Will This Company Be One of The Biggest Winners From the U.S. Tariffs?

To Investors,

In a previous letter I had mentioned how one of the main reasons for the U.S. imposing tariffs on imports is to create supply chain resiliency in key industries. I glossed through the specifics in that letter, but today I want to double-click on the rare earth minerals supply chain, why it’s important globally, but especially for the U.S., and how a company called MP Materials may emerge as one of the biggest beneficiaries of U.S. tariffs.

As a quick reminder, rare earth elements are used to produce permanent magnets which are used to make electric vehicle motors function, used in the robotics industry to give products mobility and functioning, and used in other products such as wind turbines, drones, and smartphones as a few examples. I came across a report from Adamas Intelligence that explains the importance of permanent magnets in the context of technology growth, I picked out a few key examples:

* Demand from NdFeB magnets (permanent magnets) will grow from ~230K tons today to ~880K tons by the year 2040 across robotics, electric vehicles, and other technology hardware products.

* By 2040, uses of permanent magnets for robotics will exceed usage for electric vehicles

* Adamas Intelligence predicts that robotics alone will consume two thirds of today's total magnet demand.

Additionally, currently being the largest market for NdFeB magnets, electric vehicles currently constitute about 19% of new car sales globally. According to some reports, year-to-date growth for EV sales in 2025 is around 29-30% globally compared to the previous year; while global sales of fossil-fueled vehicle sales are reportedly declining by about 8% year-on-year. Think about the amount of cars you see daily–a large majority of those may be eclectic in the coming decades.

All of that information shows a set-up for enormous market demand for permanent magnets. The country that will supply these magnets will cement itself as having control over technology growth in related categories, not necessarily as a builder of final products, but as a supplier of critical resources upon which these incredible products are dependent on.

All of what I’m going to talk about today, especially with regards to MP Materials, matters against this backdrop of significantly higher activity in the robotics industry as well as continuously higher demand for electric vehicles.

So going back to the introduction about the importance of MP Materials…

MP Materials primarily operates as a rare earths minerals producer and has a rich history in the rare earth elements industry in the United States, originally operating as Molycorp. Molycorp faced financial difficulties, leading to bankruptcy in 2015, but was revitalised in 2017 when a consortium led by JHL Capital Group and QVT Financial LP acquired its assets and renamed the company to MP Materials. This acquisition revitalised the Mountain Pass mine in California—the only active rare earth mine in the U.S.—focusing on producing critical materials for the technologies that I mentioned earlier. In 2021, MP Materials announced plans to build a permanent magnet manufacturing facility in Texas, and that facility is expected to begin production later this year.

MP Materials has long been heralded as a United States national champion, because the rare earths supply chain is essentially controlled by one country currently: China—therefore the fact that the United States has a decent, home grown, producer of rare earths is a point of pride for the country.

The influence that China has on the United States’ rare earths industry can be summarised in the chart above which shows that in 2022 the U.S. had only 13% of the global mining and beneficiation resources with no mid and downstream capabilities; as well as the chart below which shows that 72% of U.S. imports of rare earths between 2019 and 2022 came from China.

With the current escalat