Stocks fell sharply on Monday after China decided to raise tariffs on some U.S. goods as the ongoing trade war between the world's largest economies intensifies.

The Dow Jones Industrial Average dropped 617.38 points, or 2.4%, to 25,324.99 and posted its worst session since Jan. 3. The also had its worst day since early January, falling 2.4% to 2,811.87. The Nasdaq Composite dropped 3.4% — its biggest one-day loss of the year — to 7,647.02.

At its lows of the day, the Dow fell as much as 719.86 points while the S&P 500 and Nasdaq traded down 2.8% and 3.6%, respectively, at their session lows. The indexes came off their lows in afternoon trading after President Donald Trump said he had not decided whether to slap tariffs on an additional $325 billion in Chinese goods.

"I think this is a prelude of things to come," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management. "We should expect more volatility for the foreseeable future."

To stem the downturn, "you'd have to see China really come back to the table. The rhetoric we saw this morning tells you that's not where they're at," he said.

China will hike tariffs on $60 billion worth of U.S. imports, starting on June 1. The goods targeted include a broad range of agricultural products. This comes after Trump raised tariffs on Chinese imports last week. China said in a statement that the U.S. decision jeopardized the interests of both countries and does not meet the "general expectations of the international community," according to a Google translation.

Treasury Secretary Steven Mnuchin told CNBC the two countries are "still in negotiations."Trump also said the U.S. is in a "great position," in the negotiations, noting that "our economy has been very powerful; theirs has not been."

Trade bellwether Caterpillar fell 4.6% while Apple dropped 5.8%. Boeing shares declined 4.9% amid speculation the airplane maker could be singled out by China in the trade war. The utilities and real estate sectors, considered by investors to be defensive spaces in the market, were the only ones in the S&P 500 to close higher on Monday.

Asian markets fell broadly. The Nikkei 225 index declined 0.7% Monday while the Shanghai Composite pulled back 1.2%. European stocks also dropped. The Stoxx 600 index fell 1.2% while the German Dax dipped 1.5%.

"Volatility is going to persist. People don't know what to make of it," said JJ Kinahan, chief market strategist at TD Ameritrade. But "this is more of a re-evaluation of stocks than it is a pure panic. Bonds have rallied over the last couple of weeks, but if this was a panic you'd see people coming a lot more for bonds."

The benchmark 10-year Treasury yield fell to 2.39% on Monday while the 2-year rate dipped to 2.17%. The Cboe Volatility index, which is considered to be the best fear gauge in the stock market, rose 4.51 points to 20.55.

Trump tweeted on Monday that China will be "hurt very badly if you don't make a trade deal," noting that companies would be forced to leave the country without an agreement. Trump also said that China had a "great deal" almost completed but they "backed out."

Trump Tweet backed out