The benchmark S&P/ASX200 was down 64 points, or 0.8 per cent, to 7898.3 in early afternoon trading, after a 1.79 per cent nosedive to 7818.3 earlier in the session.
The broader All Ordinaries index was down about 1.0 per cent, or 79.8 points, to 8111.9 points.
The main index lost as much as $45 billion in market value, from Monday's close of $2.6 trillion, in the first half of the trading day.
By 2.15pm, that figure had narrowed to about $20 billion.
After weaker-than-expected jobs and inflation data, US President Donald Trump on Sunday could not say if his protectionist tariff policies would not lead the country into a recession, sending shockwaves through global markets.
"The market's reacting to a number of factors, but things like concerns of Trump's tariffs, that this could trigger an economic slowdown," CommSec market analyst Steven Daghlian told AAP.
"The unpredictability of the trade war was something that really weighed on markets last week."
The ASX200 has been heading south since hitting an all-time-high of 8615 on February 14.
"There's been 17 trading days since and our market has fallen for 13 of those days, so there's been quite a rapid decline," Mr Daghlian said.
"Yes, we're down heavily, but this is after record highs just weeks ago."
The trade war sparked by Trump's tariffs is also intensifying and China's retaliatory duties of 10 per cent and 20 per cent, mostly on US agricultural products, went into effect on Monday
At the same time, the US Congress is scrambling to agree to a spending bill to avoid a government shutdown.
On Wall Street, the S&P500 lost 155.21 points, or 2.69 per cent, to end at 5,614.99 points, while the tech-heavy Nasdaq Composite lost 726.01 points, or 3.99 per cent, to 17,470.21.
The Dow Jones Industrial Average fell 890.63 points, or 2.08 per cent, to 41,911.09.
The tech sell-off impacted the so-called "Magnificent Seven" stocks of Amazon, Apple, Meta, Google owner Alphabet, Microsoft, Nvidia and Tesla, all down more than 5 per cent combined.
Tech stocks account for roughly a third of the US share market, and the Magnificent Seven alone had a combined valuation of $US18 trillion ($A29 trillion) in February, greater than the GDP of any nation except the US and China.
"When you have seven stocks that are so large and have such a significant weight on an impact on the broader market, you know that's obviously a risk," Mr Daghlian said.
The downturn rippled in Asian markets with Japan's Nikkei and Taiwan stocks giving up around 3 per cent, while Hong Kong's Hang Seng Index fell 1.5 per cent, and China's CSI300 down roughly 1 per cent.
Three of 11 Australian sectors on the local bourse had crept back into the green after a sea of red in the morning, but IT stocks have been consistently Tuesday's worst performer, down by 4.4 per cent.
The resource sector and financials helped turn the local bourse around from the abyss, with BHP and Rio Tinto gaining more than 1 per cent and three of the big four banks in the green by mid-afternoon.
The Australian dollar was buying 62.73 US cents, down from 63.16 on Monday afternoon.
14°C