By CCN.com: As of 12:34 pm ET, the Dow Jones Industrial Average (DJIA) is down a staggering 305.03 points (1.2 percent) at 25,042.74. The triple-digit slide extends Tuesday’s losses and puts the Dow on track for the first monthly loss of the year.

The S&P 500 is faring little better, down 25.18 points (0.9 percent) at 2,777.31 while the tech-heavy Nasdaq Composite index flounders at 7,536.03, down 61.67 points (0.94 percent).

Overnight, the Asian markets were mixed. China’s Shanghai Composite (SSE) rose 1.6 percent, partially on the back of rare earths stocks. Japan’s Nikkei, however, collapsed to a triple-digit loss, down 1.2 percent.

China’s threat: “Don’t say I didn’t warn you”

China’s People’s Daily newspaper published an editorial using a threatening phrase that carries enormous historical weight in China. Simply translated it reads:

“Don’t say I didn’t warn you.”

In the same editorial, China warned it could restrict the export of “rare earths,” which contain minerals vital to the US tech and defense industries.

The phrase might sound relatively commonplace in English, but China’s choice of words is symbolic. The Chinese Global Times newspaper (associated with China’s communist party) explains:

“Those familiar with Chinese diplomatic language know the weight of this phrase.”

President Trump on Thursday predicted a swift end to China-US trade war. This kind of confidence believing that the US can quickly press China to submit is the biggest obstacle to reaching a deal. The trade war may last for a long time. I think people better not hold illusion. — Hu Xijin 胡锡进 (@HuXijin_GT) May 24, 2019

It has only been used a handful of times before by Chinese media. And always in the context of grand political threats or military importance. In 1962, it was uttered before China went to war with India. And again in 1979 before the violence in Vietnam. In other words, it’s a heavy threat.

The severity of the words are ringing in the ears of Dow traders.

Dow at risk as China threatens “rare earth” supply

In the same breath, China has threatened to unleash its most powerful move yet in the trade war: restricting rare earths.

Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future. — Hu Xijin 胡锡进 (@HuXijin_GT) May 28, 2019

Rare earths contain 17 elements essential for smartphones, fighter jets, batteries, and electric cars. China commands 70 percent of all rare earth production and 40 percent of total reserves. According to local reports, Xi Jinping is seriously considering an export restriction.

“Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future.” – Hu Xijin, editor in chief Global Times (Chinese state-owned media)

The move could choke the US tech industry, not to mention defense firms.

Dow poised for worst month of 2019

The news comes as the Dow Jones Industrial Average (DJIA) careens towards its first monthly loss of 2019. Down more than 3.6 percent this month, the Dow looks set to break a four-month winning streak.

Dow Nears Epic May Collapse to Snap 4-Month Winning Streak https://t.co/N32mkmxkPZ — CCN.com (@CCNMarkets) May 28, 2019

China’s rhetoric towards the US has grown angrier in recent weeks. Yesterday, a Chinese state media publication slammed the “arrogant” requests from Donald Trump.

The clash is likely to be seen by traders as a negative sign. After hopes of a quick China trade deal helped balloon the Dow near record highs, the reality is now setting in. It may be months (or years, according to some analysts) before we see the tension resolved.