The Impact of the U.S.-China Trade Truce on Rare Earth Mining Stocks

The U.S.-China trade truce of 2025 has reshaped the rare earth sector, offering a rare moment of stability amid years of geopolitical tension. By delaying China's rare earth export controls and averting a 100% tariff escalation, the agreement has stabilized global supply chains for industries reliant on critical minerals, from semiconductors to renewable energy, according to a Bitget report. For investors, this pause has created a unique window to reassess sector dynamics, with rare earth mining stocks like MP Materials (MP) and Lynas Rare Earths (LYC) emerging as focal points of strategic reallocation.

Stabilization and Strategic Reallocation

The truce's immediate effect was to reduce volatility in rare earth markets. China's one-year delay on expanded export licensing rules, according to a Tribune report, has eased fears of sudden supply shocks, allowing companies to plan long-term. For instance, MP Materials, the sole U.S. rare earth miner, , . , according to a TS2 analysis. These contracts, which include guaranteed purchases of neodymium-praseodymium (NdPr) oxide and magnet production, underscore the U.S. government's push to localize critical supply chains, as noted in a TS2 report.

However, the sector's reallocation is far from complete. Despite increased U.S. , according to . This dependency highlights the limitations of current efforts. While companies like Energy Fuels Inc. (UUUU) pivot from uranium to rare earth processing, according to a Rare Earth Exchanges guide, the lack of domestic refining capacity remains a bottleneck.

Government-Backed Initiatives and New Alliances

The U.S. has sought to diversify its supply chains through strategic partnerships. A notable example is the U.S.-Malaysia rare earth trade deal, which streamlines regulatory frameworks and reduces tariffs to facilitate access to Malaysia's ionic clay deposits-rich in dysprosium and terbium, according to a Discovery Alert report. This partnership, expected to scale U.S. metallisation by 2026, according to a Business Korea article, addresses a critical gap in the defense sector, where these heavy rare earths are essential for advanced jet engines and precision systems, according to a Bitget analysis.

Institutional investors are closely monitoring these developments. The U.S. , noted in the TS2 analysis, signals a broader trend of government-backed capital infusions into the sector. Meanwhile, Malaysia's long-term licensing framework through 2030, reported by Discovery Alert, offers operational certainty for companies like DTEC Mineral & Metal Technology, which are expanding processing infrastructure.

Challenges and Future Outlook

Despite progress, challenges persist. China's dominance in rare earth processing-accounting for over 90% of global capacity, the Tribune notes-means the U.S. remains vulnerable to indirect disruptions. Additionally, , the TS2 report noted, the company's adjusted EBITDA remains negative, highlighting the sector's high capital intensity. Analysts project profitability by 2026, the TS2 analysis argued, but this hinges on sustained demand and stable pricing.

For investors, the key lies in balancing short-term stability with long-term strategic bets. The U.S.-China truce has bought time, but the sector's future will depend on whether governments and corporations can replicate the Malaysia model to build resilient, diversified supply chains.