U.S. stocks rebound after Trump says U.S.-China situation will be ‘fine’

U.S. stocks rallied on Monday as the Trump administration said it was still talking to Beijing despite a new rupture in trade tensions.

The Dow Jones Industrial Average and other major indexes clawed back much of their losses from a sell-off on Friday, when President Trump threatened to impose 100% tariffs on Chinese goods over China’s decision to severely restrict exports of rare earth elements used in major technologies, including defense equipment.

Investors relaxed after Mr. Trump said relations with China “will all be fine” and Treasury Secretary Scott Bessent said that while China miscalculated, there was room for negotiation.

“The U.S. has pushed back, substantially de-escalated the situation, and is engaging directly with China through diplomacy, open lines of communication, and high-level meetings to protect American interests,” Mr. Bessent said on X.

The Dow Jones Industrial Average rose 621 points, or 1.4%, on Monday, meaning it recouped about 70% of last week’s sell-off.

The path forward remains uncertain. Tech companies and military manufacturers rely on samarium and other rare earths, yet China decided last week to withhold many of those minerals, especially for military purposes in other countries.

Mr. Trump reacted angrily and threatened to impose the new levies on Nov. 1. If he follows through, it would bring the effective rate on some Chinese products to 130%.

China’s Foreign Ministry on Monday said threatening new tariffs was “not the right way to engage with China.”

Ministry spokesman Lin Jian said the countries must “solve each other’s concerns through dialogue” and “properly handle differences on the basis of equality, respect and mutual benefit.”

Mr. Trump seemed caught off guard by China’s decision to crack down on critical imports. He said retaliation would include exports of “critical software” to China.

Still, he worked to cool things down over the weekend.

“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I,” Mr. Trump posted on Truth Social. “The U.S.A. wants to help China, not hurt it.”

Vice President J.D. Vance said it would be a “delicate dance” with China.

“A lot of it is going to depend on how the Chinese respond,” said on Fox News’ “Sunday Morning Futures.” “If they respond in a highly aggressive manner, I guarantee you, the president of the United States has far more cards than the People’s Republic of China. If, however, they’re willing to be reasonable.”

During a trade spat earlier this year, U.S. officials insisted they had the upper hand because China relies on the American market to buy its products.

Mr. Bessent said the Chinese economy is already “doing poorly.”

Still, parts of the U.S. have suffered blowback from the tensions. China stopped buying soybeans from American growers, delivering a massive financial hit to the heartland.

Mr. Trump said he would bring up the issue with Mr. Xi at a summit in South Korea later this month. Now, it is unclear whether the leaders will meet.

The American Soybean Association said it had been banking on the meeting to restore its No. 1 foreign market. 

“Trade wars are harmful to everyone, and these latest developments are deeply disappointing at a moment when soybean farmers are facing an ever-growing financial crisis. ASA hopes that talks can be put back on track to restore markets and trade relationships,” said ASA President Caleb Ragland on Friday.

Mr. Bessent said both leaders have time to “talk things out” before Mr. Trump’s Nov. 1 deadline for higher tariffs.

“They have a very good relationship,” the secretary said.