3M fell 6.6 percent and Caterpillar lost 7.8 percent.
At 11:10 a.m. EDT the Dow Jones Industrial Average was down 368.34 points, or 1.45 percent, at 24,949.07, the S&P 500 was down 45.23 points, or 1.64 percent, at 2,710.65 and the Nasdaq Composite was down 151.30 points, or 2.03 percent, at 7,317.33. Trump has threatened to tax another $267 billion in Chinese products - a move that would cover virtually everything China ships to America.
Shares of Caterpillar tumbled after the heavy equipment manufacturer warned Tuesday that Trump's taxes on imported steel were driving up production costs. While those companies are expected to deliver 21.9 percent earnings growth for the third quarter, investors are concerned about future growth amid rising inflation, interest rates and uncertainty over trade.
The two countries are locked in a dispute over USA allegations that China steals US technology and forces US companies to share trade secrets in exchange for access to the Chinese market.
Technology companies and banks also took heavy losses. All members of the Philadelphia semiconductor index were in the red, led by Nvidia's 5.0 percent slide.
The forecasts from the two Dow Industrials reignited worries over the impact of rising borrowing costs, wages and tariffs on corporate profits and caused S&P industrial stocks to slide 2.49 percent.
"They're coming in ahead of expectations, generally, but the degree to which they're beating expectations is less than what it has been in previous quarters", Delwiche said.
Tesla was among the few winners Tuesday. Brent crude, used to price global oils, dropped 4.1 percent to $76.52 per barrel in London.
Some Wall Street analysts think crude oil prices are unlikely to surge despite the pressure on the U.S.to punish Saudi Arabia, a major oil exporter, over Khashoggi's alleged murder. Halliburton dropped 3.3 percent to $35.21. Traders are weighing the risks of Italy's enormous debt problems, with the euro sinking ahead of a European Commission meeting to assess the country's budget plans. The plan expands its targeted deficit to 2.4 percent of GDP next year, three times more than promised by the previous government. It's anxious that the plans would prevent Italy from lowering its debt, which is second only to Greece among its members.
Global credit rating agency Moody's has downgraded Italy's credit ratings in response. Apple fell 1.6 percent. Britain's FTSE 100 lost 1.2 percent.
The US stock decline was preceded by a sharp sell-off in Asia, where China's Shanghai Composite declined 2.26 percent and Japan's Nikkei plunged 2.67 percent. Australia's S&P-ASX 200 dipped 1.1 percent.