Beijing has issued a stern warning to the United States, indicating that it will retaliate if former President Donald Trump does not retract his threat to impose 100% tariffs on Chinese imports. This warning comes as markets brace for renewed trade war turbulence.
On Friday, Trump announced his intention to impose additional tariffs on Chinese exports to the U.S., set to take effect on November 1, alongside new controls on critical software. In response, China’s commerce ministry blamed the U.S. for escalating trade tensions, emphasizing that “Wilful threats of high tariffs are not the right way to get along with China.” The spokesperson reiterated that while China does not desire a trade war, it is prepared to take measures to safeguard its rights and interests if the U.S. pursues what it sees as a detrimental course.
The announcement from Trump sparked significant volatility in financial markets, as he characterized China’s recent moves concerning rare-earth material exports as “very hostile.” The Dow Jones Industrial Average fell sharply, erasing nearly $2 trillion from the total market value of U.S. stocks.
China defended its recent export controls on rare earths, including elements like holmium and europium, stating these were not outright bans but legitimate regulatory measures. The commerce ministry clarified, “All applications of compliant export for civil use can get approval, so that relevant businesses have no need to worry.” These actions followed U.S. restrictions on several Chinese firms aimed at curbing their access to essential technology for chipmaking.
In the wake of Trump’s latest threat, international markets reacted negatively. The UK FTSE 100 index dropped almost 1% on Friday, reflecting widespread investor anxiety. Futures markets suggest potential further declines in both London and New York, although there are some signs of cautious optimism following China’s decision not to retaliate immediately.
Bitcoin, which had seen an 8% decline after Trump’s announcement, rebounded by 1.5% on Sunday, correlating with the relative calm from Beijing.
Market experts are viewing Trump’s tariff threats as particularly unwelcome for investors who had largely moved away from concerns regarding tariffs and trade. Michael Brown, a senior research strategist at Pepperstone, commented on the situation, stating the primary question on investors’ minds is whether this threat is credible. Brown suggested that it may be another case of Trump’s “escalate to de-escalate” strategy, where exaggerated tariffs are proposed to stimulate negotiations and faster resolutions.
