New York
—
US stocks dropped lower Friday after President Donald Trump threatened to hike tariffs on US imports from China, reigniting fears of a trade war that rocked global markets earlier this year.
The Dow was down 550 points, or 1.2%. The broader S&P 500 fell 1.5% and the tech-heavy Nasdaq Composite fell 2.1%.
Trump said in a social media post he is considering a “massive increase” in tariffs on imports from China, adding “There is no way that China should be allowed to hold the World ‘captive’” over rare earth exports.
His latest threat stems from accusations that China is imposing export controls on rare earths, slow-walking previous agreements to free them up for US businesses. Because of that, Trump said he no longer sees a need to meet with President Xi later this month at the Asia-Pacific Economic Cooperation summit in South Korea.
US stocks had been hovering near record highs. Wall Street in recent months has tried to look past concerns about tariffs, instead focusing on better-than-expected corporate earnings.
The president’s post on Truth Social jolted markets, sending Wall Street’s fear gauge, the CBOE Volatility Index, soaring by 26%.
AI and chip stocks that are sensitive to developments in US-China trade relations dropped lower. Nvidia (NVDA) and Advanced Micro Devices (AMD) fell 2% and 6%, respectively.
Wall Street in recent weeks has also been worried about valuations of AI and tech stocks, leaving them more vulnerable to a surprise.
“When you have a shock like today with President Trump, they are going to get hit the most because they’re the most at risk to the economic outlook worsening or corporate earnings retreating due to a potential slowdown,” said José Torres, senior economist at Interactive Brokers.
Gold and silver, which are considered safe havens amid turmoil, jumped 1.1% and 1.4%, respectively.
“Trump is sparking risk-off sentiments in markets after declaring the potential for massive tariff hikes on China,” Torres said. “Investors are clamoring for safe haven holdings.”
US oil prices slumped 4.5% and Brent crude dropped 4.1%. Oil prices had been trading lower earlier in part due to ceasefire developments between Israel and Hamas.
CNN’s Fear and Greed index dropped from “neutral” into “fear” for the first time since May.
CNN’s Elisabeth Buchwald contributed reporting.