S&P 500 Loses $1.2 Trillion in 40 Minutes

The specter of a renewed trade war between the world’s two largest economies rattled global markets on Friday, wiping out $1.2 trillion in market value from the S&P 500 index in just 40 minutes, following a surprise escalation from former U.S. President Donald Trump.

Trump announced the cancellation of his planned meeting with Chinese President Xi Jinping, warning that Washington would impose “massive new tariffs” on Chinese goods. The move reignited fears of a trade confrontation reminiscent of the 2018–2019 conflict that disrupted global supply chains.

The announcement triggered an immediate selloff across U.S. equities.

The Dow Jones Industrial Average plunged 879 points (–1.9%), while the S&P 500 dropped 2.71%, and the tech-heavy Nasdaq Composite tumbled 3.56%, marking one of Wall Street’s sharpest intraday reversals in years.

By the end of the trading session, the total market capitalization loss for the S&P 500 had deepened to $1.5 trillion.

In his statement, Trump accused China of “lying and manipulating global trade”, claiming Beijing had begun imposing restrictions on the export of rare earth minerals, a sector of strategic importance to the U.S. defense, semiconductor, and artificial intelligence industries.

Rare earth elements are crucial for manufacturing weapons systems, microchips, and advanced AI technologies. The U.S. relies on China for nearly 70% of its rare earth imports.

“When the first U.S.–China trade deal was signed in May 2025, rare earths were a core element of the negotiation,” Trump said. “Now Beijing is tightening control again, and markets are reacting accordingly.”

Investors interpreted the comments as a signal of renewed hostilities, sending shockwaves through equities, commodities, and currency markets. The sudden escalation revived memories of the earlier trade war, which had slowed global growth and cost companies billions.

Analysts warned that reimposing tariffs could further destabilize supply chains at a time when the global economy remains fragile.

Despite Friday’s selloff, Wall Street remains near record highs. The S&P 500 has surged 34% over the past six months, a rally seen only ten times since 1930, largely fueled by massive investment in artificial intelligence.

The so-called “Magnificent Seven” tech giants have spent more than $100 billion in quarterly capital expenditures, with AI-related projects now accounting for about 40% of total capital spending within the S&P 500.

Meanwhile, the U.S. dollar has fallen more than 10% year-to-date, putting it on track for its worst annual performance since 1973. The decline reflects a combination of trade tensions, uncertainty over Federal Reserve policy, and the ongoing partial government shutdown.

Economists warn that this mix, renewed trade friction, policy uncertainty, and fiscal strain, could amplify volatility across global markets in the months ahead.

Yet, despite the turbulence, investor sentiment remains cautiously resilient. “The U.S. market has faced trade shocks before,” said one Wall Street strategist. “As long as earnings stay strong and AI continues to drive productivity, investors won’t abandon equities, not yet.”