Famed ‘Big Short’ investor gives terrifying verdict on Trump hammering China with 100
Famed investor Steve Eisman has warned that a trade war with China could cause a recession.
Eisman, who is famous for predicting the 2008 financial crisis, said in an interview with the Daily Mail that he takes disputes between the US and China over imports ‘very seriously.’
US stocks tumbled on Friday after President Donald Trump threatened a massive increase in tariffs on Chinese imports.
The threat is retaliation for China’s new restrictions on rare earth exports — materials vital for artificial intelligence, semiconductors, defense, and high-tech industries.
The S&P 500 closed down 2.7 percent in its worst day since Trump’s ‘Liberation Day’ tariff announcements in April, while the Dow Jones Industrial Average fell 1.9 percent and the Nasdaq composite lost 3.6 percent.
After markets closed on Friday, Trump escalated the conflict further, saying that the US would impose new tariffs of 100 percent on imports on top of existing levies from November 1.
Eisman said that when it comes to trade negotiations for the US, China is the ‘wild card.’
‘What today showed is that while what we have over China is that they export a hell of a lot more to us than we export to them, what they control are earth metals. That’s their card. And it finally reared its ugly head today,’ he said.
‘I don’t see a recession unless there is a trade war with China. If there is a trade war with China, all bets are off.’
Steve Eisman has warned that ‘all bets are off’ if the US enters into a trade war with China
The S&P 500 closed down 2.7 percent on Friday – its worst day since Trump’s ‘Liberation Day’ tariff announcements in April
China controls roughly 70 percent of the global supply of rare earth minerals and 90 percent of the processing of it, meaning it has huge leverage over the high-tech supply chain.
On Thursday, China announced new restrictions, starting December 1, on rare earth exports and related technologies, extending controls on the critical materials.
Eisman, who hosts the podcast The Real Eisman Playbook and was played by Steve Carrell in the 2015 film The Big Short, explained how the US is in a unique position when it comes to trade negotiations with most of the world’s largest powers.
‘The US is in a great position to negotiate with any country about trade, because of all the developed countries, it has the least exposure to exports,’ he told the Daily Mail.
‘The percentage of US GDP that comes from exports is 11 percent, which is the lowest number in the world, while most other countries are around 30 percent.’
The European Union ‘basically caved’ when it came to trade agreements with the US, he said, and countries such as Mexico are willing to negotiate.
‘China is sort of the wild card.’
Trump on Friday morning accused Chinese president Xi Jinping of attempting ‘to hold the world captive’ through the ‘monopoly position’ on the materials critical to the AI arms race.
Donald Trump shakes hands with China’s President Xi Jinping during a meeting on the sidelines of the G-20 summit in Osaka, Japan, in 2019
Workers use machinery to dig at a rare earth mine in Ganxian county in central China’s Jiangxi province. China dominates the global rare earth supply chain, and the US is heavily dependent on imports
In a post on his social media site Truth Social, he called it a ‘rather sinister and hostile move’ which he would have to counter.
‘One of the policies we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States. There are many other countermeasures likewise under serious consideration,’ the president wrote.
The rules require foreign companies to obtain special approval to export items containing even small traces of Chinese rare earths.
The same applies if using Chinese processing, smelting, recycling, or magnet-making technology. Exports for military purposes are expected to be denied.
Analysts say China’s new curbs are geopolitical as well as economic, forcing countries and companies to rethink sourcing and build independent supply chains.
The US has already started investing heavily in domestic rare earths production: MP Materials is opening a new magnet plant in Texas using US-sourced rare earths, Noveon secured supply from Lynas in Australia, and the Defense Department invested $400 million to secure supply and stabilize prices.
Meanwhile, shares of companies linked to rare earth minerals jumped Friday after Trump threatened the countermeasures against China.
On Friday evening, Trump said the US would impose new tariffs of 100 percent on imports from China, effective from the start of next month, ‘over and above any tariff that they are currently paying.’
Nearly all goods imported from China already face significant duties. The average US tariff on imports from China is near 58 percent, according to analysis from the Peterson Institute for International Economics. China’s average tariff on US goods, meanwhile, is around 37 percent.