Rare Earth Metals Spike Amid Global Tension

Beijing just put the rare earth metals market into a stranglehold...

Rare earth metals are 17 metallic substances on the periodic table. These elements are key for producing electronics, cars, semiconductors, and many other modern technologies.

Despite the name, rare earth metals are fairly abundant in the Earth's crust. However, they're extremely difficult to mine. And after decades of Western underinvestment, most of the supply chain now lies in China.

The rare earth advantage gives China major leverage when it comes to global trade. And this month, Beijing put it into use...

On October 9, China's Ministry of Commerce curbed the export of five critical rare earth metals. These join seven other rare earth metals the Ministry curbed in April.

The Ministry of Commerce noted that rare earth metals are "dual use." In other words, they have both military and civilian applications.

Because of this, the Ministry seeks to control the flow of rare earth metals to non-mainland China.

Under the new export regime, buyers must file paperwork guaranteeing the metals will be used for civilian purposes. Any item made up of 0.1% rare earth metals or more will be subject to these curbs.

But the tightening didn't stop there...

The Ministry of Commerce also called for restrictions on the technology needed to refine rare earths.

In short, China has made rare earth metals a pawn in its political chess game.

But the situation only escalated when America issued its response...

A Trade War Threat Rattles Investor Nerves

The morning after Beijing's announcement, President Donald Trump aired his grievances with China on the Truth Social platform...

Some very strange things are happening in China! They are becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths... I was to meet President Xi [Jinping] in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so...

The last line refers to the Asia-Pacific Economic Cooperation summit. It's an annual discussion of Asian economics and policy.

This year's summit is scheduled for Friday, October 31. But whether Trump will be in attendance remains to be seen.

A few hours after his APEC threat, Trump posted a more formal response to China's rare earth metal curbs. As he said in that Truth Social post...

Based on the fact that China has taken this unprecedented position, and speaking only for the U.S.A., and not other Nations who were similarly threatened, starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying.

Trump declared the tariffs would take effect November 1. That's the day after the APEC summit is scheduled to take place.

A 100% tariff on China would be a dramatic hike from America's current stance, which tariffs China at 30%. It would bring the total tariff burden to about 130%.

Trump has since walked back his tariff threat. And as of October 14, he has RSVP'd "yes" to APEC once again.

Nevertheless, this mini crisis shows the gravity of a rare earth metals conflict.

And as my colleague Chris Igou wrote in the October 15 issue of his DailyWealth Trader newsletter, these events have driven significant volatility in the market...

Stocks had started [Friday, October 10] upbeat, with the Nasdaq Composite Index hitting a new intraday record high. But the mood soured after the president made his post...

The S&P 500 Index slumped 2.7% for the day, the Dow Jones Industrial Average sank 1.9%, and the Nasdaq lost 3.6%. The bearish mood persisted into the weekend.

But as I noted, Trump reversed his rhetoric. As he posted on Truth Social on October 12...

Don't worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn't want Depression for his country, and neither do I.

Stocks jumped on Monday as a result. The S&P 500, Dow Jones, and Nasdaq climbed 1.6%, 1.3%, and 2.2%, respectively.

In short, investors are watching the rare earth metals situation intently. The threat of escalation is directing massive flows of cash in and out of U.S. stocks.

But there's real pain under the surface of this volatility. The West is already getting pinched by China's new export controls...

The New Regime of Rare Earth Scarcity and U.S. Vulnerability

Five elements fall under Beijing's new rare earth metal curbs. And all five are key to modern technological supply chains...

• Samarium – useful in the production of powerful, temperature-resistant magnets found in small electronics. It also has applications in aerospace and nuclear reactors.

• Gadolinium – useful in the production of highly workable and durable metal alloys. It's also used for core shielding in nuclear reactors.

• Lutetium – useful in petroleum refinery, LED lights, and – importantly – semiconductor lithography.

• Europium – useful in the production of color TV and computer screens.

• Yttrium – useful in applications like flatscreens, LEDs, high-powered lasers, medical equipment, high-temperature superconductors, and lithium batteries.

The five elements above are essential to industries as diverse as nuclear power, chipmaking, electric vehicles, and consumer electronics. And they join seven other rare earth metals that Beijing curbed this April.

With China cutting off the supply of 12 essential resources, you might wonder why the U.S. doesn't simply mine rare earth metals itself. Unfortunately, it isn't that easy.

For various reasons, rare earth mines are hard to start in the U.S...

America's mine permitting system is slow and difficult to navigate. And that's without dealing with activists and lawsuits that would also frustrate any efforts to build up U.S. mining.

Worse, the U.S. simply can't compete in the rare earth market. China's mining apparatus is sophisticated enough to keeps rare earth metal prices low, and clients happy.

U.S. rare earth mine startups routinely fail to beat China on prices. They can't attract customers. And they shut down as a result.

Tariffs could fix this problem by reducing the price differential. But that would raise two problems...

First, prices would soar in the short term. This would squeeze America's remaining rare earth supply until mines can produce more.

Second, a significant quantity of rare earth imports is embedded in other products. In practice, tariffing these components would be tricky.

Put simply, there are logistical barriers to a tariff-based solution.

But the U.S. is likely to tear down whatever barriers it can in the months to come...

China shows no sign of relenting on its rare earth curbs. In fact, as I wrote earlier this month, it's likely to place additional export controls on metals such as tungsten.

America has to act. Major industries are already suffering from the curbs.

A spokesperson from Germany's biggest car lobby said the curbs would have "far reaching consequences for deliveries of the affected products to Germany and Europe." In an e-mail to CNBC, the spokesman remarked that semiconductors and battery companies would be hit "particularly hard, and thus also the automotive industry."

As U.S. Treasury Secretary Scott Bessent remarked on Wednesday, "If China wants to be an unreliable partner to the world, then the world will have to decouple."

In short, the pressure is mounting for the U.S. to take drastic action in shoring up its rare earth supply chain.

And this could send a whole spectrum of rare earth stocks soaring.

Next, let's look further at how the rare earth standoff is shaking up markets. And we'll see which companies are likely to benefit...

The Companies Behind a New Rare Earth Supply Chain

We already discussed how the recent bout of saber-rattling sent stock indexes reeling...

Trump's threat to impose 100% tariffs on China was caused a one-day crash. And the markets cheered his decision to relent.

The rare earth issue is clearly driving investor sentiment. But it's also driving massive flows of money...

One way we can see this is using the VanEck Rare Earth and Strategic Metals Fund (REMX). It holds a basket of companies that produce, refine, and recycle rare earth metals.

REMX has soared this year as the U.S. woke to its rare earth metals crisis. Take a look...

Rare earth metals are driving major investment. And a few different companies are riding the tailwinds...

One is Lithium Americas (LAC). This company owns and operates a proposed lithium mine in Thacker Pass, Nevada.

It's a pure play on U.S. lithium mining. And its stock has soared more than 150% so far this year.

Another strong play is MP Materials (MP). MP produces and markets rare earth metals via two major segments – the Mountain Pass mine in California and the Independence production hub in Texas. Year to date, MP's stock has soared more than 450%.

Lynas Rare Earths (LYSDY) is an Australian company. But it's still a major non-Chinese rare earth metals player. Lynas explores, develops, mines, and processes rare earth deposits. Today's rare earth metals tailwinds have pushed Lynas's stock more than 200% higher in so far in 2025.

After many long years as a footnote, rare earth metals stocks are seeing new life. And the sector is likely to keep marching higher as America's rare earth buildout gains speed.

But time is of the essence...

China's shock to the system shows that there's no more kicking this can. The U.S. must build out its rare earth metals apparatus now.

That's a big catalyst for this little-discussed commodity trade. And it means the bull run in rare earths is likely just getting started.

Good investing,

Sean Michael Cummings

Editor's Note: This rare earth standoff could spark one of the most lucrative commodity booms in decades. A handful of investors are already positioning for potential triple-digit gains. Don't wait for Wall Street to catch up – watch the full briefing here.