USA Rare Earth Inc. (USAR) saw its stock price plummet 5.81% in pre-market trading on Monday, as investors reacted to news of potential trade negotiations between the United States and China that could impact the rare earth sector. The decline comes amid a broader selloff in rare earth stocks, reflecting market uncertainty about the future of this critical industry.

The stock's movement follows reports that top Chinese and U.S. economic officials have discussed a framework for a trade deal that could pause steeper American tariffs and Chinese rare earth export controls. U.S. Treasury Secretary Scott Bessent indicated that China might delay implementation of its rare earth minerals and magnets licensing regime by a year. This potential easing of restrictions could lead to increased supply and lower prices for rare earth elements, potentially impacting the profitability of U.S.-based rare earth companies like USA Rare Earth.

Other rare earth stocks also experienced significant declines in overnight trading. United States Antimony (UAMY) fell 13%, while American Resources (AREC) and Trilogy Metals (TMQ) both dropped 8%. The sector-wide downturn suggests that investors are reassessing the near-term prospects for U.S. rare earth companies in light of the possible trade developments. However, the long-term outlook for the industry remains uncertain, as geopolitical tensions and the strategic importance of rare earth elements continue to influence market dynamics.