Dow Jones and S&P500: US Indices Drop as Trump Threatens Massive China Tariffs

Dow Sinks 579 Points After Trump Threatens Tariffs on China Over Rare Earth Dispute

U.S. stocks reversed sharply Friday after former President Donald Trump warned of a potential “massive increase of tariffs” on Chinese imports, citing Beijing’s tighter controls on rare earth minerals.

The Dow Jones Industrial Average tumbled 579 points, or 1.3%, while the S&P 500 shed 1.6%, and the Nasdaq dropped 2% after hitting a new intraday high earlier in the session.

Trump’s remarks on Truth Social escalated tensions just weeks ahead of a scheduled meeting with President Xi Jinping at the APEC summit. “There seems to be no reason to meet,” he posted, criticizing China’s export restrictions and calling the country “very hostile” in its control over rare earths—resources critical to high-tech and defense sectors.

How Are Rare Earths and China’s New Rules Driving the Market Drop?

China’s Ministry of Commerce this week imposed a new licensing requirement for any export containing more than 0.1% rare earth content or using Chinese extraction or refining technology. These rules, taking effect December 1, could significantly disrupt global supply chains.

China currently controls about 70% of global rare earth supply. Trump’s response was swift, calling China’s actions a trade “hostility” and threatening severe tariffs.

“Expectations for a China trade deal just got swept off the table,” said Jeff Kilburg of KKM Financial. Markets interpreted the escalation as a serious setback to U.S.-China trade progress.

Which Stocks Took the Hardest Hit?

Tech and semiconductor stocks led the sell-off, with names heavily exposed to Chinese manufacturing and demand under pressure. AMD dropped over 5%, Tesla slid nearly 3%, and Nvidia gave up more than 1%. Chinese tech listings also fell sharply—Alibaba and Baidu lost 5% each, while JD.com and PDD fell around 4%.

Conversely, U.S.-based rare earth stocks surged on expectations of increased domestic investment in the sector. MP Materials jumped 15%, USA Rare Earth rose 19%, Energy Fuels climbed more than 10%, and NioCorp gained nearly 14%.

What Role Is Washington’s Budget Deadlock Playing?

The market weakness was compounded by ongoing political gridlock in Washington. A partial government shutdown entered its tenth day Friday, with the Senate failing again to pass funding bills. The prolonged stalemate is adding to investor uncertainty heading into the weekend.

What Should Traders Watch Next?

The S&P 500 gave up its weekly gains, now down 1% for the period. Traders should monitor developments on two fronts: any additional tariffs or countermeasures from Washington, and whether China provides further clarification or changes to its rare earth policy.

Also in focus is the APEC summit, where U.S.-China tensions could escalate further if the proposed Trump-Xi meeting is scrapped.

More Information in our Economic Calendar.