The US Rare Earth Leader Suffered Heavy Blows from Trump's Trade War, Confirming the Stagnation of Its Primary Revenue Source

Amid the geopolitical competition and policy news, the US rare earth sector performed prominently this week. However, the latest news also shows that Trump's reckless trade policies have severely impacted the key industries he mentioned. As the greatest hope for the US to build a domestic rare earth industry chain, Las Vegas-based MP Materials confirmed on Thursday that its major revenue source—exporting rare earth concentrates to China—has stalled due to "lack of commercial feasibility" amid the trade conflict. As a countermeasure to Trump's "reciprocal tariffs," MP Materials' products sold to China now face a 125% tariff. According to the filing, MP Materials generated a total revenue of $204 million last year, with about 80% coming from the sale of rare earth concentrates to China. The filing also shows that Chinese companies settle MP Materials' imports based on "market price minus tariffs and other costs." Faced with collective media inquiries, MP Materials confirmed on Thursday that this business has stalled because "selling these materials under a 125% tariff is not commercially rational." Affected by this news, the company's stock price experienced a sharp 13% drop during Thursday's trading session. However, as of the Good Friday holiday, MP Materials' year-to-date gain still exceeded 60%. (MP Materials intraday chart, source: TradingView) The company also emphasized that it will process half of its capacity at a refinery in California and then find ways to sell to other buyers. Meanwhile, it has invested $1 billion in an attempt to rebuild a complete rare earth supply chain in the US. The problem is that, from the perspective of financial data and industrial reality, MP Materials will face considerable difficulties. The financial report shows that the company had a net loss of $65 million last year, held $851 million in cash at year-end, and had long-term debt of $909 million. Morgan Stanley analyst Carlos De Alba interpreted that he sees two opposing forces affecting this stock—the growing geopolitical importance making it a more valuable asset, but tariffs will negatively impact financial performance in the short term. So far, MP Materials can separate and process light rare earths, but it remains incapable of handling heavy rare earths needed for high-performance permanent magnets—such as dysprosium and terbium used in F-35 fighter jets, MRI equipment, and cars. The company currently has no timetable for separating heavy rare earths. Currently, China is the only global source for separating heavy rare earths. Notably, Australia's Lynas Rare Earths is building a heavy rare earth separation plant in Malaysia, which is nearing production. Similar to MP Materials, Lynas' financial situation is also challenged by the rare earth market environment. In the six months ended last December, its after-tax net profit was only A$5.9 million, roughly one-sixth of market expectations. During the earnings call at the end of February this year, Lynas CEO Amanda Lacaze urged the Trump administration (which is eyeing Ukraine's rare earths) not to underestimate the time required to build a rare earth industry chain from scratch. Lacaze stated, "Anyone who has assessed this industry knows how long it takes from the idea of 'what if we could get rare earths from X' (wherever X is) to actually putting the separated products into large bags waiting for customers to buy them." Grace Lin Baskaran, a critical minerals expert at the Center for Strategic and International Studies (CSIS), pointed out that MP Materials will face difficulties when it cannot export its products. Meanwhile, for the US trying to obtain heavy rare earths, there are only two options at the moment—either face supply chain disruptions or attempt negotiations, which will be a painful process. Baskaran also noted that although Australia's Lynas Rare Earths is already the largest separated rare earth producer outside China, it still needs to ship oxides to China for refining. It is expected that Australia will remain dependent on China for rare earth refining at least until 2026.