Rare-Earth Stocks Decline Following Trump's China Threat Comments

This analysis is based on the Barron’s report [1] published on November 3, 2025, which reported that rare-earth stocks declined following President Trump’s statement that the China threat is “completely gone.” The market reaction was immediate and significant across the U.S. rare-earth sector, with MP Materials falling 3.97% to $60.59, USA Rare Earth dropping 4.78% to $18.52, and Ramaco Resources declining 5.03% to $28.83 [0].

The current decline represents a reversal from mid-October 2025, when rare-earth stocks surged dramatically after Trump threatened China with 100% tariffs over export controls on critical minerals [2]. At that time, MP Materials rallied approximately 21%, USA Rare Earth gained over 18%, and Ramaco Resources rose 11% [2]. The subsequent U.S.-China trade truce in late October, which included China suspending new export controls on rare earths, began reversing these gains [3].

The sector’s performance demonstrates extreme sensitivity to geopolitical developments rather than fundamental business metrics. All three companies currently operate with negative P/E ratios (MP Materials: -98.02x, USA Rare Earth: -22.66x, Ramaco Resources: -46.96x) [0], indicating they are not yet profitable despite significant market capitalizations ranging from $1.59B to $10.74B [0].

: The rare-earth sector exhibits a unique valuation model where geopolitical considerations outweigh current financial performance. Despite negative earnings across all three companies, analysts maintain BUY ratings with significant upside targets (28.6% to 67.6%) [0], suggesting investors are pricing in strategic importance and future growth potential rather than current profitability.

: The market reaction highlights a fundamental tension between strategic national security considerations and commercial viability. Rare earths are critical for defense applications and high-tech manufacturing, giving these companies strategic importance that supports their valuations despite current operational losses [0].

: The 10-day trading data for MP Materials shows a consistent downward trend from -0.99% to -3.43% [0], indicating sustained selling pressure as the U.S.-China trade situation evolves. This pattern suggests the sector may continue experiencing high volatility tied to policy announcements.

: The sector’s valuation appears highly sensitive to U.S.-China trade policy statements. Rapid policy reversals could significantly impact stock valuations, as evidenced by the dramatic swings between mid-October gains and current declines [0][1][2]. Users should be aware that this creates elevated volatility risk compared to sectors driven by fundamental business metrics.

: All three companies currently operate at negative profit margins, raising questions about their ability to achieve sustainable profitability without continued government support [0]. The analysis reveals a dependency on strategic importance rather than commercial success.

: Despite short-term sentiment shifts, the long-term strategic rationale for domestic rare-earth production may remain intact given national security considerations and U.S. efforts to build domestic supply chains [0]. The sector represents a unique intersection of national security, geopolitical leverage, and industrial policy.

: Decision-makers should closely watch official U.S.-China trade agreements, Defense Department procurement programs, production milestones, and alternative supply developments that could affect the competitive landscape [0].

The rare-earth sector experienced a broad-based sell-off on November 3, 2025, with MP Materials, USA Rare Earth, and Ramaco Resources declining 3-5% following Trump’s statement about reduced China threat [0][1]. This reverses significant gains from mid-October when trade tensions boosted the sector [2]. All three companies show negative earnings but maintain strong market valuations and analyst buy ratings, indicating strategic importance outweighs current financial performance [0]. The sector demonstrates high sensitivity to geopolitical developments, creating both volatility risks and potential opportunities tied to policy changes and national security priorities [0][1][2][3].