Trade tensions between the United States and China escalated after President Donald Trump threatened to cancel a meeting with President Xi Jinping.
This warning came in response to Beijing's stricter rules on rare earth exports.
Trump made the warning on social media, saying he now saw "no reason" to meet with President Xi, claiming that China was acting hostilely and trying to control the world by limiting access to these major resources.
Meanwhile, Trump also threatened a massive increase in tariffs on Chinese products.
Following his comments, financial markets reacted negatively with the S&P 500 falling about 1.4% in late morning trading in New York, reported BBC.
Over the summer, the US and China saw a major improvement in their relations.
As part of negotiations, Trump also agreed to significantly lower the huge tariffs he had previously imposed on Chinese goofs earlier in the year.
However, tensions have risen again following China's recent actions.
Beside tightening rare earth export rules, China has started a monopoly investigation into the US tech company Qualcomm, which would slow down its acquisition of another chipmaker.
In addition to this, China also plans to charge new port fees on ships linked to the US, including those owned or operated by American companies.
China dominates global production of rare earths, which are key components in cars, smartphones, aeroplane engines and many other items.
The country produces more than 90% of the world's processed rare earth elements and rare-earth magnets.
