By Jorge Mercado Friday, October 10th, 2025

Tariff concerns were the main reason for a dismal day in the stock market on Oct. 10, with all the indices seeing major declines after President Donald Trump threatened a massive increase on Chinese products imported in the United States.

The reason for the latest blow-up is something that U.S. Bank Chief Investment Officer Eric Freedman called “one of the biggest variables” in the tariff war between the U.S. and China, which is “the dependence on rare earths.”

“Maybe it is not at the center of negotiations, but it is a key component,” Freedman told the Business Times the morning of Oct. 10 at the Santa Barbara Club.

On Oct. 9, China imposed new restrictions on rare-earth minerals. According to a U.S. Geological Survey from January, China controls about 70% of the global supply of rare earths minerals, which are criticial in the production of semiconductors used for everything from artificial intelligence to home appliances.

One day later, Trump threatened massive tariffs on Chinese products imported into the U.S. to “financially counter” China’s restrictions.

Freedman called it the latest in the “tit-for-tat stage between the U.S. and China.” He noted that Nov. 10 — the date on which the U.S. and China’s tariff reductions are set to expire — is fast approaching. The reductions were first agreed upon in April 2025, from 125% down to 10% on each other’s goods. It was extended into November back in August.

“As we evaluate the path forward, our biggest question is, will we see a tariff regime between the U.S. and China that makes the world more isolated, because without question, the world is becoming more isolated,” Freedman said. “It’s much more of a transactional country-by-country approach from the U.S. outward and I think that really lends itself to an environment where the tone will be set to the rest of the world, depending on what happens between the U.S. and China.”

One of the big viewpoints during early talks of tariff negotiations between the U.S. and China back in April was the possibility of significant onshoring back to the U.S.

“That was on the market’s mind and that’s why equities sold off as much as they did. That’s why the bond market sold off as much as it did because markets said, ‘Look, we don’t support that path with that plan,’” Freedman said.

Because of that, Freedman believes that any negotiations between the U.S. and China cannot once again include the possibility of onshoring being a solution.

“That would be very market negative relative to where we’ve ostensibly gone since April to today,” he said.