Recently, China has moved to tighten its rules controlling exports of its rare earth minerals. As access to these elements are critical for the US and other western economies, President Trump responded to the proposed restrictions last Friday with a threat of a 100% tariff on Chinese goods. As expected, US stock indices tumbled on renewed fears of a trade war with the S&P 500 falling 2.7% last Friday. But on Sunday, Trump wrote: “Don’t worry about China, it will all be fine!” Stocks rebounded on Monday and although they are positive for this week, they still haven’t recovered to pre-tariff threat levels of last Thursday.
“Rare earths” include 17 metallic elements that are actually more abundant than gold. However, they are difficult and expensive to extract and process, with the whole process being quite environmentally damaging. They are used in a wide range of applications including consumer electronics, electric vehicles, aircraft engines, medical equipment, oil refining, and military applications. According to the International Energy Agency, China controls 92% of the global output of rare earths.
September 30th was the US government’s 2025 fiscal year-end and the Congressional Budget Office (CBO) estimates the US budget deficit fell last year for the first time since 2022.
Treasury officials estimated Thursday that the dip in the budget shortfall will bring the ratio of deficit to gross domestic product to 5.9%. The measure has not been below 6% since 2022 and generally runs around the 3% area except in times of economic stress.
Increased tariff collections were obviously a major contributor to the deficit reduction with $202 billion collected in 2025, an increase of 142% from 2024. Budget cuts were also a factor, with the Department of Education experiencing the largest cut of $233 billion, representing an 87% cut from its 2024 budget.
While a 5.9% deficit is a welcome reversal from a trend of increasing budget deficits, it’s still a long way from the 3% deficit target we should be focusing on. Interest payments on our $38 trillion debt reached $1.2 trillion in 2025, up from $1.1 trillion in 2024. This now makes interest payments on the debt the second largest budget item after Social Security.
There’s still a lot of work to be done.
Have a great weekend.
Jack C. Harmon II, CFP®, CIMA
Principal, Harmon Financial Advisors
Registered Principal, Raymond James Financial Services
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