Stocks fell on Tuesday, the first trading day of a historically tough month, after the world's two largest economies began imposing new tariffs on each other's goods. Weak manufacturing data also dented investor sentiment.

The Dow Jones Industrial Average closed 285.26 points lower, or 1.1%, at 26,118.02. The S&P 500 lost 0.7% to end the day at 2,906.27 while the Nasdaq Composite pulled back 1.1% to 7,874.16.

Equities hit their session lows after the Institute for Supply Management said U.S. manufacturing activity contracted last month for the first time since early 2016. The Dow lost as much as 1.6%, or 425.06 points. The S&P 500 and Nasdaq briefly dropped 1.2% and 1.5%, respectively.

The U.S. imposed 15% tariffs on a variety of Chinese goods on Sunday, while China imposed new charges on U.S. products from Sept. 1. It marked the latest escalation in their long-running trade war.

"That adds to the concerns on whether there is a viable path for negotiation," said Quincy Krosby, chief market strategist at Prudential Financial. "The market is vulnerable to these moves on misery and optimism regarding the talks."

Retail stocks fell broadly. The SPDR S&P Retail ETF (XRT) closed 1.5% lower, led by declines in Signet Jewelers and Guess. Signet dropped 9.5% while Guess lost 8.1%.

Chipmakers such as Nvidia and Skyworks Solutions fell 2% and 1.5%, respectively. Boeing and Caterpillar both declined more than 1.6% while Apple lost 1.5%. Boeing was also under pressure after a report said the 737 Max jet could remain grounded through the holiday season.