U.S. rare earth miners surge as Trump revives China trade tensions

Investing.com -- Shares of U.S. rare earth miners jumped in premarket trading Monday after President Donald Trump threatened new tariffs against China in response to Beijing’s expanded export controls on rare earth minerals.

As of 1000 AM GMT, Critical Metals Corp (NASDAQ:CRML) surged over 20%, while USA Rare Earth Inc (NASDAQ:USAR) jumped 23.5%. Other companies in the sector also saw significant gains, with MP Materials Corp (NYSE:MP) rising 11.3%, NioCorp Developments Ltd (NASDAQ:NB) up 12.8%, and Energy Fuels Inc (TSX:EFR) climbing 14.3%.

On Friday, Trump threatened to impose 100% tariffs on Chinese goods, on top of existing rates, starting November 1. The move came as a direct response to China’s new export control measures on rare earth minerals, which are critical components in various high-tech applications.

China currently produces over 90% of the world’s processed rare earths and rare earth magnets, while the U.S. has only one rare earth mine.

The Trump administration is also intensifying efforts to secure U.S. supply chains for critical minerals and semiconductors by converting federal grants to companies into equity stakes, aiming to reduce dependence on China.

Despite the escalating tensions, Trump struck a more conciliatory tone on Sunday, posting that "everything would be fine" and that the U.S. did not want to "hurt" China.

Danske Bank noted in a Monday report that attention now turns to a potential meeting between Chinese President Xi and Trump at the end of the month, where the two sides might de-escalate tensions. The bank sees a more than 50% chance for this outcome.

"While the 100% tariff hike would push the pre-substitution US average tariff rate to around 28%, or close to the highs seen last May, the effective increase would be more modest due to re-routing of trade," Danske Bank said.

Jefferies suggested that China is unlikely to be deterred by Trump’s proposed tariffs, as it is better positioned to withstand prolonged pressure compared to the U.S.

"In case of further escalation, we believe China has the upper hand, as it can take more pain for longer than the US, owing to its socialist system," Jefferies said, adding that further market selloffs could create buying opportunities in Chinese AI/data center, semiconductor, and WFE stocks.