Why Is USA Rare Earth Stock Suddenly Down (Again) Today?

Just one day after they soared on good news, USA Rare Earth (NASDAQ: USAR) shares are down again today on news from the very same source.

That source is the White House. Speaking at a gathering of representatives from over 50 countries, United States Vice President J.D. Vance announced on Wednesday that President Trump intends to establish a trading bloc aimed at pushing back against China's control of several critical minerals markets, including rare earth minerals used in electric vehicles and computing technology. These plans include a self-imposed price floor on these materials.

Although it superficially seems to favor Oklahoma-based rare earth miner USA Rare Earth, as of 2:58 p.m. ET Wednesday its stock is down 8.4%, unwinding most of the recent spurred by a separate announcement from the White House.

It's complicated

There are two separate and opposing developments in play here, to be clear.

The first of these is the announcement from President Trump made Monday unveiling "Project Vault," which calls for a national stockpiling of $12 billion worth of critical industrial materials. This development works in favor of USA Rare Earth, of course, which mines and processes some of these important minerals, spurring the stock's surge earlier in the week.

Wednesday's news also superficially seems to favor the company. As Vice President Vance explained, "We will establish reference prices for critical minerals ... and for members of the preferential zone, these reference prices will operate as a floor maintained through adjustable tariffs to uphold pricing integrity."

Investors are far more concerned, however, that this sort of pricing control could backfire, ultimately opening the door to subpar mineral prices and weakening demand-driven pricing power. The establishment of an international trading bloc could also readily introduce USA Rare Earth's domestic customers to foreign competitors.

Image source: Getty Images.

It's also possible that investors are now simply second-guessing the net upside of Project Vault.

Don't read too much into any of the volatility

So, today's knee-jerk move is understandable, particularly after Tuesday's surge.

Just keep things in perspective. These are only plans, and are subject to change before they're implemented if they're implemented in a recognizable form at all; they may not be. For now, investors should remain focused on the simpler fact that USA Rare Earth is sitting on a massive pile of these minerals in question, and still expects to begin production of much-needed magnets later this year. That's not changed this week.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.