China’s Ministry of Commerce added 10 U.S. entities to its export control list on Monday, including rare earth producers MP Materials (MP) and USA Rare Earth (USAR), in a direct retaliation for the Pentagon’s updated 1260H list that added Chinese companies from Alibaba to BYD to its military-ties roster this month.
The sweeping designation bars Chinese exporters from supplying dual-use items — goods and technologies with both commercial and military applications — to the named firms. It also prohibits organizations and individuals in any country from transferring Chinese-origin dual-use products to those entities, escalating the rules from a licensing regime to a full ban.
The 10 targeted entities span rare earths, drone technology, robotics and aerospace. Beyond MP Materials and USA Rare Earth, the list includes drone firms Jaia Robotics, Red Cat Holdings (RCAT) and Teal Drones, as well as Aveox, a manufacturer of mission-critical electric motors.
In a statement, China’s Commerce Ministry said the measures were taken to safeguard national security and interests and fulfill international obligations including non-proliferation, describing them as a response to “the U.S. government’s malicious practices.”
In a twist that underscores the peculiar logic of the rare earth trade, shares of both MP Materials and USA Rare Earth rose on the news. MP climbed 2.7% to $62.52 in early Monday trading, right around its 50-day and 200-day moving averages. USA Rare Earth advanced 4.7% to $25.79.
The market’s reading: being added to the list confirms that Beijing has no intention of meaningfully easing the rare earth export controls it imposed in April 2025. For Western rare earth producers racing to build alternative supply chains, that’s a bullish signal — not a bearish one.
Rare earth stocks have swung wildly in recent months between three basic scenarios: a Cold War-style economic decoupling, a technological grand bargain, or a middle path of moderate adversarial competition. Monday’s action effectively confirms the middle path remains in place — no full decoupling, but no quick relaxation either.
The stakes are enormous. William Blair analyst Neal Dingmann noted in a recent report that China’s export restrictions have pushed prices for some rare earths roughly 400% higher outside China than within. That spread explains why any hint of a policy loosening can trigger a violent selloff in Western rare earth names — and why confirmation of continued tightness sends them higher.
Back in May, after the Trump-Xi summit, the White House touted greater economic cooperation on rare earths and other critical materials, provoking an abrupt selloff in MP, USAR and peers that was followed by a sharp rebound.
China’s April 2025 controls, imposed in the wake of Trump’s “Liberation Day” tariffs, targeted seven rare earth elements critical to military hardware — yttrium, scandium, samarium, gadolinium, dysprosium, terbium and lutetium — used in everything from RTX Tomahawk missiles to Lockheed Martin’s (LMT) F-35 fighter jets, Predator drones and nuclear-powered submarines.
Still, several analysts played down the practical impact of Monday’s move.
“Most of the companies are U.S. defense industry players or have close connections with the U.S. government,” said George Chen, partner for Greater China at the Asia Group, a geopolitical advisory firm. “Those companies are not going to do business in China, so the impact will be quite symbolic.”
“Beijing’s move today is a proportional response to the Department of Defense’s 1260H list,” Chen added.
Investors should note the extreme volatility in the sector. USA Rare Earth carries a 21-day average true range of 10.1%, according to MarketSurge — well above the 8% threshold that typically signals excessive volatility. MP Materials’ 21-day ATR sits at 6.9%, still elevated.
The latest escalation comes barely a week after G7 nations agreed to cap rare earth imports from any single non-bloc country at less than 60% by 2030, a measure explicitly designed to reduce reliance on China’s dominance in global production and processing.
With G7 economies accelerating supply-chain diversification and Sino-U.S. frictions in critical minerals continuing to escalate, the tug-of-war over rare earths shows no sign of ending. For investors, the only certainty is more volatility ahead.
