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Chokepoint: the Financial Effects of Rare Earth Supply Disruptions

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  • Joshua Ostry

    (Geneva Graduate Institute and CEPR)

Abstract

This paper constructs a high-frequency, news-based measure of rare earth supply shocks to examine how disruptions in these critical inputs affect global firm valuations. Using news articles between 2021 and 2025, I identify exogenous rare earth supply events, distinguishing between Chinese trade-restriction and global production shocks. Using a sample of 5800 public firms, I show that negative rare earth supply shocks, which are expected to raise input prices, cause significant and persistent declines in the equity prices of rare earth-exposed firms, especially those in the battery, semiconductor, and motor vehicle industries. Both trade and production shocks depress valuations, though trade restrictions shocks are particularly impactful. These findings highlight a financial channel through which the weaponization of critical-material supply chains transmits across global markets.

Suggested Citation

  • Joshua Ostry, 2026. "Chokepoint: the Financial Effects of Rare Earth Supply Disruptions," IHEID Working Papers 10-2026, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp10-2026
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    References listed on IDEAS

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    1. Vasco M. Carvalho, 2014. "From Micro to Macro via Production Networks," Journal of Economic Perspectives, American Economic Association, vol. 28(4), pages 23-48, Fall.
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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