Traders work on the floor during morning trading at the New York Stock Exchange.

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Stocks moved decidedly lower in a rapid move on Friday after President Donald Trump threatened higher tariffs on China, accusing the country of "becoming very hostile" with its restrictions on rare earth metals, a key resource for the tech and defense industries.

The Dow Jones Industrial Average was down 560 points, or 1.2%. The S&P 500 lost 1.7%, while the Nasdaq Composite fell 2.3%. Prior to Trump's comments, stocks were sizably higher, with the Nasdaq hitting a new all-time intraday high.

"I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so," said Trump, in a post on Truth Social. "One of the policies that we are calculating at this moment is a massive increase of tariffs on Chinese products coming into the United States of America."

Trump accused China of holding the globe "captive" using its rare earths metals resources. Earlier this week, China tightened their control on the market requiring foreign entities to get a license from Beijing to export anything that contains rare earths worth 0.1% or more of the value of the goods.

"Expectations for a China trade deal just got swept off the table," said Jeff Kilburg, founder of KKM Financial. "Profit takers are out in full force."

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Dow, intraday

Shares of tech stocks with the most to lose from souring trade relations with China led the rapid sell-off Friday. Nvidia lost more than 2%, while AMD dropped more than 5% and Tesla shed more than 3%. Meanwhile, U.S. crude oil fell as investors grew increasingly concerned that higher tariffs might ultimately weigh on demand.

"It's not surprising to see technology related stocks down the most today as they have significant exposure to China in both manufacturing and as a large customer," Art Hogan, chief market strategist at B. Riley Wealth, told CNBC. "Clearly, our relationship with the second largest economy in the world just got more difficult," he said.

The setback with China came as the U.S. government shutdown dragged into its 10th day on Friday, adding to the bearish sentiment to close out the week. The Senate failed for a seventh time Thursday to pass dueling stop-gap funding proposals that would have put an end to the stoppage. At this point, there have been no signs that Republicans and Democrats have made meaningful progress on negotiations.

With the ongoing shutdown, layoffs of federal workers "have begun," Trump administration budget chief Russell Vought said in a social media post Friday.

Friday's declines wiped out the S&P 500's gain for the week. The benchmark was now on track to lose more than 1% for the period. The Nasdaq and the Dow were also pacing for a weekly loss of more than 1% and around 2%, respectively.