The S&P/ASX200 sank by 324.5 points on Monday, or 4.23 per cent, to 7,343.3, while the broader All Ordinaries lost 323.3 points, or 4.12 per cent, to 7,524.3.
It was the worst daily performance by the local bourse since May 2020, in the early days of the COVID-19 pandemic.
National Australia Bank economists have slashed US growth expectations for 2025 to 0.6 per cent from 1.3 per cent, but have stopped short of calling a future recession.
"While we are not yet forecasting the US economy to contract, risks of a US recession are clearly elevated," NAB chief economist Sally Auld said.
Meanwhile, JP Morgan economists' baseline scenario is for a recession in the world's largest economy.
All local sectors closed deep into the red, led by a seven per cent bloodbath in energy stocks, along with a more than 4.8 per cent losses in financials and materials.
The big four banks took a hammering with CBA down 6.2 per cent, followed by Westpac which lost 5.6 per cent as NAB and ANZ each fell more than 4.4 per cent.
China's 34 per cent retaliatory tariffs on US imports compounded growth fears for the second largest economy, sending iron ore prices below $US100 per tonne and battering BHP shares, down more than six per cent to $34.57.
Energy stocks were hit hardest as oil prices tumbled, after Brent crude futures fell below the $US60 mark for the first time in four years.
Santos accordingly tumbled 9.8 per cent, as Ampol fell seven per cent and Woodside lost 5.8 per cent.
Even defensive sectors utilities and consumer staples bled lower, losing 2.1 per cent and 1.9 per cent.
The downturn has led interest rate markets to narrow bets on interest rate cuts, despite little-to-no signals from central banks, Pepperstone head of research Chris Weston said.
"Recent commentary from the Reserve Bank or governor Michele Bullock hasn't really given us anything, so there's a massive disconnect between where the market is seeing things going and that will need to reconcile itself," Mr Weston told AAP.
But central banks weren't the key to solving the problem, he said.Â
"This is a fiscal issue. Unless we start to see something a bit more constructive from the world's biggest economies - we're talking China, Europe, the UK, Japan and India - I think the volatility will probably stay with us for a bit."
Further complicating matters for investors and traders was that incoming data would not reflect tariffs until later in April.
The Australian dollar was buying 60.14 US cents at 5pm, down 3.7 per cent since Friday afternoon's 62.49 US cents, after dipping below the 60 US cent level for the first time since April 2020.
ON THE ASX:
* The benchmark S&P/ASX200 index fell 324.5 points , or 4.23 per cent, to 7,343.3 on Monday
* The broader All Ordinaries lost 323.3 points, or 4.12 per cent, to 7,524.3
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 60.14 US cents, from 62.49 US cents on Friday
* 87.38 Japanese yen, from 91.14 Japanese yen
* 54.65 euro cents, from 56.37 euro cents
* 46.61 British pence, from 47.71 British pence
* 108.02 NZ cents, from 109.10 NZ cents
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