To The Moon

The Market Just Got Hit by 'Tariff Man.' Is the APEC Summit Our Only Way Out?

Yesterday's market rout made it brutally clear: forget fundamentals. As the Dow plunged 462 points and the S&P 500 shed 2.71%, there was simply nowhere to hide, with titans like $NVIDIA(NVDA)$   tumbling 4.5% and $Tesla Motors(TSLA)$   skidding 5.2%. It's the ultimate proof that this year, the market trades on words—a phenomenon traders have dubbed the "TACO Trade." The escalating friction between the world's two largest economies can override any company-specific news, and as the chart below shows, this isn't the first time.

The catalyst for this market-wide panic was not a complex economic report, but the single, aggressive social media post from Donald Trump shown below:

The conflict has now zeroed in on these elements because they represent the ultimate economic chokehold. These aren't just obscure minerals; they are the foundation of a nation's most strategic sectors—from green energy and electric vehicles to, most critically, advanced defense systems. Without a reliable supply, key manufacturing and security industries would grind to a halt, which is precisely why they have been weaponized in this trade dispute.

Setting the Stage: A Timeline of the Conflict

The trade conflict escalated sharply this week when China upgraded its rare earth outflow controls on October 9th. The U.S. responded the next day with President Trump's proposal for an additional 100% tariff on all Chinese goods.

Key milestones include:

October 8: The U.S. adds 15 Chinese tech firms to its "Controlled List".

October 9: China significantly expands its rare earth trade controls, adding "long-arm jurisdiction" rules that cover related technology and equipment.

October 10: President Trump retaliates, announcing a proposed 100% tariff on all Chinese goods, effective November 1.

October 11: The escalation triggers a global market rout. The Nasdaq plummets 820 points, while rare earth stocks like MP Materials surge 15%.

December 1(Tentative): China's new, stricter rare earth controls are scheduled to officially take effect.

The Porous Wall: US Workarounds

This week's sweeping escalation from China was not created in a vacuum. It was a direct response to the persistent and creative ways U.S. companies have circumvented prior restrictions. These historical workarounds are the very loopholes the new 'long-arm jurisdiction' rules are designed to close.

Indirect Sourcing via Third Countries.

Reuters documents that U.S. buyers have increasingly turned to transshipment channels through Thailand and Mexico to access rare earth materials produced in China. According to Reuters, U.S. imports of antimony oxides from these two countries exceeded 3,800 metric tons between late 2024 and early 2025—far above their domestic production capacity. The report explains that materials shipped from China are relabeled at these intermediary ports, after which they enter the U.S. market under new country-of-origin documentation. Trade analyst Cole Morace, also cited by Reuters, confirms that customs data identifies companies such as Texas-based Youngsun & Essen as major recipients of these indirect shipments.

Purchases from Southeast Asian Processors

Eco-Business and Mining Technology both report that U.S. firms purchase rare earths and related products that have undergone minimal processing or simple repackaging in Malaysia and Vietnam. According to their analysis, facilities such as Lynas in Malaysia may blend Chinese feedstock with non-Chinese sources and then export the result as Malaysian product. Mining Technology specifically highlights that Vietnam, with little indigenous output, operates as a processing and export hub for Chinese-origin rare earths, with such shipments ultimately reaching U.S. buyers as “Vietnamese” goods.

Acquiring Finished Magnets through Overseas Partnerships

Business Standard and Reuters have covered the growing trend of U.S. companies sourcing high-tech magnets from India, Japan, and South Korea. These reports explain that raw rare earths or intermediate compounds are sent from China and converted into finished magnets by local companies—like India's IREL, which works closely with Japanese and South Korean partners. The magnets are then sold to U.S. importers as products of Indian, Japanese, or Korean origin, thereby circumventing direct trade controls.

Closing the Loopholes: More Recent and Stricter Controls, and US' Retaliations

On October 9, 2025, China's Ministry of Commerce rolled out a major overhaul to its rare earth trade controls. Previously, China's restrictions mostly targeted exports of raw rare earth elements, using quotas and licensing that applied only at the border. Under the new rules, taking effect December 1, the scope is far wider: any company worldwide must now get a Chinese license to export goods containing more than 0.1% Chinese-origin heavy rare earths, or if those goods were made using Chinese rare earth technology—even if production happens outside China.

The updated regime doesn't just cover minerals; it also restricts the export of rare earth-related technology, equipment, and finished products—especially those for defense or advanced tech like semiconductors. Licenses for military end-use are now automatically rejected, and high-tech applications face extra scrutiny. Compared to the past, these new controls make it much harder for foreign buyers to avoid Chinese oversight, effectively closing loopholes like third-country trans-shipping or relabeling, and cementing China's grip on the entire rare earth supply chain.

President Trump reacted swiftly and forcefully to China’s new rare earth controls, labeling them “sinister and hostile.” On Truth Social, he warned, “There is no way China should be allowed to hold the world captive,” and announced, “the United States of America will impose a tariff of 100% on China, over and above any tariff that they are currently paying” effective November 1. He also stated, “I was set to meet them in two weeks at APEC in South Korea, but now it appears there is no reason to proceed with that”. However, he has also stated that he is yet to cancel the meeting.

The APEC Showdown: Strategic Timing of the New Controls

This high-stakes exchange has transformed the planned Asia-Pacific Economic Cooperation (APEC) summit into a crucial inflection point. China's October 9 announcement of its sweeping 'blanket' trade controls was a calculated gambit, timed just weeks before the summit to maximize their negotiating leverage. The US response on October 10 was equally strategic, with President Trump not only threatening a new 100% tariff on all Chinese goods but also setting its effective date for November 1—the final day of the APEC meeting. Both sides have now played their strongest hands, turning the summit into a potential make-or-break moment. The central question now is whether this immense pressure will force a negotiated de-escalation during the meeting, or if the conflict will spiral into a full-blown economic war as the new tariffs loom.

Market's Verdict: The Immediate Winners

The aggressive escalation between economies sent a shockwave through global markets, triggering a broad sell-off as investors are pricing in the rising probability of further escalation. However, amid the widespread risk aversion, a sharp divergence emerged. Capital flowed decisively into two distinct categories: traditional safe havens and companies strategically positioned to benefit from the companies on the supply chain of the very source of the conflict: Rare Earth

A Flight to Traditional Havens

Gold $XAU/USD (XAUUSD.CFD)$ : In a textbook response to international tension, gold rallied sharply, closing up 0.91%. Investors flocked to the precious metal as a reliable store of value amid the escalating uncertainty.

US Treasuries: US Treasuries surged 1.61%. This demonstrates a classic "flight to quality," as capital moved from volatile equities into the perceived safety of U.S. government debt.

The International Tension Premium: Domestic Rare Earths

$MP Materials Corp.(MP)$   : As the largest rare earth producer in the Western Hemisphere, MP Materials became a primary beneficiary of the news. Its stock soared 8.37% as the market priced in its critical role in securing a supply chain based in the west.

$USA Rare Earth Inc.(USAR)$  : The development-stage company also saw significant buying pressure, climbing 4.96%. Investors are clearly betting on the strategic necessity and fast-tracking of domestic rare earth projects to counter trade controls from the East.

It's been a wild 24 hours, and we can clearly see where the money is flowing. The real question is what will happen next week. Are you buying protection, or are you buying the opportunity? 

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