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President Donald Trump has warned that the United States is considering a “significant increase” in tariffs on China and threatened to cancel a planned summit with Xi Jinping, reigniting trade tensions between the two countries.
The US president on Friday accused China of becoming “very hostile”, referring to China’s recent decision to impose export restrictions on critical minerals.
In a post on Truth Social, President Trump said the United States had been contacted by “other countries that are extremely angry about this massive trade antagonism that has come out of nowhere.”
The comments had an immediate impact on the market, with the S&P 500 index dropping as much as 1.7% and the Nasdaq Composite Index dropping as much as 2.5%. The yield on the two-year US Treasury note fell to a three-week low, and the dollar fell 0.6% against a basket of currencies.
The president hinted at the possibility of canceling a meeting between U.S. and Chinese leaders scheduled to take place during the APEC forum to be held in South Korea at the end of October. International companies saw the planned talks as a step toward stabilizing U.S.-China relations.
“This was a real surprise, not just to me, but to every leader of the free world,” President Trump wrote of China’s export restrictions. “I was scheduled to meet with President Xi at APEC in South Korea in two weeks, but there seems to be no reason to do so now.”
China on Wednesday announced sweeping measures to disrupt global supplies of rare earths and critical minerals. The move was widely seen as an effort to gain influence ahead of the summit, the first meeting of the Trump administration’s second term.
Under new Chinese rules, foreign companies will need permission from the Chinese government to export critical magnets and other products that contain even small amounts of Chinese rare earths.
“No one has ever seen anything like this, but it will essentially ‘clog’ the market and make life difficult for virtually every country in the world, especially China,” Trump said in the post.
President Trump’s threat to impose steep new tariffs on China raises the possibility that the two countries will return to the full-scale trade war that erupted earlier this year. The war began when President Trump imposed 145% tariffs on China, and President Xi retaliated by imposing 125% tariffs on goods from the United States.
The trade war has had a dramatic impact on trade flows, with US Treasury Secretary Scott Bessent at the time saying it amounted to a de facto embargo.
