Worries over protectionist trade policies and controversy surrounding technology companies have prompted investors to pull money out of the US market.
That meant steep drops on Monday from former big winners including Netflix, Microsoft and Alphabet, Google's parent company.
Among other recent winners, Intel plummeted 6.1% following a report in Bloomberg News that Apple plans to start using its own chips in Mac computers.
And Amazon sank following more broadsides from President Donald Trump on Twitter.
The Dow Jones industrial average fell as much as 758 points, although major indexes regained some of their losses later in the afternoon.
The Dow lost 458.92 points, or 1.9%, to 23,644.19. The S&P 500 index gave up 58.99 points, or 2.2%, to 2,581.88.
The Nasdaq composite slumped 193.33 points, or 2.7%, to 6,870.12. The Russell 2000 index of smaller-company stocks fell 36.90 points, or 2.4%, to 1,492.53.
Kate Warne, an investment strategist for Edward Jones, said moves by China were small but significant.
"The fact that a country has actually raised tariffs in retaliation is an important step in the wrong direction," she said.
"The tariffs imposed by China today lead to greater worries that we will see escalating tariffs and the possibility of a much bigger impact than investors were anticipating last week.
"And that could be true for Mexico as well as for China."
Food maker Tyson dropped 6.2% after China raised import duties on a 3 billion dollar list of US goods in response to the tariffs on imported steel and aluminium that President Trump ordered last month.
Amazon fell another 5.2% percent. The online retailer has slumped with the market recently, although it is still up about 17% in 2018.
Mr Trump has repeatedly criticised Amazon over issues including taxes and the company's shipping deals with the US Postal Service.
Jack Ablin, chief investment officer of Cresset Wealth Advisors, said Amazon is just the latest company to falter after it drew scrutiny from the government, as Facebook and Alphabet have slumped recently on data privacy concerns.
"It seems like the long arm of the government is interfering with investors' expectations," he said.
"Investors are pricing in an escalating trade war and regulation of tech companies."
Microsoft dropped 3% and Alphabet, Google's parent company, shed 2.4%.
Monday marked the first time another country has placed tariffs on US goods in response to the Trump administration's recent trade sanctions.
The price of gold climbed 1.2% to 1,343.60 dollars an ounce and silver jumped 2% to 16.60 dollars an ounce as some investors took money out of stocks and looked for safer investments.
Health insurer Humana was one of the market's few winners following more reports Walmart could buy the company or create a new partnership with it.
Humana is a major provider of Medicare Advantage coverage for people aged 65 and older. It gained 4.4% while Walmart slid 3.8%.
Energy companies skidded as benchmark US crude lost 1.93 dollars, or 3%, to 63.01 dollars a barrel in New York.
Brent crude, used to price international oils, slid 1.70 dollars, or 2.5%, to 67.64 dollars a barrel in London.
Trading in France, Germany and Britain was closed for Easter.
Japan's benchmark Nikkei 225 lost 0.3% and South Korea's Kospi fell almost 0.1%. The Hang Seng in Hong Kong was closed as well.