Tuesday was absolute chaos. The Dow Jones closed up 203 points to hit 46,270, which sounds good until you see what happened with everything else. The S&P 500 ended down 0.2%. The Nasdaq got hammered even worse, dropping 0.8% as tech stocks took a proper beating.
Why the mess? Trade tensions between America and China are back and they’re uglier than ever. On Friday, October 10th, Trump announced he’s putting a 100% tariff on Chinese goods starting November 1st.
That’s doubling the price on everything from China. His reason? China announced export controls on rare earth minerals on October 9th, and Trump went ballistic.
China’s commerce ministry basically told America to get stuffed, saying the US was “threatening to intimidate” them. Beijing’s already promised countermeasures if Trump doesn’t back off. So we’re watching a full-blown trade war restart in real time, which has investors absolutely bricking it.
The numbers show how nervous everyone is. At one point on Tuesday morning, the Dow was up nearly 1%. Then everyone remembered what’s actually happening and things tanked.
The VIX spiked to its highest level in ages. Gold’s been climbing because people are panicking. Oil dropped. Even crypto took a hit. When all that happens at once, you know people are genuinely scared.
Here’s the really annoying bit. Things were actually getting better between the US and China.
Back in May, they cut tariffs from absolutely insane levels (145% and 125%) down to something more reasonable (30% and 10%). Then in August they agreed to a 90-day truce to actually talk things out. That truce got extended twice.
Everyone thought maybe, just maybe, this trade war thing was ending. Then China announced those rare earth controls last week and Trump absolutely lost it.
Why does anyone care about rare earths? Because they’re in literally everything. Your phone, your laptop, electric cars, military stuff. China controls most of the global supply. When they say they’re restricting exports, that’s a massive problem. One former White House advisor said China’s rare earth controls could “forbid any country on Earth from participating in the modern economy.” That’s not exaggerating. It’s genuinely that serious.
The market’s trying to work out what happens next. There’s supposed to be a meeting between Trump and Xi Jinping. Treasury Secretary Scott Bessent said on Monday the meeting’s still happening despite all the drama.
He mentioned there have been “substantial communications” between both sides. But Trump himself threatened to cancel it on Friday when he announced the tariffs. So honestly, who even knows if it’ll happen?
What’s interesting is how different parts of the market reacted. The Dow held up okay because it’s got more traditional companies.
The S&P 500 was basically flat. But the Nasdaq got destroyed because tech stocks are super sensitive to anything involving China. Most tech companies need Chinese manufacturing and rare earth minerals for their products.
The bigger worry is whether this turns into something way worse. One strategist from JonesTrading said, “The sell-off has the potential to evolve into a larger correction, especially if the US-China trade truce is over.” That’s what’s freaking people out. If this trade fight gets worse, it could tank the entire market.
Tuesday ended mixed. The Dow stayed positive, probably because some investors are hoping someone will calm down before November 1st. But with Trump threatening to double prices on Chinese goods and China promising to hit back, things could get absolutely horrible before they get better. The next few weeks are going to be rough.