The Tariff Spiral: A Memo to Myself on Why I Drank Coffee at 11 PM

I'm watching MP Materials up 15%, USA Rare Earth up 19%, Energy Fuels up more than 10%. These are the stocks that move when the world stops making sense. And the world, as of Friday, has stopped making sense.

Let me trace the breadcrumbs because I can't sleep, and I need to understand what just happened in the last 72 hours.

The Play-by-Play (or: How I Learned to Stop Worrying and Embrace the Tariff Spiral)

October 9. China announces export controls on rare earths. Twelve out of seventeen rare earth metals. Equipment too. Effective December 1. The message is clear: we're cutting you off from the stuff you need to build chips, defense systems, renewable energy infrastructure. Have fun with that.

Friday. Trump responds. Not with a strongly worded statement. Not with measured policy. He posts a 100% tariff on Chinese goods, effective November 1, "over and above any Tariff that they are currently paying."

Let me translate: We're now stacking tariffs. There are already tariffs. Add 100% more on top. That's not policy. That's a economic declaration of war with footnotes.

He also says export controls on "any and all critical software." Which is what—everything? The AI stack? Machine learning libraries? Database software? We're not being surgical here. We're carpet-bombing.

The Dow drops nearly 900 points on the initial wave. The S&P bleeds. Nvidia takes it in the gut because of course it does—the company that needs rare earths and worries about China restrictions more than almost anyone else, and that sells half its chips to customers in Asia. AMD gets dragged down with it.

But then—and this is the beautiful part, the part that makes you understand markets aren't rational, they're sentimental—rare earth stocks explode. Mining companies. Metal processors. Equipment manufacturers. They spike because a 100% China tariff and export controls on rare earths means one thing: the U.S. is about to massively invest in domestic rare earth production. It's a guaranteed government contract disguised as foreign policy.

This is how you make money from catastrophe. You look at the policy statement and think not "this is bad," but "who profits when this happens?"

The answer: miners. Refiners. People getting federal permits in rural America to dig up rare earths and process them domestically. Tax breaks incoming. Defense spending reallocation. Probably some new agency or task force with a budget line item in the millions.

The Crack in the Engine

Here's what keeps scratching at me: we're not in a trade negotiation anymore. Negotiations imply both sides want a deal. This is escalation. China cuts off rare earths. Trump doubles down with 100% tariffs. What's the endgame?

Let me think this through:

China's rare earth move is defensive. They're saying: you want to box us out of advanced chip manufacturing, we'll restrict the materials you need to do it. It's the economic equivalent of the standoff before a duel. Everyone with a brain cell knew this was coming. Rare earths are the only leverage Beijing has left that Washington can't sidestep.

Trump's response is to say: fine, we'll just embargo everything. 100% tariffs on top of existing tariffs is an embargo. It's math at that level. Nothing moves. No Chinese goods flow into the U.S. except maybe essentials that haven't been tariffed yet (and honestly, give him time).

But here's the thing: Americans like cheap stuff. Walmart's business model likes cheap stuff. Consumer inflation hasn't come roaring back yet because supply chains have held and China is still our primary supplier of manufactured goods. A true 100% tariff—or even a credible threat of one—breaks that. It breaks consumer spending. It breaks margins. It breaks everything you're assuming about Q4 earnings.

The stock market rallied on Friday and Monday because—I think—we're deep in the denial phase. The Dow gained 1.3%, the S&P 500 gained 1.6%, the Nasdaq climbed 2.2%. We're pretending this is manageable. We're pretending the rare earth play is profitable enough to offset the damage. We're pretending that Asian futures falling and volatility creeping up aren't warning signs.

They're warning signs.

The Question Nobody Wants to Ask

What if we're not at the beginning of a negotiation? What if we're at the beginning of a full decoupling?

The U.S. and China have been doing a slow-motion separation for years, but this is different. This is fast. This is angry. This is "we're no longer going to pretend we're trading partners" fast.

If that's true—if we really are fully decoupling supply chains, reshoring manufacturing, cutting off software exports—then the next 18 months look like this: inflation as domestic production kicks in (because domestic production is expensive); corporate margin pressure as companies scramble to find alternatives; geopolitical risk premium baked into everything; and a dollar that either strengthens like crazy or gets murdered depending on whether the Fed follows suit with rate hikes.

The rare earth stocks up 15-19%? That's a symptom, not a victory. That's the market pricing in emergency government spending on domestic rare earth mining. That's a recognition that we've decided to economically self-isolate in certain categories rather than negotiate.

But the market only goes up on rare earth miners. Semiconductor stocks get hit. Retailers get hit. Anything with exposure to Chinese supply chains or Chinese demand gets hit. The math doesn't work unless you believe this is temporary theater and we're negotiating.

We're not negotiating. Trump said so himself. When does he stop talking about tariffs long enough to negotiate? When does Beijing come back to the table after we've threatened their lifeline?

A Thought Experiment

Imagine you're running a manufacturing company. You've got a supply chain built on Chinese components, Chinese rare earths, Chinese labor arbitrage. You're making good margins because of cost efficiency.

Then the president says: 100% tariff on Chinese goods, effective November 1.

What do you do on November 1? Do you get your components from the new domestic rare earth mines that don't exist yet? Do you source from Vietnam or India or Mexico at 2x the cost? Do you raise prices and pray your customers absorb it? Do you cut production and hope demand stays low?

You have 18 days from now to figure this out. 18 days to renegotiate supply contracts, find new suppliers, reset your cost structure, and tell your CFO what Q4 looks like.

This is chaos. This is executives canceling meetings to conference call with supply chain managers. This is dividend cuts and profit warnings before they even get to earnings season. This is the real earnings guidance hitting the market in mid-November when companies do their business reviews and realize their cost structure just exploded.

The Dow up 1.3% is people buying the dip on the assumption this gets resolved. The rare earth miners up 15-19% are people betting this doesn't get resolved and we're investing $50 billion in domestic production over the next decade.

Only one of these bets can be right.

Why I'm Still Awake

There's a line in the market right now. On one side: people who think Trump is negotiating. On the other side: people who know he's not.

The rare earth companies know. They're buying in because they've got 18 months of government contracts coming. Diversified energy companies know—Energy Fuels is up more than 10% because it does uranium and rare earths, and both are about to get defense spending and tariff protection.

But the broader market isn't there yet. The S&P 500 is still on the "this is manageable" side of the line. Earnings season is coming. Guidance will matter more than ever because guidance will tell us whether the market's assumptions are holding or breaking.

Japan's markets are down. Asian equity futures are down. European markets will probably fade. The dollar is probably strengthening because capital is fleeing to safety.

And we're all sitting here, watching Treasury yields and crude oil fall, trying to figure out if this is the beginning of a recession or a temporary blip before we collectively decide that trade wars are expensive and agree to just... get along.

My bet? Temporary blip before we realize the bill just came due.

The rare earth miners know different. They're already pricing in the new regime.

One of us will be rich and one of us will be right. Maybe neither. Probably neither.

I should sleep.

I won't.