Trump’s Rare Earth Metal Intervention

President Trump’s administration in 2025, “is broadening its rare earth metals price support policy to include more U.S. mining, refining, and magnet production companies, building on a successful precedent set with MP Materials.” US Rare Earth is the US number two rare earth metals (REM) mining company. Their stock price rose by 15 percent on July 31, 2025, from this Trump administration announcement. What seems noble is another example of crony capitalism and federal government economic intervention.

REM Background

REM are defined as,

The group consists of yttrium and the 15 lanthanide elements (lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium). Scandium is found in most rare earth element deposits and is sometimes classified as a rare earth element.

Each element is found in the periodic table.

Each metal, as an element, has similar properties and are usually found together under ground as rare earth oxides. The table below shows their US use by percent.

REM Uses by Percent

REM and their alloys are used in many everyday devices like computer memory, DVDs, echargeable batteries, electric vehicle and hybrid-electric vehicle batteries, cell phones, vehicle catalytic converters, magnets, fluorescent lighting, etc. A demand explosion for many items since 2005 required REM. Today, over 5 billion people own a cell phone. REM are used in many military pieces of equipment.

This chart shows a history of rare earth element production, in metric tons of rare earth oxide equivalent, between 1950 and 2024. It clearly shows the United States’ entry into the market in the mid-1960s when color television exploded demand. When China began selling rare earths at very low prices in the late 1980s and early 1990s, mines in the United States were forced to close because they could no longer make a profit. When China cut exports in 2010, rare earth prices skyrocketed. That motivated new production in the United States, Australia, Russia, Thailand, Malaysia, and other countries. In 2018 production data in Burma / Myanmar became available and boosted the “others” category. Prior to 2018, some production from Burma / Myanmar may have been unreported. Graph by Geology.com using data from United States Geological Survey Mineral Commodity Summaries and other publications.

Economic Intervention

An MP Materials July 10, 2025 press release entitled, “MP Materials Announces Transformational Public-Private Partnership with the Department of Defense to Accelerate U.S. Rare Earth Magnet Independence,” states, “The approach mirrors the strategy used to back MP Materials earlier this year, where government involvement transformed market confidence and secured long-term domestic supply.” The REM supplied by MP Materials will be purchased by the US Department of Defense (DoD) for use in military hardware. MP has one existing US facility called Mountain Pass in California and will build a new facility called 10X.

Here is crony capitalism from the press release:

DoD has entered into a 10-year agreement establishing a price floor commitment of $110 per kilogram for MP Materials’ NdPr products stockpiled or sold, reducing vulnerability to non-market forces and ensuring stable and predictable cash flow with shared upside.

For a period of 10 years following the construction of the 10X Facility, DoD has agreed to ensure that 100% of the magnets produced at the 10X Facility will be purchased by defense and commercial customers with shared upside.

The Company has obtained a commitment letter from JPMorgan Chase Funding Inc. and Goldman Sachs Bank USA to provide $1.0 billion of financing for the costs of constructing and developing the 10X Facility, subject to customary terms and conditions set forth therein. In addition, within 30 days, the Company expects to receive the proceeds of a $150 million loan from DoD in connection with its plan to expand its heavy rare earth separation capabilities at Mountain Pass.

DoD agreed to purchase $400 million of a newly-created series of the Company’s preferred stock convertible into shares of the Company’s common stock, and a warrant permitting DoD to purchase additional shares of the Company’s common stock.

As a result of the strategic investment, DoD is positioned to become the Company’s largest shareholder. On an as-converted and as-exercised basis, the convertible preferred stock and the warrant represent, in the aggregate, 15% of the Company’s issued and outstanding shares of common stock as of July 9, 2025,... (emphasis added)

On July 8, 2025, MP Materials stock price was $30.03 per share, but it increased to $58.55 on July 15, 2025 after the announcement. Crony capitalism at its US best. According to one publication,

This expanded policy aims to provide guaranteed price floors for key rare earth elements, reducing investment risk and bolstering domestic critical minerals production to counter China’s market dominance.”

US taxpayer-funded loans or supposed private company investments have poor outcomes like Solyndra. They manufactured solar panels and filed federal bankruptcy in 2011 during President Obama’s first term. US taxpayer-funded auto loans to US automakers General Motors (GM) and Chrysler in 2009 as part of their federal bankruptcy filing. GM was colloquially renamed “Government Motors” when the US government was issued special shares of stock as the new majority owner under the bankruptcy agreement. These special shares were later sold at a loss on publicly-traded stock exchanges.

Many fans of Austrian economics know the MP Materials and US Rare Earth REM financing agreements will end badly with crony capitalism sourced from nonsense.