US stocks nosedived Friday after President Trump threatened a “massive increase” of tariffs on China, accusing the nation of “becoming very hostile” in its rare earth restrictions.
The Dow Jones Industrial Average plunged 518 points, or 1.1%, by approximately 12:25 p.m. ET, while the S&P 500 and tech-heavy Nasdaq fell 1.3% and 1.8%, respectively.
Investors quickly grew fearful of heightened trade tensions as Trump appeared to cancel a planned meeting between himself and Chinese counterpart Xi Jinping later this month.
In a lengthy post on Truth Social, Trump said China’s hostility “came out of nowhere,” with the country allegedly looking to impose strict export controls on virtually every aspect of its rare earth supply chain.
Supplies of minerals like copper, cobalt, zinc and lead have become a key factor in US-China trade tensions, as these magnets are key to energy infrastructure, defense technologies and the manufacturing industry.
“I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right! There is no way that China should be allowed to hold the World ‘captive,’ but that seems to have been their plan for quite some time,” Trump wrote in the post.
“They have quietly amassed [rare earths] into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least. But the US has Monopoly positions also, much stronger and more far reaching than China’s. I have just not chosen to use them, there was never a reason for me to do so – UNTIL NOW!”
Trump warned that higher tariffs on China could be “potentially painful,” but “will be a very good thing, in the end.”
The White House is considering other countermeasures alongside the tariff increase, he added.
Stocks had been considerably higher before Trump’s post, with the Nasdaq hitting a new all-time intraday high. But the president’s warning appeared to squash hopes for a trade deal with China.
Friday’s decline wiped out the S&P 500’s gain for the week. Now the index appears poised to lose 1%.
Tech stocks of companies that are particularly China-reliant led the sell-off. Nvidia, AMD and Tesla dropped 1.7%, 5.7% and 2.9%, respectively.
Meanwhile, US rare earth stocks surged as investors bet on the need for increased American supply.
MP Materials, USA Rare Earth, Energy Fuels and NioCorp Developments jumped 14.2%,14.8%, 9.9% and 11.6%, respectively.
Chinese stocks plummeted after Trump’s post. Shares in Alibaba and Baidu fell 10.4% and 6.6%, while JD.com and PDD dropped 5.5% and 4.2%, respectively.
