WASHINGTON, Oct 10 (Reuters) — In a stunning twist that surprised allies and rattled global markets, U.S. President Donald Trump announced today he is considering a “massive increase” in tariffs on Chinese imports, and that there is “no reason” to go ahead with a planned meeting with Chinese President Xi Jinping in two weeks.
His statement came just as China had tightened restrictions on exports of rare earth materials and imposed additional port fees on U.S. vessels, effective Oct. 14. The reaction was immediate: U.S. stocks plunged, the dollar weakened, and investors scrambled for safe havens.
By midday, the S&P 500 was down about 1.2 percent and the Nasdaq dropped more than 2 percent. Treasury yields fell, while gold surged. Analysts said markets had readied themselves for trade diplomacy, not this sudden escalation. “This is a surprise,” said Gene Goldman, chief investment officer at Cetera Investment Management. “Markets were very optimistic about that China meeting.”
The move threatens to undo months of tentative progress in U.S.–China diplomacy. Earlier this year, both sides had stepped cautiously toward easing tensions. But with Beijing’s new export controls and port charges, Trump’s fresh salvo signals a shift to conflict.
From Beijing, Chinese officials pushed back hard. In state media, they accused the U.S. of undermining global trade rules and warned of retaliatory measures if Washington follows through. Analysts see a risk of a renewed cycle of tit-for-tat escalations. The International Monetary Fund warned that higher tariffs pose fresh upside pressures for inflation, especially in countries exposed to trade shocks.
For ordinary people, the consequences could ripple fast. U.S. importers may pass higher costs to consumers. Exporters in China could face barriers or retaliatory tariffs from U.S. buyers. Industries already hit by supply chain disruptions will be strained further. Markets from Tokyo to London to Mumbai turned volatile as investors reckoned with more uncertainty.
In Washington, administration officials remained defensive. One senior U.S. diplomat, speaking on condition of anonymity, said “we have to protect American interests,” especially in sensitive supply chains like rare earths. Meanwhile, Trump’s cancellation—or postponement—of his meeting with Xi could imperil a broader diplomatic reset many had hoped was underway.
Observers noted that markets had been walking a tightrope. The U.S. is currently in a government shutdown, key data releases have been delayed, and global economic growth is already under pressure. Many thought trade tensions had relented, but today’s turn refocused attention on how fragile the truce was.
For now, the world watches. One investor in New York, speaking after the opening bell, summed it up: “We had a lot of relief priced in. Now we’re back to fear.” As the shockwaves spread across continents, the stakes are painfully clear: a misstep here could drag the global economy back toward turbulence.
Source: Reuters
