Rare earth stocks find themselves underground on Monday as Treasury Secretary Scott Bessent said he expects that China and the U.S. will work out a trade deal in the near future.
Meanwhile, stock markets largely soared on news of the trade optimism, with the Dow Jones Industrial Average up roughly 0.5%, the S&P 500 up 1%, and the Nasdaq up 1.6% as of midday Monday.
Bessent, appearing on CBS’ “Face the Nation” Sunday news program, said that he anticipates that China will resume soybean purchases from the U.S., and that there could be an announcement on Thursday when President Trump and Chinese President Xi Jinping meet in South Korea.
“I’m not going to get ahead of the two leaders who will be meeting in Korea on Thursday, but I can tell you we had a very good two days,” he said. “So I would expect that the threat of the 100% [tariff] has gone away, as has the threat of the immediate imposition of the Chinese initiating a worldwide export control regime.”
Part of those export controls concerns rare earth minerals, which are used in the manufacturing of a wide variety of products, such as vehicles and consumer electronics. And Bessent’s comments led to some earthquakes in the market on Monday, as rare-earth stocks fell significantly.
Shares of MP Materials, for instance, were down more than 9% since the market opened, as of midday Monday. USA Rare Earth Inc., likewise, was down roughly 10%.
Notably, MP Materials’ share price is up more than 312% year-to-date and USA Rare Earth shares are up roughly 85%. So investors are still making out well, despite today’s downturn.
The issue at the molten core of the rare earth trade is the fact that China controls the vast majority of rare earth mineral production and refining. By some measures, the Chinese control as much as 70% of rare-earth mining, 80% of refining and processing capacity, and more than 90% of the world’s supply.
That means those minerals are scarce, which drives up prices—and share prices of companies operating in the space outside of Chinese control.
While we don’t know yet what kind of trade deal or agreement will surface later this week—or if one will at all—Bessent’s signaling that things are heading in a positive direction is what’s having an effect on rare-earth stocks today.