Why the US Is Buying 10% of USA Rare Earth

If you’re trying to understand the USA Rare Earth deal and why the US government is buying 10% of the company, the answer goes beyond normal market logic.

The Trump administration is preparing a $1.6 billion rescue-and-takeover package for USA Rare Earth (NASDAQ: USAR), giving the federal government a 10% ownership stake, discounted shares, warrants, and another $1.3 billion in debt financing, according to multiple reports.

This is one of the most aggressive federal interventions in the U.S. mining and critical minerals sector in decades — and whether you love it, hate it, or see it as a necessary evil, the move signals something serious: The United States is now directly entering the rare-earth industry.

Here’s what the deal includes, what it means for markets, and why — for anyone who actually believes in capitalism — this entire setup feels fundamentally wrong.

What the Government Is Actually Buying

According to early reporting:

16.1 million USAR shares granted to Washington
17.6 million warrants priced at $17.17
All priced at a 25% discount to USAR’s prior close of $22.71
A government-backed $1.3 billion loan facility
Potential additional $1 billion private investment

This puts the total potential support package over $2.6 billion.

USAR’s market cap sits near $3.4 billion, meaning the government is effectively becoming the largest non-institutional shareholder overnight.

This is not a subsidy.
This is not a tax credit.
This is ownership.

Why the USA Rare Earth Deal Matters

The U.S. has one major strategic problem:

China controls 70–90% of global rare earths processing and magnet manufacturing.

Rare earths are essential for:

electric vehicles
wind turbines
night vision
drones
fighter jets
missile guidance
radar systems
precision motors
nearly every modern defense technology

The U.S. military cannot function without them.

USA Rare Earth’s Round Top deposit in Texas is one of the only U.S.-based sources containing high concentrations of heavy rare earths like dysprosium — the elements China dominates the world in.

Add in:

A fully U.S.-based mine-to-magnet supply chain
A magnet plant in Oklahoma
Processing labs in Colorado
Projected production by 2028

…and the deal becomes strategic, not financial.

The Strategic Rationale: America Wants Full Control of the Supply Chain

Last year, Washington funded or partially funded:

Lithium Americas (Nevada lithium)
Trilogy Metals (Alaska copper-cobalt)
MP Materials (rare earths in California)

This new USAR deal is the clearest signal yet that:

The U.S. government is done begging global markets for critical minerals.

We are now entering an era of state-backed supply chains — for better or worse.

But Here’s the Part That Drives Me Absolutely Crazy: This Is Not Capitalism

I get the national security argument.
I get the China argument.
I get the strategic argument.

But let’s be honest:

This is not capitalism.
This is industrial policy with taxpayer money taking equity stakes in private companies.

Why it bothers me:

1. The Government Is Picking Winners

Millions of private businesses get zero support, yet one miner gets billions.

2. A 25% Discount on Shares Is Not a Free Market

In a capitalist system, private investors set prices — not Washington.

3. This Creates a Moral Hazard

Companies now see that the fastest way to get funded is to become “strategic.”

4. It Distorts Competition

What if another rare-earth startup could outperform USAR — but can’t overcome Washington’s political moat?

5. It Sets a Precedent

Today it’s rare earths.
Tomorrow it’s semiconductors.
Next it’s AI.
Then aviation.
Then agriculture.

At some point you have to ask:
Where does the free market end and central planning begin?

Why the Government Will Defend This Anyway

Washington’s logic is straightforward:

China dominates rare earths
The U.S. military depends on rare earths
Corporate incentives aren’t enough
The private sector won’t fund multi-billion-dollar mines with 10-year timelines
National security > ideological purity

In other words:

“If the market won’t solve it, we will.”

That may be realistic.
But it’s not free enterprise.

What This Means for USAR Stock

The stock will likely react to:

Bullish factors:

Billions in guaranteed funding
National security backing
Government ownership validates stability
No bankruptcy risk
Multi-decade project visibility

Bearish factors:

Dilution
Government control can limit upside
Politics now affect valuation
Price caps or margin restrictions possible
Private investors may view USAR as semi-nationalized

This is no longer a “normal” commodity play.
It’s now quasi-governmental.

How This Changes the Mining Sector

This deal will have ripple effects:

More miners will pitch themselves as “strategic.”
The U.S. government may invest in nickel, cobalt, copper, graphite, and uranium.
Sovereign wealth funds may follow suit.
Private capital might avoid sectors where the U.S. could intervene.
The old free-market model of mining is dead — at least for critical minerals.

We are officially in an era where mineral policy looks a lot more like defense procurement.

The Bottom Line

The U.S. needs rare earths.
The U.S. needs domestic production.
The U.S. cannot rely on China.

But let’s call this what it is:

A strategic, semi-nationalization move — not capitalism.

If the goal is national security, this might be justified.

But if the goal is maintaining a free-market economy driven by private investment, competition, and price discovery, then this entire approach is fundamentally contradictory.

Sometimes the government does what it has to do.
But let’s not pretend this is the invisible hand at work.

MacroHint Disclaimer

This article is for informational and educational purposes only. It does not constitute financial advice. Always conduct your own research or seek a qualified professional before making investment decisions.

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Why the US Is Buying 10% of USA Rare Earth