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. The Communist power controls 70 percent of the global supply, and 90 percent of the processing capacity, giving it huge 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.
The announcement of the extraordinary tariff is set to hit American shoppers where it hurts most: their wallets.
Everyday items imported from China — from electronics and clothing to furniture and kitchenware — will jump in price.
They won’t necessarily double, since the tariff is applied to the value of the item as it enters the US, not the final retail price. But it still means the toys you’re buying for your kids this Christmas, the smartphone you were planning to order, the winter coat you bought online, or even small home appliances could cost hundreds of dollars more.
Grocery bills aren’t immune. Many packaged foods, snacks, and ingredients are sourced from China or contain components made there, meaning pantry staples could see noticeable price jumps.
Technology lovers will feel the pinch acutely. Laptops, tablets, TVs, and gaming consoles rely heavily on Chinese components.
Higher tariffs could delay shipments or push up retail prices, forcing Americans to pay more for the same products or wait longer for new releases. News of the tariffs in April forced Nintendo to delay the launch of their Switch 2.
Automobiles and electric vehicles could also see sticker shock. Many cars and EVs use Chinese-made electronics, batteries, and rare earth components, meaning a new tariff could raise the cost of both imported and domestically assembled vehicles.
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 this week announced new rare earth restrictions, starting in December, in an effort to force Trump to the negotiating table.
Beijing believes that the president is keen to make a deal and that they can prey on that perceived weakness.
The new conflict is a repeat of a dispute between Washington and Beijing that was resolved months ago.
On that occasion, China’s tightened of restrictions on rare earth sparked concern among American industries from car-making to defense.
In response, Trump hit back with its own export controls on materials that China relies on.
The two sides eventually relaxed the controls following a series of meetings in the UK and Europe, spearheaded by Treasury Secretary Scott Bessent.
China’s new 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.
