US stocks ended lower on Tuesday, with the tech-heavy Nasdaq veering near correction territory, as trade tensions escalated following US President Donald Trump's new tariffs on Canada, Mexico and China.

The 25 per cent tariffs on imports from Mexico and Canada, along with doubled duties on Chinese goods, took effect on Tuesday.

The Nasdaq Composite ended lower after veering into correction territory during the session but pared losses in choppy trading. The index closed down 9.3 per cent from its record closing high on December 16.

Shares in financials and industrials were the biggest losers among the benchmark S&P 500's 11 main sectors.

Citigroup and JPMorgan Chase & Co fell 6.2 per cent and nearly 4 per cent, respectively, sending the bigger banks index down 4.7 per cent.

The CBOE market volatility index rose 3.20 per cent to its highest since December 20.

The Dow Jones Industrial Average fell 1.55 per cent, to 42,520, the S&P 500 lost 1.22 per cent, to 5,778 and the Nasdaq Composite lost 0.35 per cent, to 18,285.

Car makers Ford and General Motors, which have vast supply chains across North America, fell 2.9 per cent and 4.6 per cent, respectively. The domestically focused Russell 2000 index dropped 1 per cent. (Reuters)