Washington, D.C. – In a dramatic pivot from his bellicose rhetoric just days earlier, U.S. President Donald Trump assured the public on Sunday that ongoing trade frictions with China would soon be resolved, downplaying Beijing's recent restrictions on rare earth exports as a mere "temporary misstep" by Chinese President Xi Jinping. The unexpected olive branch, posted on Trump's social media platform Truth Social, came as U.S. financial markets reeled from the fallout of his Friday tariff threats, erasing trillions in market value and reigniting fears of a full-blown trade war between the world's two largest economies.
"Don't worry about China, it will all be fine," Trump wrote in the post, which quickly garnered millions of views and reactions from global leaders and investors alike. He characterized Xi's decision to expand export controls on rare earth minerals – vital components for everything from electric vehicle batteries to fighter jet sensors – as an aberration rather than a deliberate escalation. "Highly respected President Xi just had a bad moment. He doesn't want depression for his country, and neither do I," Trump added, emphasizing a shared interest in economic stability. "The U.S.A. wants to help China, not hurt it."
The conciliatory tone marked a stark contrast to Trump's fiery announcements on Friday, when he vowed to slap a 100% tariff on all Chinese imports starting November 1, "over and above any tariff that they are currently paying." That threat, coupled with plans to restrict U.S. exports of "critical software" to Chinese firms, sent shockwaves through global markets. The Dow Jones Industrial Average plunged nearly 900 points on Friday, while the S&P 500 and Nasdaq Composite posted their steepest single-day declines since April, wiping out approximately $2 trillion in equity value. Tech giants like Nvidia and Advanced Micro Devices saw shares drop 4.9% and 7.8%, respectively, as investors fretted over disruptions to supply chains reliant on Chinese rare earths.
U.S. markets remained shuttered on Monday for the federal Columbus Day holiday, but futures trading painted a grim picture, with Dow futures signaling an opening drop of over 800 points. Asian markets echoed the unease, with Japan's Nikkei 225 falling 1.8% and Hong Kong's Hang Seng Index declining 2.3% in early trading, as fresh reports highlighted China's accelerating exports amid the standoff. The volatility underscored the fragility of the U.S.-China economic relationship, which had shown signs of stabilization earlier this year following a hard-fought truce.
The immediate trigger for the latest flare-up was China's announcement on Thursday of sweeping new restrictions on rare earth exports. Beijing, which controls over 90% of the global supply of these 17 metallic elements, added five new minerals – including holmium, erbium, thulium, europium, and ytterbium – to its export control list, alongside dozens of refining technologies and magnets. The rules, effective December 1, require foreign companies to obtain licenses for exporting any products containing more than 0.1% of Chinese-sourced rare earths or those produced using Chinese technology. Applications involving military or advanced semiconductor uses, such as AI chips, will face case-by-case scrutiny.
Chinese officials framed the measures as a defensive response to a "turbulent global security environment," citing U.S. actions like investigations into American chipmakers Nvidia and Qualcomm for alleged antitrust violations. "These controls do not constitute export bans. Applications that meet the requirements will be approved," a Commerce Ministry spokesperson emphasized on Sunday, defending the curbs as "legitimate" and aimed at safeguarding national security. Beijing also accused Washington of hypocrisy, pointing to new U.S. port fees on Chinese vessels set to begin Tuesday – a move China countered with reciprocal fees on American ships.
In its first official rebuttal to Trump's tariff salvo, China's Commerce Ministry struck a defiant yet measured tone. "We do not want it [a trade war], but we are not afraid of it," the spokesperson stated, echoing Beijing's longstanding position. The ministry lambasted Trump's threats as a "textbook double standard" that undermined bilateral talks, warning of "resolute measures" to protect China's interests if the U.S. proceeds. "Frequently resorting to the threat of high tariffs is not the correct way to get along with China," the statement read, urging dialogue through existing export control mechanisms.
This exchange arrives at a precarious moment in U.S.-China relations. Tensions had eased somewhat since spring, when Trump imposed tariffs as high as 145% on Chinese goods, prompting Beijing to retaliate with 125% levies on U.S. exports. A fragile truce in May reduced rates to 30% and 10%, respectively, paving the way for a 90-day pause in August to facilitate negotiations. Trump and Xi had even agreed to a sideline meeting at the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, South Korea, later this month – their first in-person encounter since 2019. However, Trump's Friday post cast doubt on the summit, stating there was "no reason" to meet amid Beijing's "hostile" actions.
Analysts see China's rare earth gambit as a calculated power play. These elements are indispensable for high-tech industries: neodymium powers EV motors, dysprosium enhances turbine efficiency, and europium enables LED screens. With China dominating processing (over 90% globally), the restrictions effectively grant Beijing "veto power" over swaths of manufacturing, from iPhones to F-35 jets. "China's bet is that we won't be able to deal with it that quickly," noted RAND analyst Bradley Martin, highlighting the U.S.'s lag in domestic production. Efforts to diversify – like the U.S. Department of Defense's $120 million investment in Australian mines – are years from fruition.
The broader context reveals a pattern of tit-for-tat escalations. Since their Madrid talks in September, both sides have layered on restrictions: the U.S. probed Nvidia for monopoly practices and expanded entity lists targeting Chinese firms, while Beijing hit Qualcomm's acquisition and imposed high port fees. U.S. imports from China totaled $194 billion in the first seven months of 2025, down from $239 billion the prior year, signaling the truce's uneven success.
Economists warn of cascading effects. A full 100% tariff hike could balloon duties to 130%, nearing the 145% peak and inflating costs for U.S. consumers by an estimated $500 billion annually, per the Peterson Institute for International Economics. China's export data, released Monday, showed a surprising 8.6% year-over-year surge in September, driven by front-loading shipments ahead of potential barriers – a tactic reminiscent of 2018's trade skirmishes. Yet, beneath the surface, "cracks in the foundation" are emerging: China's factory activity contracted for the third straight month, and U.S. consumer sentiment dipped to 55.0 in October, near historic lows amid tariff fears.
Globally, the spat looms over upcoming forums like the IMF and World Bank meetings, where Trump's policies could overshadow discussions on resilient supply chains. Allies like Taiwan reported minimal semiconductor disruptions from the curbs, but Europe's auto sector – heavily reliant on Chinese rare earths for EVs – braced for price hikes. In Washington, bipartisan lawmakers urged Trump to prioritize diversification, with Sen. Marco Rubio (R-FL) tweeting that "dependence on China for critical minerals is a national security vulnerability we can't ignore."
Trump's Sunday post hinted at backchannel diplomacy, with sources close to the White House suggesting aides are pushing for a pre-APEC call with Xi to salvage the summit. "This is classic Trump: threaten big, then negotiate from strength," said Everett Eissenstat, a former Trump trade advisor. Beijing's restraint – no immediate retaliatory tariffs – leaves room for de-escalation, though Xi's domestic pressures, including a slowing economy, may harden his stance.
As markets await Tuesday's open, the episode serves as a reminder of the high-wire act defining U.S.-China ties. What began as a "bad moment" could evolve into collaborative progress – or descend into the economic winter both leaders claim to dread. For now, Trump's reassurance offers a flicker of hope, but investors and policymakers remain on edge, watching for the next post, policy, or provocation.
