New York
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\n US stocks closed sharply lower Friday after President Donald Trump threatened to hike tariffs<\/a> on imports from China, reigniting fears of a trade war that rocked global markets earlier this year.\n <\/p>\n \n The Dow fell 879 points, or 1.9%. The broader S&P 500 dropped 2.71% and the tech-heavy Nasdaq Composite slid 3.56%.\n <\/p>\n \n The S&P 500 and Nasdaq each posted their worst day since April as a slide in tech stocks led the market lower. The Dow posted its worst day since May. The S&P 500\u2019s drop of 2.71% saw the index shed roughly $1.56 trillion in market value in one day, according to FactSet data.\n <\/p>\n \n Trump said in a social media post he is considering a \u201cmassive increase\u201d in tariffs on imports from China, adding \u201cThere is no way that China should be allowed to hold the World \u2018captive\u2019\u201d over rare earth exports.\n <\/p>\n \n 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<\/a> with President Xi Jinping later this month at the Asia-Pacific Economic Cooperation summit in South Korea.\n <\/p>\n \n US stocks had been hovering near record highs<\/a>. Wall Street in recent months has tried to look past concerns about tariffs, instead focusing on better-than-expected corporate earnings.\n <\/p>\n \n The president\u2019s post on Truth Social jolted markets, sending Wall Street\u2019s fear gauge, the CBOE Volatility Index, soaring by 32% to its highest level since June.\n <\/p>\n \n \u201cThat was clearly not something traders wanted to hear!\u201d Steve Sosnick, chief strategist at Interactive Brokers, said in a note. \u201cWe\u2019d become quite accustomed to relatively quiescent markets with an upward bias, so it was quite shocking to see stocks in a quick freefall.\u201d\n <\/p>\n \n AI and chip stocks that are sensitive to developments in US-China trade relations dropped lower. Nvidia (NVDA<\/a>) and Advanced Micro Devices (AMD<\/a>) fell 4.95% and 7.78%, respectively.\n <\/p>\n \n \u201cThe ramping up of tensions with China is the big story,\u201d said Ross Mayfield, an investment strategist at Baird. \u201cIt definitely caught markets off guard.\u201d\n <\/p>\n \n Wall Street in recent weeks has also been worried about valuations<\/a> of AI and tech stocks, leaving them more vulnerable to a surprise.\n <\/p>\n \n \u201cWhen you have a shock like today with President Trump, they are going to get hit the most because they\u2019re the most at risk to the economic outlook worsening or corporate earnings retreating due to a potential slowdown,\u201d said Jos\u00e9 Torres, senior economist at Interactive Brokers.\n <\/p>\n \n Meanwhile, US-based rare earth mining and processing companies jumped higher. USA Rare Earth (USAR<\/a>) and MP Materials (MP<\/a>) gained 4.96% and 8.37%, respectively.\n <\/p>\n \n US Treasuries rallied as investors rushed into safer assets amid market volatility and concerns that a reignited trade war could hit economic growth.\n <\/p>\n \n 10-year and 30-year Treasury yields fell as investors scooped up bonds.\n <\/p>\n \n Gold and silver, which are considered safe havens amid turmoil, rose 1.5% and 1.2%, respectively.\n <\/p>\n \n \u201cTrump is sparking risk-off sentiments in markets after declaring the potential for massive tariff hikes on China,\u201d Torres said. \u201cInvestors are clamoring for safe haven holdings as a heavy increase in levies could weigh on the earnings picture and the economic outlook ahead.\u201d\n <\/p>\n \n US oil prices slumped 4.2% and Brent crude dropped 3.8% to their lowest levels since May.\n <\/p>\n \n Oil prices had been trading lower earlier in part due to ceasefire developments<\/a> between Israel and Hamas.\n <\/p>\n \n Robert Yawger, commodity specialist at Mizuho Securities, said the flare-up in tensions between Trump and Xi stoked concerns of a \u201cdemand destruction event,\u201d where a trade war weighs on economic growth and demand for oil.\n <\/p>\n \n \u201cIt\u2019s a mini mirror image of what happened in April,\u201d Yawger said, referring to the slump in oil prices<\/a> in the spring when investors were raising forecasts of a possible recession.\n <\/p>\n