Rare Earth Stocks Tumble as US-China Trade Truce Eases Supply Fears
A provisional deal pausing Chinese export curbs has cooled the urgency for a US domestic supply chain, hitting shares of miners like MP Materials.
Shares of U.S. rare earth miners, which had surged on escalating trade tensions with China, fell sharply this week after the two nations reached a provisional trade agreement, temporarily shelving a geopolitical threat to critical mineral supply chains.
MP Materials (MP), the largest U.S. producer of rare earth elements, saw its stock decline by more than 12% following the announcement. The sell-off erased gains from earlier in the month when the stock rallied nearly 19% after Beijing threatened to impose new export restrictions on materials vital for electric vehicles, wind turbines, and advanced defense systems. The broader sector felt the impact, with several smaller domestic mining firms experiencing similar double-digit percentage drops.
The reversal was triggered by a trade truce that, according to reports, includes a one-year pause on China's planned export licensing system. This move provides short-term stability for U.S. manufacturers but undermines the immediate economic case for developing a costly and complex domestic supply chain, a key objective for U.S. economic and national security policy.
In Tuesday morning trading, MP Materials' stock was changing hands at around $64.29, a significant drop from its recent highs. The company, with a market capitalization of approximately $11.5 billion, has been at the center of Washington's efforts to break China's dominance over the rare earths market. China currently controls an estimated 92% of global rare earth processing, giving it significant leverage in trade disputes.
Investor sentiment has been whipsawed by the fluctuating geopolitical climate. "The market is reacting to a perceived de-escalation," noted one analyst. "The premium that was priced into these stocks based on an imminent supply chain crisis has evaporated for now."
Despite the market downturn, the long-term strategic push for supply chain independence continues. Earlier this month, MP Materials announced a significant public-private partnership with the Department of Defense to build a domestic rare earth magnet supply chain, a critical component for both consumer electronics and military hardware. The Pentagon has already invested hundreds of millions into the company's efforts, underscoring the national security implications of the sector.
The company's flagship Mountain Pass mine in California is the only operational rare earth mining site in North America. However, it still relies on Chinese partners for final processing. To close this gap, MP Materials recently began commercial production at a new magnet manufacturing facility in Fort Worth, Texas, with a goal of producing 1,000 metric tons of high-powered magnets annually.
While the trade truce has introduced a headwind, many analysts view the fundamental thesis for a U.S. rare earths industry as intact. The average analyst price target for MP Materials remains above $80, suggesting Wall Street sees the recent pullback as a short-term reaction rather than a permanent impairment. The core issue remains: as long as the U.S. depends on a strategic rival for materials essential to its economic future and defense, the drive to build a resilient, domestic alternative will persist, regardless of temporary shifts in trade policy.