Wall Street Slides as Trump’s China Tariff Threat Sparks New Trade War Fears

US stocks tumbled on Friday after former President Donald Trump threatened a “massive increase” in tariffs on imports from China, reviving fears of another bruising trade war between the world’s two largest economies.

The Dow Jones Industrial Average dropped 386 points, or 0.84%, after falling as much as 500 points earlier in the session. The S&P 500 slipped 1.2%, while the tech-heavy Nasdaq Composite shed 1.6%.

Trump, in a post on Truth Social, accused Beijing of holding the world “captive” through its control of rare earth exports and suggested that Washington should respond with higher import duties. He added that he no longer sees a reason to meet with Chinese President Xi Jinping at the upcoming Asia-Pacific Economic Cooperation (APEC) summit in South Korea.

The comments rattled investors and reversed weeks of relative calm on Wall Street, where markets had been hovering near record highs thanks to strong corporate earnings and easing inflation concerns.

The CBOE Volatility Index, known as Wall Street’s “fear gauge,” spiked 35% following Trump’s remarks.

Gold and silver prices rose 1.5% and 1.8% respectively, as traders sought safety in traditional havens, while oil prices plunged — US crude fell 3.6% and Brent crude slid 3.25% — partly influenced by reports of a ceasefire deal between Israel and Hamas.

“President Trump is sparking risk-off sentiment after declaring the potential for massive tariff hikes on China,” said José Torres, senior economist at Interactive Brokers. “Investors are clamoring for safe-haven holdings.”

The renewed tariff threat comes amid growing tensions over China’s export restrictions on rare earth elements — vital materials used in technology and defense industries — which Washington claims are being used as an economic weapon.

Analysts warn that escalating rhetoric could unsettle global supply chains and add fresh volatility to markets already bracing for the 2026 US election cycle.