The investor who became famous for shorting risky mortgage securities before the 2008 financial crash is now sounding the alarm again this time about a possible U.S.–China trade war.
President Donald Trump announced a “massive” 100% tariff increase on all Chinese imports, starting as early as November, after Beijing restricted rare earth exports to the United States. These critical minerals are essential for manufacturing semiconductors, AI technology, and defense equipment and China dominates nearly 70% of global production.
Speaking to the Daily Mail, Steve Eisman, known for predicting the 2008 housing collapse (portrayed in The Big Short), warned that Trump’s move could reignite economic turmoil.
“I don’t see a recession unless there is a trade war with China,” Eisman said. “If there is a trade war with China, all bets are off.”
Following the announcement, the S&P 500 dropped 2.7%, marking its worst performance since Trump’s “Liberation Day” tariff rollout in April. Eisman called China the “wild card” in trade negotiations, noting that its control over rare earth elements gives it tremendous leverage.
“While the U.S. exports less to China than it imports, China controls the earth metals and that’s their card,” Eisman added.
Economically, the U.S. is less dependent on exports than most developed nations only about 11% of its GDP comes from exports, compared to roughly 30% for many others. However, Eisman and other analysts warn that tariff escalation could backfire, fueling inflation and supply chain disruptions, especially in tech and manufacturing sectors.
Trump, meanwhile, lashed out on social media, calling China’s export restrictions “shocking” and accusing Beijing of holding the world “captive” by cutting off access to critical minerals used in electronics, jet engines, lasers, and AI systems.
Some analysts remain skeptical about Trump’s threats, pointing to the so-called “TACO trade” short for “Trump Always Chickens Out” a term used by investors who believe he often retreats from extreme policy measures.
Yet, the risks are real. The European Union Chamber of Commerce in China warned that Beijing’s latest export controls could “add further complexity to the global supply chain,” especially with a backlog of export licenses still pending from earlier restrictions.
As tensions between the world’s two largest economies escalate with disputes ranging from semiconductors and soybeans to port tariffs markets are bracing for what could be the most volatile phase of U.S.–China relations since 2018.
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