škurla, (opens in a new tab) submitted to the Institute of Economic Studies, Charles University, under the supervision of Dr. Vilém Semerák. (opens in a new tab)
The Strategic Hypothesis
Škurla sets out to examine a central economic and geopolitical dilemma: the U.S. remains dangerously reliant on China for neodymium-iron-boron (NdFeB) permanent magnets—essential components in everything from electric vehicle motors to missile guidance systems. The thesis hypothesizes that this dependency creates systemic vulnerabilities not only in supply chains but also in sectors vital to national security, particularly the Guided Missile and Space Vehicle Manufacturing sector.
Key Findings
Škurla’s work distinguishes itself through a dual-method approach combining complex network analysis and input–output analysis, applied specifically to the global trade of permanent magnets (HS 850511) andU.S. industrial dependencies. Škurla’s thesis confirms,through rigorous centrality analysis, that China is the irreplaceable hub in the global permanent magnet trade network. With the highest closeness and betweenness scores, China acts as the system’s core node—its removal would fracture trade routes, especially for import-reliant nations like the U.S., which remains structurally peripheral and deeply dependent on Chinese exports. The network itself displays "small-world" properties: tightly clustered, with short path lengths that make it efficient—but dangerously fragile. Most of China’s trade partners lack strong interconnections, reinforcing China’s role as a single point of failure.
Crucially, Škurla challenges the idea that allies like Japan or Germany could replace Chinese supply. An important and provocative point, particularly in the West with lots of omission and even misinformation in mainstream media. Japan's production still depends on dysprosium sourced almost entirely from China, and U.S. domestic efforts have only marginally reduced rare earth import dependence, which still exceeds 95% for some elements.
The consequences of this exposure are stark. By simulating the removal of the Guided Missile and Space Vehicle Manufacturing sector—a heavy user of NdFeB magnets—Škurla estimates a $38.4 billion loss in intermediate output and nearly $20 billion in GDP reduction, with half the damage cascading through upstream industries. The takeaway is clear: permanent magnet dependency is not only strategic—it’s deeply systemic.
REEx Reflection on the Paper
Škurla doesn’t just highlight U.S. dependence on rare earths—he sharpens the focus on a far more dangerous blind spot: the unequal threat posed by heavy rare earth elements like dysprosium. While general concerns often center on neodymium or total NdFeB magnet imports, the thesis reveals that it’s dysprosium—vital for heat-resistant, high-performance magnets in missiles, jets, and EVs—that constitutes the true strategic choke point. This is no commodity nuance; it’s a geopolitical pressure valve, and China controls nearly 100% of global processing capacity.
Even Japan, a technological titan with advanced REE capabilities, remains tethered to Chinese dysprosium—a stark indictment of the U.S. reliance on "allied" diversification.
Škurla’s conclusion is as sobering as it is provocative: without metallurgical independence, the U.S. and its partners are chasing illusions. Frankly, a point REEx has been disseminating to a growing community of readers. With dysprosium demand projected to surge more than 600% by 2050, today’s supply chain strategies look not just inadequate—they look technologically complacent and geopolitically naïve. The clock is ticking, and the playbook needs rewriting.
Limitations
While methodologically rigorous, the study is bounded by:
- Static input–output tables from 2017, which likely underestimate the surge in permanent magnet use, particularly in EVs.
- Monoproduct focus: Though HS 850511 is dominated by REE magnets, the code also includes non-REE magnets, which could bias trade flow estimates slightly.
- It focuses on a single representative sector, omitting broader commercial interdependencies in renewables and consumer electronics that could reveal even greater systemic fragility.
Implications and Final Verdict
Škurla’s thesis offers a timely and meticulously constructed warning: the U.S. is deeply exposed to a chokehold in permanent magnet supply, not just through trade metrics but via sectoral economic entanglement. The author omits a range of “ex-China” activity occurring across the rare earth element value chain for sure. There is hope for a more diversified future. But it’s a steep climb.
As China tightens export controls and formalizes rare earth state ownership, the notion of "friend-shoring" rings hollow unless matched with domestic metallurgical infrastructure and upstream diversification beyond rhetoric. As REEx continues to reinforce—industrial policy among the West’s traditional allies is not a nice to have—it’s a must.
This study should be required reading for defense economists, industrial planners, and national security strategists. It reframes rare earth vulnerability not merely as a trade imbalance—but as a national economic risk multiplier.
Citation
Škurla, P. (2025). US Dependence on Rare Earth Elements from China: The Case of Permanent Magnets (opens in a new tab) (Bachelor’s thesis, Charles University, Institute of Economic Studies).
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