The U.S. stock market saw a sharp decline on Friday after President Trump accused China of blatant hostility regarding rare earth regulations. He hinted at potential “significant increases” in tariffs against the country.
By around 12:25 p.m. ET, the Dow Jones Industrial Average had dropped by 518 points, translating to a 1.1% decline, while the S&P 500 slipped by 1.3%, and the tech-centric Nasdaq fell by 1.8%.
Investor anxiety over escalating trade disputes heightened when Trump appeared to cancel an upcoming meeting with Chinese President Xi Jinping that was slated for later in the month.
In a lengthy post on Truth Social, Trump remarked that China’s antagonism had “come out of nowhere” and expressed concern over the country allegedly seeking to impose strict export controls on various components within the rare earth supply chain.
Rare minerals, including copper, cobalt, zinc, and lead, are central to U.S.-China trade tensions since they are vital for energy infrastructure, defense tech, and manufacturing.
“I sensed they were waiting quite a while, and, as usual, I was right! China cannot be permitted to hold the world ‘hostage,’ yet it seems that has been their objective for quite some time,” he stated.
He pointed out China’s stealthy accumulation of rare earths as a rather “sinister and hostile” maneuver, suggesting it placed them in a monopolistic condition. However, he also noted that the U.S. holds a more significant and extensive monopoly than China, but he hadn’t felt the need to leverage it—until now.
Trump acknowledged that rising tariffs on China “could be painful,” though he argued it would ultimately yield positive outcomes.
Alongside the tariff threat, he noted that the White House was evaluating additional measures.
Prior to Trump’s comments, stock prices had experienced a notable surge, with the Nasdaq reaching a new intraday peak. Yet, his warning seemed to dampen expectations for a trade resolution with China.
As a result of Friday’s downturn, the S&P 500’s prior week gains were wiped out, now projecting a potential drop of about 1%.
Technology stocks, particularly those heavily reliant on China, led the losses, with Nvidia, AMD, and Tesla decreasing by 1.7%, 5.7%, and 2.9%, respectively.
Simultaneously, U.S. rare earth stocks surged, as investors anticipated greater domestic supply needs. MP Materials, U.S. Rare Earths, Energy Fuels, and NioCorp Developments rose by 14.2%, 14.8%, 9.9%, and 11.6%, respectively.
In reaction to Trump’s post, Chinese stocks took a hit, with Alibaba and Baidu seeing declines of 10.4% and 6.6% respectively, while Jingtocom and PDD dropped by 5.5% and 4.2% respectively.
