President Donald Trump on Friday threatened a “massive” increase in tariffs on Chinese products, rocking markets and adding a fresh dose of uncertainty into trade relations between the world’s largest economies.
China has become “very hostile” on trade matters, Trump said in a bombshell Truth Social post. “I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so.” The leaders were expected to announce a full-fledged trade deal at the meeting.
On Thursday, China announced a series of new limits on the trade of rare earths and technologies related to them.
A spokesperson for the Chinese Embassy in Washington, D.C., did not immediately respond to a request for comment on Trump’s post.
Both the announcements from China and Trump marked a sudden escalation of a trade war that had appeared to be cooling off. The emerging certainty helped lift stock markets to record highs. But the president’s Truth Social post Friday immediately sent U.S. stocks to session lows, with the S&P 500 falling more than 1% after earlier trading in positive territory. The Nasdaq, which contains many tech companies that do business in China, slid about 2%.
China’s new trade regulations require foreign companies to get special approval to export items that contain even small traces of rare earths elements sourced from China. These critical minerals are needed in a broad range of products, from jet engines, radar systems and electric vehicles to consumer electronics including laptops and phones.
China and the U.S. have held more than three rounds of trade talks this year, with rare earths, TikTok and tariffs featuring in the discussions. After talks in May in Geneva, the administration said China had decided to ease up on rare earth export controls.
In June, the two sides met again in London, where they announced yet another agreement on the issue. After those talks, the U.S. said it expected the issue to be “resolved.”
In a Truth Social post after those negotiations, Trump said “our deal with China is done.”
“Full magnets and any necessary rare earths will be supplied, up front, by China,” he added.
“They were kind of releasing them, but it was going a lot slower than some companies believed was optimal,” National Economic Council Director Kevin Hassett said of China’s rare earth exports at the time.
But U.S. companies have said throughout the talks that the flow of rare earth exports from China have been staggered at best. China dominates the supply of these critical minerals, leaving companies few other options.
A full-fledged trade deal with China remains elusive even despite the extensive negotiations.
Just as with rare earths, U.S. officials said in September that China had struck a “framework for a TikTok deal.” However, in the preceding weeks China had not confirmed that such a deal was agreed to.
Many experts believe China’s strategy is to keep talking while making few concrete agreements.
“Beijing will be happy to keep the U.S.-China negotiation going, but it is unlikely to make concessions,” William Yang, a senior Northeast Asia analyst for the International Crisis Group who is based in Taiwan, told NBC News recently.
U.S. officials plan to meet with their Chinese counterparts for further talks in November, where rare earths will likely again take center stage.
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