US-China Trade Deal Rattles Rare Earth Producer MP Materials

Shares of MP Materials plummeted following the announcement of a new trade framework between the United States and China. Ironically, a diplomatic breakthrough now poses a significant threat to the rare earth elements producer’s business model.

Strategic Advantage Under Pressure

MP Materials has historically benefited from its position as America’s primary domestic supplier of rare earth elements to both defense and technology sectors. The company operates the Mountain Pass facility in California and secured a $400 million investment from the Department of Defense as recently as July 2025. This strategic importance, however, faces new challenges under the proposed trade agreement.

The U.S. Treasury Department announced what it called a “highly successful framework agreement” for upcoming trade discussions between President Trump and Chinese President Xi Jinping. The arrangement reportedly includes provisions for China to substantially increase its rare earth exports to the United States—a development that directly threatens MP Materials’ market position.

Market Reaction and Price Pressures

The stock price immediately declined as investors digested the implications. Increased supply with steady demand typically leads to lower prices, which would significantly compress the company’s profit margins.

Market analysts highlight several concerning developments:

Should investors sell immediately? Or is it worth buying MP Materials?

• Trade framework permits expanded Chinese exports
• Accelerated rare earth extraction planned in Malaysia
• Reduced scarcity premium for domestic US production
• Uncertainty regarding pricing power

Expanded Global Competition

The potential trade agreement extends beyond China. President Trump’s arrangement with Malaysia includes expedited development of approximately 16 million tons of rare earth deposits. This multinational sourcing strategy fundamentally challenges the previous emphasis on domestic production.

MP Materials now faces competition not only on strategic value but also on cost efficiency against multiple international suppliers. The geopolitical tensions that previously justified premium pricing for American production show early signs of diminishing.

Critical Financial Reporting Ahead

MP Materials is scheduled to release third-quarter results after market close on November 6, 2025—timing that couldn’t be more challenging. These financial figures will demonstrate how the company is navigating the shifting geopolitical landscape.

While analysts previously projected the company would achieve profitability by 2026, the changing trade environment raises important questions. Can MP Materials maintain its competitive position without the protective shield of geopolitical tensions?