Market Sell-Off Follows Tariff Warning
U.S. stocks turned sharply lower Friday after President Donald Trump announced potential tariff increases on Chinese imports, citing Beijing’s growing restrictions on rare earth metals — materials vital to the U.S. technology and defense sectors.
The Dow Jones Industrial Average fell more than 500 points, or 1.2%, while the S&P 500 dropped 1.7% and the Nasdaq Composite slid 2.3%. Earlier in the day, the Nasdaq had reached a record high before reversing course.
President Trump stated he was considering “a massive increase of tariffs on Chinese products coming into the United States of America,” accusing China of becoming “very hostile” and “holding the world captive” through control of rare earth exports. He also said his planned meeting with Chinese President Xi Jinping at the APEC summit was unlikely to move forward.
Rare Earth Restrictions Escalate Trade Tensions
The market downturn followed China’s decision earlier in the week to tighten export controls on products containing rare earth metals, requiring foreign firms to obtain new licenses from Beijing. The move sparked concern that China could leverage its dominant position in the rare earth supply chain against U.S. industries dependent on those materials.
Financial strategist Jeff Kilburg said, “Expectations for a China trade deal just got swept off the table. Profit takers are out in full force.”
Tech and Energy Stocks Hit Hard
Technology companies with significant exposure to Chinese manufacturing led Friday’s sell-off. Nvidia fell more than 2%, AMD dropped 5%, and Tesla slipped over 3%. Shares of major Chinese companies trading in the U.S., such as Alibaba and Baidu, declined by more than 6%.
Oil prices also moved lower as traders grew concerned that rising trade tensions could weaken global demand.
“Technology-related stocks are reacting the most today as they have major exposure to China both in production and as a key market,” said Art Hogan, chief market strategist at B. Riley Wealth.
Broader Economic Concerns
The market reaction came amid a prolonged U.S. government shutdown, now in its 10th day, further weighing on investor sentiment. Federal budget director Russell Vought confirmed that layoffs of government employees had begun as Congress remained at an impasse over funding legislation.
Friday’s declines erased the S&P 500’s weekly gains and left major indexes on pace for losses of more than 1% for the week.
Meanwhile, Wall Street’s “fear gauge,” the CBOE Volatility Index (VIX), spiked above 20 — its highest level since June — reflecting growing market uncertainty.
Rare Earth Stocks Rally Amid Tariff Talk
While most equities fell, companies tied to rare earth production surged following Trump’s comments. MP Materials rose 15%, USA Rare Earth jumped 19%, and Energy Fuels climbed more than 10%. The rally reflected investor expectations that renewed trade frictions could benefit U.S. producers of critical minerals.
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