Donald Trump warned that he was considering a “massive increase” in US tariffs on China and threatened to cancel his planned summit with Xi Jinping, reigniting trade tensions between the countries.
The US president on Friday accused China of becoming “very hostile” in a reference to its recent decision to impose export controls on critical minerals.
[ China clamps down on rare earth exportsOpens in new window ]
Trump said in a Truth Social post that the US had been contacted by “other Countries who are extremely angry at this great Trade hostility, which came out of nowhere”.
The comments immediately hit markets, with the S&P 500 dropping as much as 1.7 per cent and the Nasdaq Composite falling as much as 2.5 per cent. The yield on the two-year US Treasury tumbled to its lowest level in three weeks, while the dollar fell 0.6 per cent against a basket of currencies.
The president suggested that he would cancel a meeting the US and Chinese leaders had planned to hold during the Apec forum in South Korea at the end of October. International companies had seen the planned meeting as a step towards stabilising US-China relations.
“This was a real surprise, not only to me, but to all the Leaders of the Free World,” Trump posted about the Chinese export controls. “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.”
China on Wednesday unveiled a sweeping package of measures that will disrupt global supplies of rare earths and critical minerals. The move was widely viewed as an effort to create leverage before the leaders’ summit — their first meeting of Trump’s second term.
Under the new Chinese rules, foreign companies would have to obtain permission from Beijing to export critical magnets and other products that contain even small amounts of rare earths sourced from China.
“Nobody has ever seen anything like this but, essentially, it would ‘clog’ the Markets, and make life difficult for virtually every Country in the World, especially for China,” Trump said in his post.
Trump’s threat to impose steep new levies on China raises the prospect of the two countries returning to the full-blown trade war that erupted earlier this year when Trump hit Beijing with 145 per cent tariffs and Xi retaliated by slapping 125 per cent levies on goods coming from the US.
The trade war had a dramatic impact on trade flows, which US Treasury secretary Scott Bessent at the time said amounted to a de facto trade embargo. --Copyright The Financial Times Limited 2025
