Key Points
U.S. and Chinese negotiators have struck a framework agreement to end the trade war and permit rare earth exports to the U.S.
MP Materials has received U.S. government support to mine and refine rare earths in the U.S.
Increased supply of rare earths from China -- and perhaps Malaysia, too -- could undercut MP's profits.
MP Materials (NYSE: MP) stock, arguably the bellwether for the rare earths mining industry in the U.S. today, and a direct recipient of support from President Donald Trump earlier this year, tumbled 10.7% through 11 a.m. ET Monday
Blame President Trump for that... but also give him a round of applause.
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Good news for U.S. is bad news for MP Materials
Over the weekend, trade negotiators from the U.S. and China struck what Treasury Secretary Scott Bessent calls "a very successful framework for the leaders to discuss on Thursday." The full details probably won't be known until Thursday, but the broad outlines seem to include China buying more U.S. soybeans, Trump retracting a threatened 100% tariff on Chinese exports, and... China allowing more rare earth exports to the U.S.
Investors generally love the news, and the S&P 500 (SNPINDEX: ^GSPC) is up strongly today. Investors in MP Materials stock specifically, however, are nervous.
Is MP Materials stock a buy?
They're right to worry. MP stock nearly quadrupled in price over the past year after the U.S. government invested $400 million in the company in July -- aiming to support MP's plan to return rare earth mining and refining activity to U.S. shores. Increased rare earth supply from China, however, could undercut MP's prices and undermine its profitability.
Additionally, now we hear President Trump has struck a deal with Malaysia, home to some 16 million tons of rare earths deposits, to have that country accelerate development and sell more rare earths to the U.S. And as we all learned in Econ 101, when demand is steady, increased supply leads to lower prices... and less profit for MP Materials.
As things stand today, Wall Street analysts still hope MP Materials will turn profitable in 2026. But the situation is changing rapidly, and profitability for MP stock remains uncertain.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.