Wall Street ended sharply lower on Friday after US President Donald Trump threatened steep new tariffs on China, escalating tensions over rare earth metals. Trump accused Beijing of “becoming very hostile” and using its control of these critical resources to hold the world “captive.”
The Dow Jones Industrial Average sank 878 points, or 1.9 per cent, to finish at 45,479. The S&P 500 lost 2.7 per cent to 6,552, while the Nasdaq Composite dropped 3.6 per cent to 22,204. It was the S&P’s steepest daily decline since April. Earlier in the session, the Nasdaq had touched a record high before the sell-off gathered pace.
Rare earths at the centre of trade standoff
In a post on Truth Social, Trump said he had planned to meet China’s President Xi at APEC in South Korea in two weeks, but now saw “no reason” to proceed. He warned that a “massive increase” in tariffs was under consideration.
China last week tightened restrictions on rare earth exports, requiring foreign entities to obtain licences for goods containing more than 0.1 per cent of the minerals. Rare earths are critical in manufacturing smartphones, electric vehicles, and defence technology.
Tech stocks lead the losses
The threat of a broader trade war sent traders rushing to the options market for protection, with Wall Street’s volatility index spiking above 22. Technology stocks bore the brunt of the damage, given their reliance on Chinese manufacturing and markets. Nvidia shed around 5 per cent, AMD fell nearly 8 per cent, and Tesla lost 5 per cent. US crude oil prices also retreated on concerns tariffs could dampen demand.
Shutdown adds to pressure
Markets were also weighed down by Washington gridlock, as the US government shutdown entered its tenth day. With no progress between Republicans and Democrats, federal worker layoffs have begun, according to budget chief Russell Vought.
Local outlook
Australian investors are bracing for a rough start to the week. Futures for the S&P/ASX 200 point to a 0.9 per cent drop at Monday’s open. Analysts, however, suggest the dip could prove short-lived, with traders ready to buy on weakness.
Locally, quarterly results from major miners and financial firms will headline the week, alongside labour force data and several speeches from Reserve Bank officials. In the US, third-quarter earnings season picks up, with banks in focus.
