A stock market sell-off has gripped Australia and the Asia-Pacific, with investors on edge about a potential US-China trade war.

US President Donald Trump has signed a presidential memorandum that could impose tariffs on up to $US60 billion ($77 billion) of imports from China, sending shivers through Wall Street and prompting a vow from Beijing to "fight to the end".

Under the terms of the memorandum, Mr Trump will target the Chinese imports only after a consultation period, a measure that will give industry lobbyists and legislators a chance to water down a proposed target list which runs to 1,300 products.

In response, the Australian share market lost about $38 billion in today's trade.

The benchmark ASX 200 fell a hefty 2 per cent to 5,820 — its lowest level in five weeks, and third-lowest closing price for the year.

Only 11 stocks of the top 200 made it into the black, 4 held their ground and the other 185 fell.

The broader All Ordinaries index dropped 1.9 per cent 5,926 points.

Both indices are down 4 per cent since the start of the year.

The Australian dollar recovered slightly to 77.12 US cents.

On whether a trade war will eventuate, that depends on whether US President Donald Trump's plan to impose $77 billion in tariffs on imports from China was just an aggressive negotiation strategy.

"The issue here is whether the White House intends to spark a trade war or is seeking to negotiate new trade terms," said CMC Markets' chief market strategist Michael McCarthy.

"If we see a measured response from the Chinese, things may not get as ugly as they're currently looking."

Who are the worst performers?

Myer's steep drop of 10 per cent made it the weakest stock on the local market, plunging to a record-low 35.5 cents.

The materials sector was hit hardest (-2.9pc), followed by technology (-1.9pc), consumer cyclicals (-1.9pc) and financials (-1.9pc).

Mining giants Rio Tinto (-4.4pc), BHP (-3.1pc) and Fortescue Metals (-3.1pc) also experienced a heavy sell-off.

They were hurt particularly by a gloomy sentiment in China where steel and iron ore futures fell by more than 6 per cent.

Sharp losses were also experienced by big banks Westpac, ANZ and Commonwealth Bank, all down by between 2 and 2.4 per cent.

NAB shares also made a significant loss of 1.7 per cent.

How are the neighbours faring?

In Asia, the Shanghai Composite and Hong Kong's Hang Seng index lost 3.4 and 3 per cent respectively.

But the sharpest losses came from the Tokyo stock market.

The Nikkei fell by more than 4.5 per cent to its lowest level since mid-October.

Perhaps buoyed by its cricket team's feisty performance against England, New Zealand's NZX 50 was one of the best performing global indices down a little over 1 per cent for the day.

How would Australia fare in a trade war?

If the US and China engage in tit-for-tat tariff warfare, Australia will be badly affected, Mr McCarthy said.

"Industrials and commodities are likely to slump if this continues, so the materials and energy sectors will be hit hard.

He believes the banking sector may still perform well — with a caveat.

"We do have a lot of companies engaged in Asia and the US, so if we see those economies hit hard, [banking] stocks will fall as well."

In regards to silver linings, Mr McCarthy believes the agriculture sector will perform well.

"We know that Australia and New Zealand have a reputation for pure foods.

"An opportunity in global markets to insert those products into other markets could be an opportunity for Australian farmers."