USA Rare Earth Inc. (USAR) saw its stock price plummet 9.55% in early trading on Monday, as investors reacted to news of a potential trade deal between the United States and China that could significantly impact the rare earth sector. The sharp decline comes amid a broader selloff in rare earth stocks, reflecting market uncertainty about the future of this critical industry.

The stock's dramatic 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.

The rare earth sector as a whole experienced significant declines, with other players such as United States Antimony falling 17%, MP Materials down 4.1%, and Critical Metals dropping 8.4%. This 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. The potential pause in Chinese export controls and the U.S. signing deals with Southeast Asian partners to diversify critical mineral supply chains are likely contributing to the uncertainty reflected in USA Rare Earth's stock price, as investors reassess the company's market position and growth prospects in a rapidly evolving international trade environment.