US-China trade war scare: What happened Friday and where things stand now

It is a US bank holiday today for Columbus Day (with Canada and Japan also off) but markets that are open were still subject to quite the volatile weekly open.

The final quarter volatility is never something to beckon with, particularly after an already volatile beginning of 2025. At the close of last week, markets were rocked by a massive trade war scare initiated by some more aggressive Chinese stance.

Beijing put up the pressure regarding its rare earth exports, announcing new export controls on rare earth elements and tightening its grip on critical materials essential for semiconductors, defense, and electric vehicles.

For now, China has a considerable advantage in this market and is expanding its dominance through key ties with African nations (which have many rare earth resources), for example.

Following this aggressive tightening, Donald Trump took to Truth Social on Friday, posting a statement that immediately triggered a significant wave of selling across risk assets.

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In addition to the existing tariffs (that started to be put in place since 2015), Trump threatened to impose an additional 100% tariff on all Chinese goods, effective November 1.

The President stated that China had taken an “extraordinarily aggressive position on Trade in sending an extremely hostile letter to the World,” and accused them of holding the world “captive” with their control over “Magnets” and other Elements.

Market reactions were immediate: the S&P 500 plummeted 2.7%, the Nasdaq 100 closed down 3.5%, and the crypto market saw a record wipeout with Bitcoin tumbling over 8% and over $19 billion in leveraged positions liquidated.

The most significant moves happened in major altcoins like Cardano going from $0.82 in the morning to $0.28 lows (67%!!) on a wick.

A similar move happened in XRP going from $2.83 highs in the Friday morning to a $1.32 wick (-52%!)

These crazy moves happened around 16:30 Friday during the liquidation.

This marks another classic TACO trade—or Trump Always Chickens Out—came into play over the weekend, leading to a sharp reversal for stock future and cryptos.

Treasury Secretary Scott Bessent stated that the US had “aggressively pushed back” against China's export controls and confirmed the 100% tariff “does not have to happen,” indicating that President Trump was still on track to meet President Xi Jinping later in the month.

Trump himself tempered his tone on Truth Social on Sunday, saying, “Don’t worry about China, it will all be fine!” and that the US “wants to help China, not hurt it!!!”.

In response to this rapid U-turn, US stock futures surged higher at the Sunday Globex open, reversing the huge losses seen on Friday.

The US Dollar had initially corrected from the higher tariffs and overall deleveraging from the Friday scare, but recovered the entire move since.

Metals on the other hand just loved everything about the news yet again, with both Gold ($4,107 and Silver ($52) trading to new record highs.

Looking at the current picture, China urged the US to "promptly correct its erroneous practices" regarding tariffs and to act with "equality, respect and mutual benefit", though they maintained they were “not afraid of a tariff war”.

For now, the latest flashpoint has cooled, but the underlying trade tensions remain a significant risk for investors and traders as Markets approach the November 1 deadline for Chinese tariffs.

Safe Trades!

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