Washington & Wall Street Mobilize for Rare Earth Independence

Friday, a single “Truth Social” post from US President Donald Trump resulted in a near-instant $2 trillion loss in market value. For market watchers who participated in the April 2025 market, the feeling was all too familiar: any trade escalation between the world’s two largest economies results in a devastating market swoon. Recently, relations between President Trump and Chinese President Xi Jinping appeared to be thawing. However, in a long-ranging social media post, President Trump accused China, the world’s largest rare earth processor and producer, of using its monopoly to hold the US captive (China mines ~70% of rare earth minerals and processes ~90% of them).

Why are Rare Earth Elements So Important?

Rare earth elements (REE) are a group of 17 chemical elements that are critical components in numerous modern technologies, including medical instruments like MRIs, electric vehicles, solar panels, batteries, smart phones, and jet engines.

Rare Earths: The New “Cold War”

The second half of the last century culminated in a “Cold War” predominantly between the United States and the Soviet Union. Though no direct fighting between the two adversaries ever took place, the Soviet Union and the United States competed in nuclear supremacy, space exploration, and world leadership. Today, a similar Cold War is taking place between China and the United States. Amid a lopsided trade balance, President Trump has levied wide-ranging tariffs against China. In retaliation, China is using its dominant position in rare earth elements for negotiating leverage.

US Government Pushes to Secure Rare Earth Independence

Though the rhetoric between the US and China has cooled since President Trump’s Truth Social post, the US appears to be taking no chances. US rare earth stocks, such as Lithium Americas (LAC), MP Materials (MP) and USA Rare Earth (USAR) have surged over the past few months following the US government’s acquisition of equity stakes and pledge financial support. Meanwhile, Trilogy Metals Inc (TMQ) jumped more than 200% in a single session earlier this month after the US government took a 10% stake in the company.

However, according to a Financial Times report, the US is not finished. According to filings from the Defense Logistics Agency (DLA), the US Department of Defense acquired ~$1 billion in critical minerals. Meanwhile, $7.5 billion has already been earmarked for essential minerals in the recently passed “One Big Beautiful Bill Act.”

JPMorgan Chase Enters the Rare Earth Market

The US government is not the only force sending rare earth stocks into the stratosphere. JPMorgan Chase (JPM), the largest US bank, announced Monday that it will help to create and fund a decade-long $1.5 trillion initiative to support US economic and national security interests (with a focus on supply chain, defense, energy independence, & AI). JPM will pledge up to $10 billion of its own capital.

Manhattan Project 2.0: Rare Earth Independence

Though rare earth stocks have already soared in 2025, the recent REE news suggests that they are merely at the beginning of a multi-year trend. The US government appears to be taking an “all hands-on deck” approach similar to that of the “Manhattan Project.” Treasury Secretary Scott Bessent echoed the notion, calling the rare earth efforts an equivalent to the COVID-era “Operation Warp Speed.”

Bottom Line

The $2 trillion market reaction to President Trump’s accusation that China is weaponizing its near-monopoly on critical rare earth elements signals a new “Cold War” over these essential technology components. As a result, the US government is investing billions and securing equity stakes across domestic REE producers, while major private players like JPMorgan Chase launch multi-trillion-dollar initiatives.

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This article originally published on Zacks Investment Research (zacks.com).

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