U.S. stocks fell sharply into the close Friday after Donald Trump threatened a “massive” increase in tariffs on China and accused Beijing of turning “very hostile” with restrictions on rare earth metals.
The Dow Jones Industrial Average lost 878.82 points, or 1.9%, to 45,479.60. The S&P 500 dropped 2.71% to 6,552.51 and the Nasdaq Composite slid 3.56% to 22,204.43, the S&P’s biggest one-day decline since April 10. Earlier gains evaporated after Trump’s remarks, with the Nasdaq giving up a fresh intraday record.
Trump posted on Truth Social that a meeting with President Xi at APEC in South Korea in two weeks now “seems to be no reason to do so,” adding the U.S. is “calculating” a massive tariff hike on Chinese imports. He said China is holding the world “captive” via rare earths.
Earlier this week, China required foreign entities to obtain a Beijing license to export goods containing rare earths worth 0.1% or more of value.
“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.”
The CBOE Volatility Index jumped above 22 as traders rushed for options protection. Tech shares with heavy China exposure led losses: Nvidia fell about 5%, AMD nearly 8%, and Tesla around 5%. U.S. crude oil also declined on demand concerns tied to higher tariffs.
“It’s not surprising to see technology down the most given exposure to China in manufacturing and as a customer,” said Art Hogan, chief market strategist at B. Riley Wealth, to CNBC. “Clearly, our relationship with the world’s second-largest economy just got more difficult.”
The sell-off came as the U.S. government shutdown reached Day 10. The Senate on Thursday failed for a seventh time to pass dueling stop-gap bills. Budget chief Russell Vought said layoffs of federal workers “have begun.”
Weekly gains were wiped out, with the S&P 500 down 2.4% for the week, the Nasdaq off 2.5% and the Dow 2.7%.
