On Friday, President Donald Trump warned on social media he is weighing a 100% tariffs hike on Chinese imports and new export controls after Beijing tightened rules on rare earths, triggering a sharp market reaction. Background: investors had been pricing a fragile truce between Washington and Beijing; the move punctured that assumption and forced a rapid re-pricing of trade risk — see 100% tariff threat.
China supplies the bulk of processed rare-earth materials used in magnets, EV motors and some defense components — roughly 70% of the market — so U.S. import taxes and Chinese export curbs have outsized pass-through potential to prices and supply chains. See reporting on Beijing’s reliance on processed rare earths and the new licensing rules China accounts for nearly 70%.
Higher tariffs and restricted access to processed inputs are inflationary in the near term: companies facing higher input costs typically pass at least part of them to consumers, which could keep headline inflation elevated and complicate the Federal Reserve’s path for cutting rates. That raises the risk of slower real incomes for households and squeezed margins for manufacturers.
For businesses, the immediate priorities are inventory management and supplier diversification — expect guidance revisions, stepped-up sourcing discussions in North America and Australia, and accelerated capex for non-Chinese processing where economics and permitting allow. Consumers should watch prices on electronics, EVs and appliances first; firms reliant on magnets and specialized alloys will likely feel the pain fastest.
