U.S.-China Trade Standoff: Rare Earth Curbs Spark $2T Market Fallout

• China defends rare earth export curbs after U.S. chip restrictions.
• Trump threatens 100% tariffs, intensifying global trade conflict.

On October 12, 2025, Reuters reported that trade tensions between the United States and China reignited after Beijing defended its newly announced rare earth export curbs. China described the move as “legitimate” and “defensive,” responding to expanded U.S. restrictions on advanced semiconductors and software. The U.S. argues that these measures are critical to prevent Beijing’s access to sensitive technologies with potential military applications.

President Donald Trump fired back, threatening 100% tariffs on all Chinese imports. Bloomberg noted that Trump also suggested canceling a highly anticipated meeting with Chinese President Xi Jinping at the upcoming Asia-Pacific summit in South Korea. If canceled, this would mark six years since the two leaders last held direct negotiations.

China’s Ministry of Commerce accused Washington of violating the trade truce established in Madrid earlier this year. In its official statement, Beijing criticized the tariffs, stating, “Willful threats of high tariffs are not the right way to get along with China.” While emphasizing its desire to stabilize the situation, China announced retaliatory fees on U.S. ships docking at its ports, mirroring similar charges imposed by Washington on Chinese vessels.

Rare earth minerals have emerged as the flashpoint in the dispute due to their strategic importance and China’s dominance, controlling roughly 70% of the global supply. These materials are critical for producing electric vehicles, artificial intelligence systems, and defense technologies. Analysts at Hutong Research warn that disruptions to the rare earth supply chain could cripple U.S. defense production capabilities and pose a major national security risk.

President Trump’s assertion that China’s rare earth policies could “hold the world captive” triggered widespread market panic and a $2 trillion stock market slump. Severe losses hit the manufacturing and technology sectors as investors assessed the long-term implications of the trade standoff.

Both sides are leveraging strategic resources and tariffs as negotiation tools. China’s export curbs and the U.S.’s proposed tariffs are set to take effect in early November, coinciding with the expiration of a temporary trade agreement. This overlapping timeline has heightened stakes and uncertainty as businesses brace for the impact.

The Asia-Pacific summit remains one of the few opportunities for de-escalation, though its outcome remains uncertain. The geopolitical significance and mounting market repercussions of this conflict underline the urgency of achieving a resolution before trade restrictions fully take effect.