Since March, the Trump administration has introduced several waves of tariffs worth tens of billions of dollars against Chinese goods in an effort to rebuild the U.S. industrial base.
So far the US has so far placed $250 billion in taxes on imported Chinese goods, about half of all imports from China, and the taxes on most of those goods are set to rise on January 1. Vehicle companies rose after Bloomberg News reported that regulators in China intend to propose cutting the tax on imported cars to 5% from 10%.
The Japanese yen fell 0.4 percent to 112.34 per dollar, the biggest dip in nearly two weeks.
US-China Business Council senior vice president Erin Ennis said it would not be a surprise to see Trump move towards announcing more tariffs, given his repeated threats to do so.
ASIA'S DAY: Japan's Nikkei 225 index jumped 1.5 percent to 21,457.29 after official data showed that the unemployment rate eased to 2.3 percent in September, from 2.4 percent a month earlier.
News of the possible tariffs sent Boeing stock tumbling 6.6 percent, contributing to the Dow's overall losses.
At 12 p.m. ET, the Toronto Stock Exchange's S&P/TSX composite index was up 49.17 points, or 0.34 per cent, at 14,771.08.
Photos show Venice underwater in worst flood in 10 years
Local media said a yacht owned by the family of former prime minister Silvio Berlusconi was one of those badly damaged. Three quarters of the city of Venice is under water as gale-force winds and torrential rain brings chaos to Italy.
The S&P 500 index fell 17.44 points, or 0.7 percent, to 2,641.25.
In an interview with the Wall Street Journal last week, China's ambassador to the US Cui Tiankai said Beijing wanted more discussions before it would make a specific offer. Trade-sensitive industrial shares rose almost 1.2 per cent in mid-morning trading.
The pan-European STOXX 600 index rose 0.01 percent.
Brazil's Bovespa rose in morning trading after far-right politician Jair Bolsonaro was elected president, but it later ended down 2.2%. Stocks climbed earlier this month after Bolsonaro led the previous round of voting, as investors preferred him to leftist parties.Bond prices dipped. Most of those imports are now being charged a 10 percent tariff, which is set to increase to 25 percent at the end of the year. Brent crude, used to price global oils, fell 0.4% to $77.34 a barrel in London.
Brent crude futures fell $1.34 to $76.00 a barrel, a 1.7-per-cent drop.
Gold fell 0.1 percent to $1,231.51 an ounce, the biggest fall in a week.
CURRENCIES: The dollar strengthened to 112.95 yen from 112.37 yen late Monday.