Donald Trump has announced a further 100 percent tariff on all Chinese goods after Beijing imposed export restrictions on rare earth metals.
Trump sparked a frantic Wall Street sell-off when he teased the tariff earlier on Friday.
The S&P 500 dropped 2.71 percent — its largest one-day decline since the Liberation Day tariffs on April 10. The Dow closed down 1.9 percent and the tech-heavy Nasdaq dropped 3.56 percent.
China this week announced new export controls on rare earth minerals which are vital in the AI arms race, semiconductors, defense, and high-tech industries.
China controls roughly 70 percent of the global supply of rare earth minerals and 90 percent of the processing of it, meaning it has huge it leverage over the high-tech supply chain.
‘It is impossible to believe that China would have taken such an action, but they have, and the rest is history,’ Trump said.
He announced that the 100 percent additional tariff would come into effect on November 1, as well as export controls on critical software.
Trump earlier accused Chinese president Xi Jinping of attempting ‘to hold the world captive’ through the ‘monopoly position’ on the materials. He called it a ‘rather sinister and hostile move.’
‘Some very strange things are happening in China,’ Trump wrote, as he called Beijing ‘very hostile.’
The President said he had considered canceling his upcoming meeting with Xi at the APEC summit in South Korea.
China has announced new restrictions, starting December 1, on rare earth exports and related technologies, extending controls on materials critical for high-tech, defense, and AI products.
The rules require foreign companies to obtain special approval to export items containing even small traces of Chinese rare earths.
The same applies if using Chinese processing, smelting, recycling, or magnet-making technology. Exports for military purposes are expected to be denied.
Analysts say China’s new curbs are geopolitical as well as economic, forcing countries and companies to rethink sourcing and build independent supply chains.
The US has already started investing heavily in domestic rare earths production: MP Materials is opening a new magnet plant in Texas using US-sourced rare earths, Noveon secured supply from Lynas in Australia, and the Defense Department invested $400 million to secure supply and stabilize prices.
Experts warn that this is a wake-up call for US industrial policy and a key factor in trade negotiations with China.
Meanwhile, shares of companies linked to rare earth minerals jumped Friday after Trump threatened the countermeasures against China.
The market reaction was swift: MP Materials rose 15 percent, USA Rare Earth surged 19 percent, Energy Fuels gained more than 10 percent, and NioCorp Developments climbed nearly 14 percent.
