The markets today were hit with some fresh turmoil: the Dow lost roughly 500 points midday after Donald Trump publicly labeled China’s recent rare earth export restrictions “hostile” and announced he was canceling a planned meeting with Xi Jinping. The move reinforced how critical and combustible rare earths have become in the global balance of power.
SPY, intraday
Rare earths - those 17 little-known elements - aren’t exotic curiosities. They’re the backbone of modern technology: the magnets in electric motors, the phosphors in screens, the sensing apparatus in missiles and satellites. It’s no exaggeration to say that the 21st century depends on their supply.
China’s Grip on Global Supply Chains
But here’s the rub: China dominates not just mining, but processing and refining. For many rare earths, upwards of 90 % of global processing capacity is in Chinese hands. That gives Beijing tremendous sway over the entire downstream tech and defense world. By limiting exports, China is literally throttling access to materials critical for everything from electric vehicles to stealth aircraft.
When Trump calls China “hostile” and drops a summit, markets see this as escalation, not just rhetoric. It underscores that rare earths are no longer a niche commodity - they are strategic leverage, tugging at diplomacy, defense, and trade. The sudden tariff threats, supply-chain disruption, and instability have real consequences for global equities.
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Market Reaction and Sector Moves
Investors are already repositioning. Rare earth linked stocks rose sharply when export curbs were first signaled, with names like USA Rare Earth (USAR) and MP Materials (MP) gaining traction. The VanEck Rare Earth & Strategic Metals ETF (REMX), often dismissed as a niche play, has outpaced many broader indexes this year. With governments scrambling - through stimulus, contracts, and policy - to build their own rare earth capacity, some of these companies are transitioning from speculative bets into strategic infrastructure plays.
But make no mistake, the risks are significant. These companies wrestle with heavy capital demands, permitting hurdles, delicate regulatory environments, and the possibility of technological substitutes. The sector responds violently to headlines - as we saw today - and policies can swing unexpectedly.
For the average retail investor, rare earths shouldn’t be your core position, but they deserve a seat at the table. Think of them as a strategic satellite bet - a way to play the convergence of clean tech, defense, and geopolitics. If you believe that governments will prioritize supply security over short-term profits, and that demand for advanced materials will only accelerate, then rare earth stocks may offer asymmetric upside.
Bottom Line: the Dow’s fall today is a reminder that the geopolitical power in 2025 is no longer about oil fields or trade tariffs alone - it’s about who controls the elements that power our cars, devices, and defense systems. And the rare earths might just be the most potent leverage left.
Here’s to the future,
Matt McCall
Editor, Market Insights
