Trump said he would impose an additional 100% tariff on imports from China starting Nov. 1, alongside export controls on critical US-made software.
He made the announcement after China expanded restrictions on rare earth exports, materials vital to semiconductor and AI production.
Trump, who is scheduled to meet Chinese President Xi Jinping in South Korea in about three weeks, questioned whether the meeting should go ahead.
“This was a real surprise, not only to me, but to all the Leaders of the Free World,” he said.
“There seems to be no reason to do so.”
In a social media post, Trump accused Beijing of taking an “extraordinarily aggressive position on trade,” calling China’s move “unprecedented” and a “moral disgrace.”
He said the new tariffs would be “over and above any tariff that they are currently paying.”
During the regular session, the Dow Jones Industrial Average fell 1.9%, the S&P 500 dropped 2.7%, and the Nasdaq Composite lost 3.6%, marking their steepest one-day declines since April 10.
After hours, shares of major tech firms, including Nvidia, Tesla, Amazon.com, and Advanced Micro Devices, fell more than 2%.
The selloff fueled concern that elevated stock valuations—driven by enthusiasm for artificial intelligence—could trigger a larger correction.
The S&P 500 and Nasdaq, both up double digits for the year, hit record highs only a day earlier.
“With equities at high valuations, this selloff is a sign of jitters,” said Gene Goldman, chief investment officer at Cetera Investment Management.
“Everything is priced for perfection, so the uncertainty increases market jitters.”
JPMorgan Chase CEO Jamie Dimon had warned earlier this week of a possible market correction within two years.
Still, some analysts said the trade tensions were unlikely to derail broader market momentum.
“This could warrant a pullback but I don’t necessarily see it derailing the AI theme that’s been driving the market,” said James St. Aubin, chief investment officer at Ocean Park Asset Management.
Trump told reporters later that China’s actions “came out of the blue.”
He said, “This is not something that I instigated. This was just a response to something that they did.”
The current US-China trade truce remains in place but is set to expire in less than a month.