Wall Street slumped as US President Donald Trump escalated his trade conflict with China after Beijing tightened its rare earth restrictions.

Late on Friday after Wall Street's official trading session, Trump said he would impose an additional 100 percent tariff on imports from China, as well as export controls on critical US-made software, an announcement that sent Big Tech shares tumbling.

Nvidia, Tesla, Amazon and Advanced Micro Devices all fell more than 2 percent after the bell.

Those losses added to already steep declines during Friday's trading session after Trump warned in a post on Truth Social earlier in the day that he was weighing a "massive" tariff increase on Chinese imports, adding that there are "many other countermeasures" under consideration.

Trump's latest move against China shocked markets and threatened further damage to already strained relations between the world's two largest economies.

All three major US stock indexes sold off sharply during Friday's session before stocks extended losses after the bell.

The S&P 500 and the Nasdaq suffered their largest single-day percentage drops since April 10. On a weekly basis, the S&P 500 logged its biggest drop since May, while the Nasdaq's Friday-to-Friday decline was its steepest since April.

"The second largest economy and the first largest economy are arguing again, and we're seeing a sell first, ask questions later mentality to end the week," said Ryan Detrick, chief market strategist at Carson Group in Omaha. "President Trump's post did truly come out of nowhere, which opened the door for some extreme volatility."

"And it's important to remember we haven't had this level of volatility in a long time," Detrick added. "One could argue we were due for some spookiness this October."

Trump's erratic trade policies have rattled markets since his April 2 "Liberation Day" tariff announcement, with on-again, off-again trade negotiations, causing turbulence across asset classes.

The Dow Jones Industrial Average fell 878 points, or 1.9 percent, to 45,479, the S&P 500 lost 182 points, or 2.71 percent, to 6,552 and the Nasdaq Composite lost 820 points, or 3.56 percent, to 22,204.

The Philadelphia Stock Exchange Semiconductor Index dropped 6.3 percent, in the wake of Trump's announcement.

China produces over 90 percent of the world's processed rare earths and rare earth magnets, which are critical for products ranging from electric vehicles and aircraft engines to military radars. An escalating trade war between the two largest global economies could trigger major supply chain disruptions, particularly for the technology, electric vehicle and defence industries.

The CBOE Volatility Index, viewed as a reflection of market anxiety, reached its highest closing level since June 19.

US-listed shares of Chinese companies dropped sharply, with heavyweights Alibaba Group Holding, JD.com and PDD Holdings down between 5.3 percent and 8.5 percent.

Qualcomm fell 7.3 percent after China's market regulator said the country had launched an antitrust investigation into the semiconductor manufacturer over its acquisition of Israel's Autotalks.

The US government is currently in its 10th day of shutdown as a congressional impasse has so far yielded few signs of progress or serious negotiation. This has resulted in a data blackout, with official government economic indicators postponed for the time being.

Still, data from independent sources continues unabated. The University of Michigan released its preliminary take on October consumer sentiment, which is drifting along near historic lows as high prices and weakening job prospects remain at the forefront of consumer worries. (Reuters)