US–China tariff risk shifted from a threatened 100% levy to mixed de-escalation signals after Beijing clarified its rare-earth “export controls” were not an export ban, even as $2.5 trillion in S&P 500 market cap evaporated during Friday’s selloff.
Beijing’s clarification stated the controls are “not a ban,” that export applications meeting regulations will be approved, and that licensing exemptions may be offered, describing the measures as a “legitimate practice” to safeguard national security amid military applications of rare earths.
China said the impact on global supply chains should be “minimal” and denounced the threatened 100% US tariffs as a double standard, while confirming retaliatory “special port fees” on US vessels and warning it is ready to fight a tariff war but does not seek one.
From Washington, messaging pointed to talks rather than escalation. President Donald Trump wrote: “Don’t worry about China, it will be all fine… [President] Xi just had a bad moment.”
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Separately, Vice President JD Vance said Trump is “willing to be [a] reasonable negotiator with China,” hopes the US “doesn’t need to use leverage,” and values the “friendship” with Xi.
President Donald Trump also posted “don’t worry about China,” even as ~$2.5 trillion in S&P 500 market cap evaporated during Friday’s selloff, according to The Kobeissi Letter.
The timeline is central: The Kobeissi Letter said China’s rare-earth move hit at ~8:30 a.m. ET on Oct. 9, roughly 26 hours before Trump’s tariff post, arguing the market shock was “a non-news event UNTIL” that later post and calling it the “largest crypto liquidation in history” alongside the –$2.5T S&P drawdown.
Despite these assurances, it seems channels were not fully open. Beijing reportedly declined a call requested by Trade Representative Jamieson Greer to discuss the tariff escalation.
Are rare earths really rare?
On supply-side risk, some market voices downplayed structural scarcity. Pundits argued China’s rare-earth dominance reflects environmental regulatory arbitrage, not technology, and said the West could rapidly rebuild capacity, citing retrofits of phosphate fertilizer plants and naming Mexico’s Lázaro Cárdenas Phosphate Complex as a candidate.
The post estimated 25,000 tonnes per year of output could be added in around 9 months for about $800 million capex, versus ~6,000 tonnes per year total US consumption, and suggested funding under the Defense Production Act.
However, the brouhaha in tariff and export controls left a wrinkle in semiconductors as analysts claimed that if the new rules require licenses for products containing China-sourced rare earths, Taiwan Semiconductor Manufacturing Company could not sell chips to the US, also affecting SK Hynix and Samsung Electronics.
After China’s clarification, they assessed the probability of Trump’s 100% tariffs going into effect as “extremely low,” and added, “We expect another ‘trade deal’ soon.” Near-term watch items are formal licensing guidance from China’s Commerce Ministry, any White House statements following Beijing’s declined call, details on “special port fees,” and whether market pricing retraces Friday’s trillions in drawdown as miscommunication risk recedes.
Information for this story was found via the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
