Hot air on rare earths
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Why did markets react so sharply to the threat of 100% US tariffs on China?
Markets had a bit of a hissy fit on Friday over the threats of 100% tariffs on China and the meeting between Xi and Trump supposedly cancelled. But how much of that is hot air? Well, if you look at the gambling odds from Polymarket, they say there's an 11% chance, that's all, of 100% tariff on China by November the 1st, and a 67% chance of the two presidents meeting before the end of the month. So are we just seeing another take-home moment? In which case will the markets Good morning. Well, a lot happened on Friday. We saw big falls in oil, down four and a quarter percent for WTI and three point eight percent for Brent. Treasuries were down between nine and eleven basis points across the curve. The US dollar was down naught point six percent on the DXY, the Aussie fell one and a quarter percent, whilst the yen climbed one and a quarter percent.
And US equities uh fell a lot as well, three point six percent down for the Nasdaq in one day, thirty uh three point two percent low. For the Russell 2000 and 2.7% off the S P. Bitcoin lost 5.6% on Friday, although it climbed it back a little bit over the weekend. Uh the VIX is up by a third to twenty one point seven, which is the highest since June. Why all these big moves? Well, it does get down to the Trump pronouncement on Chinese tariffs, a hundred percent from the start of November, in retaliation to uh Beijing's controls on w rare earth exports, which talked about on on Friday. So here's Nabs Ray Atrill. I mean, curious there was such a market response to this because I mean we we you know, we feel as though this could well be another take home moment, couldn't couldn't it?
Uh we can but hope so. Good good uh good morning, Phil. Certainly the early reaction of the uh of New Zealand and Sydney markets where we've seen the Aussie and the Kiwi dollars, for example, both coming back a little bit, you know, does suggest that the market is uh uh is wanting to travel, if you like, with a degree of hopefulness that uh, you know, come November the first um you know things will have been smoothed over and you know, certainly, you know, Donald Trump took A more conciliatory line in a post on his Truth Social platform on Friday saying, don't worry about China, it will all be fine. Highly respected President Xi just had a bad moment.
What do the Polymarket odds reveal about the likelihood of a tariff war and a Xi‑Trump meeting?
He doesn't want um depression for his country, neither do I. The US wants to help China not hurt it, and then nah. But China, for its part, has said on Sunday that since the two countries had held trade talks in Madrid last month, the US has continuously introduced a series of new restrictions against China, including putting Chinese companies on a trade blacklist. China's position on tariff wars has been consistent. We don't want to fight, but we're not afraid to fight. So um You know, so you know, i i it it it to me it feels like we're back in you know, we're back in the you know of April f post April the second Liberation Day environment, but obviously with markets having, you know, such strong memories of of of how quickly markets rebounded when we did have that uh that trade détente.
Um, you know, do you really want to be, you know, selling the family silver at this stage on the basis that we are going to be in for an effective trade Trade embargo, which you know, 100% tariffs certainly would represent that, and that is exactly how they were perceived when um you know we had those retaliatory tariffs coming from both sides back in uh back in April and May. So um I mean the background to this, as you say, it's I think on Thursday when those announcements were made about restrictions on um rare earth exports or the export of any pr product that had Even a small proportion of uh of rare earths contained within it, that it was um, you know, it was another sort of example of of of bluff and bluster, and markets didn't really take it seriously.
But um, you know, and then you look at uh uh Trump's response, and it certainly seems to me that there's a there's a bit of a battle in Washington here between the sort of the transaction list that is President Trump and the the China Hawks, effectively, who are really from a point
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Chapters
8 chapters
1
Why did markets react so sharply to the threat of 100% US tariffs on China?
0:01–2:09
2
What do the Polymarket odds reveal about the likelihood of a tariff war and a Xi‑Trump meeting?
2:09–5:04
3
How are rare‑earth export restrictions shaping US‑China trade tensions?
5:04–7:17
4
Will the upcoming summit between the US and China prevent a November 1st tariff deadline?
7:17–9:36
5
Can Australia’s rare‑earth resources protect the Aussie dollar from risk‑off pressure?
9:36–12:14
6
What impact could renewed tariff threats have on global growth forecasts?
12:14–14:01
7
Why is the Japanese yen emerging as a safe‑haven currency amid market volatility?
14:01–15:40
8
How are US consumer‑sentiment and inflation expectations influencing Fed policy expectations?
15:40–16:46