The Dow declined as much as 450 points in intraday trading on Tuesday before closing 280.23 points, or 1.01 percent lower for the day. The S&P 500 and the Nasdaq declined 0.66 percent and 0.55 percent, respectively.
Most of the 30 Dow components traded in red territory, with Intel and Dow declining 2.76 percent and 2.52 percent, respectively, leading the laggards.
Nine of the 11 primary S&P 500 sectors traded on a downbeat note, with the energy sector losing 1.55 percent, the biggest loser.
Trade bellwethers Caterpillar and Boeing declined 2.03 percent and 0.87 percent, respectively.
On Monday, the Dow decreased 0.96 percent, the S&P 500 fell 0.86 percent, and the Nasdaq lost 1.12 percent.
U.S. President Donald Trump announced on Monday that he will "restore" tariffs on steel and aluminum imported from Brazil and Argentina, drawing wide concern domestically and abroad.
Calling the move "unexpected," Argentine Minister of Production and Labor Dante Sica said "we still don't know what this implies. We want to know the details and the scope of the announcement."
The Brazil Steel Institute, which represents the interests of steel exporters, said in a statement that the new tariffs would hurt not only Brazilian companies, but also U.S. steel companies, as they would need the semi-finished products imported from Brazil.
Also on Monday, U.S. Trade Representative (USTR) Robert Lighthizer said he proposed additional tariffs of up to 100 percent on some 2.4 billion U.S. dollars worth of French products.
The USTR said he has completed the first segment of the investigation under section 301 of the Trade Act of 1974 and concluded that France's digital services tax discriminates against U.S. companies, such as Google, Apple, Facebook, and Amazon.
Market analysts have warned that the relative resilience of U.S. equities is unlikely to last while the country's aggressive protectionist stance is not likely to change any time soon.
Jonas Goltermann, senior economist at Capital Economics, said in a note Tuesday that "while the proposed new tariffs would have marginal economic impact, and the overall effect on financial markets so far has been limited compared to past episodes of increased U.S. trade aggression, they suggest that President Trump may seek to escalate U.S. protectionism further and widen his set of targets."
He pointed out that opening new trade war fronts could prove more detrimental to U.S. equities than the conflict with China has been.
U.S. tech firms have a lot to lose if the European Union (EU) were to take a tougher stance on taxing their revenues there, said Goltermann. He added that U.S. investment banks also have a significant market share in Europe and present an easy target for EU regulators.
On the data front, U.S. manufacturing activity continued to lag in November amid weak inventories and new orders data, according to the latest Institute for Supply Management (ISM) manufacturing report that was released on Monday.
According to the report, last month's purchasing managers' index registered 48.1 percent, a decrease of 0.2 percentage point from October reading, and lower than Wall Street expectations.
"Global trade remains the most significant cross-industry issue. Among the six big industry sectors, Food, Beverage & Tobacco Products remains the strongest, while Fabricated Metal Products is the weakest. Overall, sentiment this month is neutral regarding near-term growth," said Timothy Fiore, chair of the ISM's Manufacturing Business Survey Committee.
The sector ended a 35-month expansion period where the PMI averaged 56.5 percent in August, the first contraction in a few years, according to ISM.
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