Trump's rare earth push away from China, has a Chinese hand

In US President Donald Trump’s grand battle plan to end China’s near-monopoly over rare earth supplies, there is a unique twist. MP Materials, which owns the sole operational rare earth mine located in California’s Mountain Pass, has entered into an agreement with the US government in a pushback against Beijing. But there’s a twist: Shanghai-based Shenghe Resources is actually one of the biggest stakeholders in MP Materials.

At present, Shenghe Resources holds an 8 percent stake in MP Materials. But with the latest deal, the Department of Defense will surpass the Shanghai company and hold a 15 percent stake in the company. The U.S. government will be buying $400 million worth of preferred shares along with receiving warrants. According to Reuters, the deal is likely to close tonight.

While MP Materials has stopped sending rare earths to China since April, the company maintains that it will retain a ‘free market’ stance. "We're getting an important national security need met, but we're maintaining our free market public company approach," MP CEO James Litinsky said in an investor call.

Many have accused China of weaponizing rare earths to secure favorable deals in the ongoing tariff war. Some see the MP Materials deal as a key moment for the U.S. to reduce its dependence on Beijing.