Markets Plunge as Trump Threatens Major Tariff Hike on China

U.S. markets nosedived Friday after President Donald Trump threatened sweeping new tariffs on Chinese imports, escalating tensions over Beijing’s tightening control of rare earth metals—a vital supply chain component for both the technology and defense industries.

The Dow Jones Industrial Average sank 878 points (1.9%) to close at 45,479.60, while the S&P 500 dropped 2.7% to 6,552.51, marking its steepest one-day decline since April. The Nasdaq Composite was hit hardest, plunging 3.6% to 22,204.43 after briefly touching a record high earlier in the session.

“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,” Trump wrote on Truth Social. “One of the policies we’re calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States.”

The remarks came after China moved to restrict exports of goods containing even trace amounts of rare earth elements—requiring foreign companies to obtain special licenses from Beijing. Trump accused the country of holding the world “captive” through its dominance of the market, which supplies essential materials for semiconductors, EV batteries, and weapons systems.

Tech Sector Leads the Sell-Off

The tariff threat hit technology names particularly hard, as investors braced for supply chain disruptions and weaker Chinese demand. Nvidia fell nearly 5%, AMD lost 8%, and Tesla slid 5%. The CBOE Volatility Index (VIX) spiked above 22, breaking a four-month stretch of market calm as traders rushed to hedge against deeper losses.

“It’s not surprising to see tech down the most today,” said Art Hogan, chief market strategist at B. Riley Wealth. “These companies have significant exposure to China, both in manufacturing and as a major customer base. Clearly, our relationship with the world’s second-largest economy just got more complicated.”

Broader Economic Strains

The tariff shock came against a backdrop of domestic uncertainty. The ongoing U.S. government shutdown entered its tenth day Friday, with the Senate once again failing to pass competing stop-gap funding bills. White House budget director Russell Vought confirmed on social media that layoffs of federal workers “have begun.”

With political gridlock deepening and global trade tensions rising, investors fled risk assets to end the week. The S&P 500 finished down 2.4% for the week, while the Dow and Nasdaq fell 2.7% and 2.5%, respectively. U.S. crude oil prices also slid amid fears that tariffs could sap global demand.

“Expectations for a China trade deal just got swept off the table,” said Jeff Kilburg of KKM Financial. “Profit-takers are out in full force, and traders are reassessing what this means for earnings season ahead.”

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