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U.S. and Canadian stocks fell on Tuesday as a sharp escalation in the trade dispute between the United States and China rattled markets and put the Dow Jones Industrial Average back in negative territory for the year.

The Dow Jones Industrial Average fell 287.33 points, or 1.15 per cent, to 24,700.14, the S&P 500 lost 11.18 points, or 0.40 per cent, to 2,762.57 and the Nasdaq Composite dropped 21.44 points, or 0.28 per cent, to 7,725.59. In earlier trading, markets had fallen even more sharply.

In Toronto, the S&P/TSX Composite Index fell 67.10 points, or 0.41 per cent, to 16,316.53. Big losers included auto makers, railways and energy companies.

The biggest contributor to the TSX loss was Enbridge, while the biggest sector drag was energy.

Magna International fell nearly 3 per cent, Imperial Oil was off 2 per cent, Enbridge was down 1.4 per cent and Canadian National Railway and Canadian Pacific Railway both fell more than 1 per cent.

Consumer discretionary stocks slid 1 per cent and materials and energy stocks were off 0.6 per cent.

Leading the index were Canada Goose Holdings Inc., up 4.7 per cent, Canopy Growth Corp., up 4.6 per cent, and Aurora Cannabis Inc., higher by 4.5 per cent.

Lagging shares included SSR Mining Inc., down 7.0 per cent, Ivanhoe Mines Ltd., down 5.1 per cent, and Lundin Mining Corp., lower by 3.6 per cent.

The most heavily traded shares by volume were Aurora Cannabis, Baytex Energy Corp. and Bombardier Inc.

The TSX’s energy group fell 1.28 points, or 0.65 percent, while the financials sector slipped 0.3 percent.

West Texas Intermediate crude futures fell 1.18 percent, or $0.78, to $65.07 a barrel. Brent crude fell 0.35 percent, or $0.26, to $75.08

Still, the TSX is up 0.7 per cent for the year.

President Donald Trump threatened to impose a 10 per cent tariff on another US$200 billion of Chinese goods, and Beijing warned it would retaliate.

Trump said his move followed China’s decision to raise tariffs on US$50-billion in U.S. goods, which came after the White House announced similar tariffs on Chinese goods on Friday.

“Investors are waking up to the idea that all the rhetoric on trade could be more than just a negotiating tactic,” said Emily Roland, head of capital markets research at John Hancock Investments in Boston.

The three major indexes pared losses from earlier in the session. The Dow briefly dropped below its 100-day moving average but rebounded, though the index ended the session below its 50-day moving average.

“A 300-point move (on the Dow) is not what it used to be,” said Keith Lerner, chief market strategist at SunTrust Advisory Services in Atlanta. “Based on a technical perspective, the market is handling this in stride.”

The CBOE Volatility Index, commonly known as Wall Street’s fear gauge, hit nearly a three-week high of 14.68 points, before easing to 13.35.

The small-cap Russell 2000 index, whose components are more domestically focused than large-cap companies, was barely changed.

Sectors seen as bond proxies due to their high dividend yields, including utilities, telecoms, consumer staples and real estate, advanced.

Shares of Boeing, which has been a proxy for trade-war tensions with China, fell 3.8 per cent, weighing the most on the Dow. Construction equipment maker Caterpillar closely followed with a 3.6 per cent drop.

The declines weighed on the S&P industrials index, which fell 2.1 per cent, its biggest one-day percentage drop in nearly two months.

Shares of chipmakers, which depend on China for a large portion of their revenue, slipped. The Philadelphia Semiconductor index fell 1.2 per cent.

Tariff worries dragged FedEx Corp down 2 per cent. The logistics company’s shares were the biggest weight on the the Dow Transports, which fell 1.8 per cent. FedEx is scheduled to issue its quarterly report after the closing bell on Tuesday.

With files from Reuters

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