The Dow Jones industrial average fell 1.9 percent to 23,644.19. The S&P 500 fell by 2.3 percent, after recovering from a decline of around 3 percent. Boeing (BA) slid $6.14, or 1.9 percent, to $321.74, while industrial giant Caterpillar (CAT) fell 2.75 percent to $143.33.
U.S. Treasury prices are lower, with the benchmark 10-year yield up 3 bps at 2.76% and the two-year yield also 3 bps higher at 2.27%.
Microsoft dropped 3 percent and Alphabet, Google's parent company, shed 2.4 percent.
China's latest step is just one point of contention between China and Washington, Europe and Japan over a state-led economic model they complain hampers market access, protects Chinese companies and subsidizes exports in violation of Beijing's free-trade commitments.
Amazon AMZN.O dropped more than 4 percent after President Donald Trump launched his latest attack over the pricing of the online retailer's deliveries through the USA postal system and promised unspecified changes.
Brent crude, used to price global oils, rose 16 cents to $67.80 in London.
Amazon spiked 2 percent to $1,403 after Bloomberg News reported that the White House isn't talking about taking any steps against the company.
Facebook's shares were down 2.8% and fell into a bear market, meaning a drop of 20% or more from a recent high.
Volatility was the theme in the US equity markets during the holiday-shortened week.
Trump has approved possible higher US duties on $50 billion of Chinese goods in response to complaints that Beijing steals or pressures foreign companies to hand over technology.
Tesla dropped 5.3 percent after saying the vehicle in a fatal crash last week in California was operating on Autopilot mode.
Humana (HUM) shares rose following continued reports Walmart (WMT) could buy the company or form a partnership with the health insurer.The Wall Street Journal reported on the possible deal last week.
Energy companies skidded as benchmark US crude lost $1.93, or 3 percent, to $63.01 a barrel in NY. Natural gas slid 5 cents to $2.68 per 1,000 cubic feet.
Copper rose 2 cent to $3.05 a pound. The Hang Seng in Hong Kong was closed as well.
CURRENCIES: The dollar declined to 105.99 yen from 106.50 yen.