Fears of a deepening trade war spooked stock markets on Monday.
The Dow plunged nearly 400 points at the open, following a sell-off that spread through Asian and European markets.
The worries sparked by a sudden warning leveled by the U.S. President at Beijing.
Donald Trump on Twitter threatened to hike tariffs on Chinese goods by the end of the week.
The sudden tensions come just as U.S.-China trade talks are set to begin again.
Despite the threat, Beijing said it was still planning to send a trade delegation to Washington this week but in a press conference did not answer whether it will still send its top trade official, Liu He, to the meeting.
(SOUNDBITE) (Mandarin) CHINESE FOREIGN MINISTRY SPOKESMAN, GENG SHUANG, SAYING: "What is of vital importance is that we still hope the United States can work hard with China to meet each other halfway, and strive to reach a mutually beneficial, win-win agreement on the basis of mutual respect." Just on Friday, White House official Larry Kudlow said talks were looking positive.
(Soundbite) (ENGLISH) LARRY KUDLOW, WHITE HOUSE NATIONAL ECONOMIC COUNCIL DIRECTOR, SAYING: We've come a long way.
So next week is very important when Vice Premier Liu He comes to town.
The engagements and discussions will continue on all the key subjects, all the key subjects including enforcement of course.
So we'll see.
I think it'll be a clearer picture by the end of next week." If Trump's change of heart sticks, it would reverse his February decision to keep tariffs steady at 10 percent, when he cited progress on a deal.
The trade war is now entering its second year.
It resulted in billions of dollars in losses for both countries last year, hitting industries including autos, technology, and agriculture.