The S&P/ASX200 lost 74.8 points, or 0.94 per cent, to 7,859.7 while the broader All Ordinaries fell 80.4 points, or 0.99 per cent, to 8,052.7.
The top-200 tanked as much as 2.1 per cent in early trading, the equivalent of almost $50 billion, after a worse-than-expected US tariff announcement sparked a broad market sell-off, CommSec market analyst Laura Besarati said.
"I think it was a little bit of a kneejerk reaction from markets, a little bit of an overreaction potentially, because now that we have gone on with trade we've seen those losses narrow quite a bit," Ms Besarati told AAP.
"At the moment, the Aussie market is down by roughly one per cent and that means now we've wiped out about $32 billion which is much less than the number we saw this morning."
Investors had expected a 15 per cent cap on US President Donald Trump's reciprocal tariffs but were instead served a 10 per cent base level and even higher imposts of 34 per cent for China, 24 per cent for Japan and 20 per cent for the European Union.
Eight of 11 local sectors finished lower, with energy stocks, IT, real estate and materials stocks each shedding two per cent or more.
The defensive consumer staples sector managed a 1.1 per cent uplift, helped by more than 1.9 per cent gains in Woolworths and Coles shares.
Energy stocks were down 2.7 per cent after oil futures dropped almost four per cent after the tariff fuelled existing concerns around global growth and demand for crude.
Brent crude futures partially recovered after a sharp sell-off to trade at $US72.8 after briefly breaching the $US75 level ahead of the tariff bombshell.
Materials stocks also weighed heavily on the local bourse, falling two per cent as investors weighed the impact of the trade war on China, sending iron ore giants BHP, Rio Tinto and Fortescue all more than 2.7 per cent lower.
Gold miners were again leading the top 200, with Spartan and Ramelius Resources both up more than four per cent each, after the precious metal and safe haven hit a new record high of $US3,167.57/oz.
Plastics manufacturer Ansell, with its China-based production and massive US exports, was the worst performer, tanking more than 14 per cent to $29.34 a share.
Financials stocks finished the day 0.6 per cent lower, with the Commonwealth Bank managing a one per cent gain.
ANZ was the worst performer of the big four, down 1.4 per cent after the prudential regulator asked it to bulk up its risk capital overlay to the tune of an extra $250 million.
Health care stocks performed surprisingly well, eking out a small gain as CSL, Pro Medicus and Fisher and Paykel rose on news that pharmaceutical products were largely spared from this round of tariffs - although sectoral tariffs are expected soon.
Among all the grim news was a dovish shift in interest rate markets, now pricing-in an 85 per cent chance of a 25 basis point rate cut in May, IG Markets analyst Tony Sycamore said.
The Australian dollar was slightly lower against the greenback, buying 62.88 US cents, down from 62.94 US cents at 5pm on Wednesday.
ON THE ASX:
* The benchmark S&P/ASX200 index fell 74.8 points, or 0.94 per cent, to 7,859.7
* The broader All Ordinaries rose 80.4 points, or 0.99 per cent, to 8,052.7
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 62.88 US cents, from 62.94 US cents on Wednesday
* 92.47 Japanese yen, from 94.33 Japanese yen
* 57.46 euro cents, from 58.32 euro cents
* 57.47 British pence, from 48.73 British pence
* 109.24 NZ cents, from 110.01 NZ cents
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