Trump’s new China tariff sparks wide sell-off, wiping 2.7% off the S&P 500 on the bull market’s third birthday

Investors entered Friday morning with cautious optimism. The S&P 500 index drifted higher for most of the week, hitting new highs along the way. But by midday, sentiment had turned sharply after Trump issued a lengthy post on the Social Truth network, in which he stated, among other things, that the US was considering a “massive increase in tariffs on Chinese products” coming into the US. He then said the US would impose 100% tariffs on Chinese imports “on top of any tariff they already pay” starting November 1.

“Some very strange things are happening in China!” Trump wrote against the backdrop of a scheduled meeting later in October with President Xi Jinping in South Korea, ahead of the Asia-Pacific Economic Cooperation summit. China has “become very hostile,” Trump wrote, claiming that controls on rare earth exports would clog global markets for the valuable resource. And again and again in 2025, China has faced Trump’s tariff-laden trade regime, holding the trump card in rare earths, essential for high-tech manufacturing.

The S&P 500 fell 2.7% in afternoon trading, while the Dow Jones Industrial Average fell about 900 points, down 1.9%. The technology and green energy sectors, both of which rely heavily on rare earth metals such as neodymium and dysprosium, bore the brunt of the selling.

Rare earths are real risks

Rare earth elements — a group of 17 minerals important for the production of everything from smartphones and wind turbines to missile guidance systems — have long been a choke point in U.S.-China relations. China controls more than 60% of global production and nearly 90% of processing capacity.

Trump’s post accused Beijing of “a rather sinister and aggressive move, to say the least.” He said he had not spoken with his Chinese counterpart, but was surprised by the new restrictions, and that “there seemed to be no reason” to go ahead with meeting Xi in two weeks.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, wrote in a statement to luck This “form correct” October is really starting to live up to its potential “Its reputation as one of the most volatile months and the sell-off that many expected… has finally arrived.” He noted that this time of year is historically volatile and stocks were “priced to perfection” entering the month, so it’s no surprise they’re down from all-time highs.. Northlight believes more volatility is possible in the coming weeks, but absent any real hit to the economy, the market should see a rebound later this year, Zaccarelli wrote.

Likewise, Jamie Cox, managing partner of Harris Financial Group, agreed in a separate statement that “October finally showed up in the markets today. With major indicators looking to consolidate, tariff noise was all it took to get this month started.”

Markets have received a reminder that a selloff can be “violent” when a negative catalyst interrupts a market narrative that values ​​“too much optimism,” wrote Jeff Buchbinder, chief equity strategist at LPL Financial.

Chinese technology companies saw sharp declines, with Alibaba, Baidu, and JD.com among the hardest hit; Shares of Alibaba fell by as much as 10%, Baidu by more than 8%, and JD.com by more than 6%. US technology stocks with heavy exposure to China, such as Nvidia, AMD, and Tesla, also fell; NVIDIA shares lost 4.89%, AMD shares fell 7.7%, and Tesla shares fell more than 5%.

On the other hand, companies related to rare earth metals saw huge gains. Shares of MP Materials rose as much as 15% and USA Rare Earth as much as 19% before paring gains, while NioCorp Developments rose 8%.

​[This report was updated to update share movements and include additional market commentary in reaction to the sell-off.]

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