The trade war between the U.S. and China is heating up: On Friday, U.S. President Donald Trump lashed out at Beijing after China said it would tighten control over rare earth mineral exports, with the president saying he would impose a new 100% duty on Chinese goods—”over and above” existing tariffs.
The reignited trade war has rocked markets, particularly tech stocks, with the Nasdaq closing 3.6% down on Friday. Analysts are warning that the escalation could lead to an even more economically turbulent market outlook than was seen earlier this year after Trump made his “Liberation Day” tariff announcement. Trump made the threat on social media, writing that he would impose the new 100% tariff on Chinese goods by Nov. 1.,. Trump also said that the U.S. would limit exports of “any and all critical software.”
“It is impossible to believe that China would have taken such an action, but they have, and the rest is History,” Trump wrote.
Earlier on Friday, Trump indicated he might cancel an anticipated meeting with China’s leader, Xi Jinping. “One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America,” he said on Friday in a post. “There are many other countermeasures that are, likewise, under serious consideration.”
Why is the trade war escalating again now?
Washington’s latest tit-for-tat comes after China announced new trade curbs on rare earth minerals—the country controls the vast majority of these materials, which are vital for technology manufacturing, as well as for making magnets, batteries, and vehicles. Trump said that China’s move would “clog” the markets, and that Beijing was holding the world “captive.” Analysts have echoed the president’s concerns, with many cautioning that China’s new regulations will have major impacts for the U.S.’s ability to access materials necessary for technology manufacturing and even military equipment.
“These restrictions undermine our ability to develop our industrial base at a time when we need to. And then second, it’s a powerful negotiating tool,” a critical minerals analyst at the Center for Strategic and International Studies said, per NPR.
Tariff threats roil markets, and analysts are worried
U.S. markets responded quickly to the new tariff threats. On Friday, the Dow Jones Industrial Average dropped 876 points, while the S&P 500 fell 2.7%, and the Nasdaq composite closed 3.6% down. Tech stocks in particular took a hard hit: chipmaker Nvidia, Amazon, and EV-manufacturer Tesla fell by around 5%.
And while the global economy has shown remarkable resilience so far in the face of trade upheaval and Trump’s tariffs, analysts believe this period of turbulence is far from over. “This is all a game of high stakes poker going on between the US and China in this AI Revolution as we are also seeing more scrutiny in Beijing around Nvidia’s golden chips,” Wedbush Securities analyst Dan Ives said in a research note to clients.
Ives added, “These moments we view as buying opportunities to own the winners in semis, software, Big Tech, and the AI future as in our view these tensions will not bubble up into a much more tense time vs. the nervous period of time we saw in April.”