Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, called Trump's proposed tariffs a "bombshell" announcement that might help the steel and aluminum industry but ultimately hurt US stocks. The head of the European Commission said the region would respond in kind.
Industrial heavyweights like Boeing (BA.N) and Caterpillar (CAT.N) also fell as investors anxious about higher raw material costs and trade barriers elsewhere. The Nikkei in Japan added 1.1 percent, riding the momentum of Monday's United States equity gains.
ENERGY: Benchmark U.S. crude fell 50 cents to $61.14 per barrel.
The U.K.'s FTSE 100 Index decreased 0.8 percent.
By 13:09 p.m. ET, all the major sectors in the S&P 500 were down in response along with 29 of the 30 components of the Dow Industrial Average. The Dow fell almost 300 points that afternoon and plunged another 380.83 Wednesday, closing at 25,029.20.
Big exporters like Apple and drugmaker Pfizer, which would suffer if trade tensions picked up, also fell. Fatter wallets and a solid labor market signal inflation-adjusted consumer spending may pick up after falling in January, while progress on prices reaffirms that the Fed will opt for a widely expected rate rise this month - and remain on track for at least two additional increases this year. Palladium rose 0.8 per cent at US$1,043.70, but headed for a 2 per cent monthly drop. The Nasdaq composite fell 127 points, or 1.8 percent, to 7,142.
World stocks were set to snap a record 15-month long winning streak on Wednesday, tumbling another quarter percent after new Fed boss Jerome Powell's comments suggested the possibility of four US interest rate rises this year rather than three.
Equity gains from here may be hindered by bond markets, with USA 10-year yields close to the psychologically key 3 per cent level and up 17 basis points this month. The country's Q4 seasonally adjusted CAPEX dropped 0.2 percent quarter-on-quarter, which meant it missed market estimates of a 0.9 percent growth.
The yield on the 10-year US Treasury bond, a proxy for interest rates, jumped during the question and answer period, weighing on stocks.
Dental products supplier Patterson Companies plunged 23 percent in the first few minutes of trading Thursday after issuing weak quarterly results.
"You could see earlier in the day when investors thought the president was going to have a listening session regarding tariffs the market went positive", Quincy Krosby, chief market strategist at Prudential Financial Inc., said by phone.
Steel makers were sharply higher following reports that the government would announce tariffs on imported steel. US stock indexes fell sharply, with the S&P 500 index down more than 1.5 percent in what would be a third consecutive day of losses.
The Dow Jones industrial average sank 77 points, or 0.3 percent, to 24,954.
Overall, nominal incomes rose 0.4 percent in January from the prior month, as wages and salaries increased 0.5 percent.