Donald Trump has threatened to impose additional US tariffs of 100% on China starting next month, accusing Beijing of “very hostile” moves to restrict exports of rare earths needed for American industry.
Wall Street fell sharply after the US president reignited public tensions with the Chinese government, and raised the prospect of another acrimonious trade war between the world’s two largest economies.
Over the summer, relations had improved between Washington and Beijing, and Trump agreed to drastically reduce steep tariffs he imposed on China earlier this year, following negotiations between the two countries.
Late on Friday, however, the president threatened to ratchet them back up by imposing a 100% tariff on goods from China “over and above” any existing tariffs. This would happen on 1 November “or sooner”, he said, hinting that the move could be accelerated should Chinese officials opt to retaliate.
The US will also introduce export controls on “any and all critical software”, he added.
“I never thought it would come to this but perhaps, as with all things, the time has come,” Trump wrote on his Truth Social website, claiming: “Ultimately, though potentially painful, it will be a very good thing, in the end, for the USA.
“One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America. There are many other countermeasures that are, likewise, under serious consideration.”
A planned meeting between Trump and Xi Jinping in South Korea later this month may no longer happen, Trump suggested, saying “there seems to be no reason” to meet with the Chinese president.
The US president’s threat sets the stage for another escalation in his volatile dispute with China. Just four months ago, he described US relations with the country as “excellent” after signing off on a tariff reduction deal.
Trump repeatedly hiked US tariffs on Chinese goods in the spring, amid spiraling tensions between the two countries, to a peak of 145%. Beijing hit back, raising its own tariffs on US exports to 125%.
But talks between officials, amid widespread concern over the impact of such exorbitant duties on the world economy, led to a fragile detente. US tariffs on Chinese products fell to 30%, while Chinese tariffs on US goods dropped to 10%.
The president’s latest online attack on Beijing alarmed investors on Friday. The benchmark S&P 500 fell 2.7%, suffering its worst day since April, and the Dow Jones industrial average retreated 1.9% in New York, while the technology-focused Nasdaq Composite sank 3.6%.
Shares in the tech giant Nvidia – the world’s biggest public company, with a market value of almost $2.5tn – were hit particularly hard, dropping almost 5%.
Other leading global markets also came under pressure. The FTSE 100 dropped 0.9% in London.
China is the world’s largest producer of rare earths, producing more than 90% of the world’s processed rare earths and rare-earth magnets. The 17 elements are critical for manufacturers of everything from electric cars to plane engines.
Earlier this week, Beijing significantly expanded its export controls over rare earths, adding five new materials to its control list. Its last expansion of controls, back in April, prompted supply shortages around the world before a series of diplomatic deals helped resolve some of the issues.
“I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right!” Trump claimed on Friday. “There is no way that China should be allowed to hold the World ‘captive,’ but that seems to have been their plan for quite some time, starting with the ‘Magnets’ and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least.
“But the US has Monopoly positions also, much stronger and more far reaching than China’s.”
Trump’s aggressive tariff strategy is a key pillar of his policy agenda. He has claimed higher taxes on imports from across the world will strengthen the US economy and raise trillions of dollars for the federal government.
But tariffs are also often passed on to consumers, leading to higher prices. After years of heightened inflation, Trump has repeatedly claimed there now is none in the US. In reality, price growth has been rising.
