Stocks continued their sell-off overnight as fears of further escalation in the U.S.-China trade war were realized after markets closed on Monday.

The big picture: Investors are beginning to fear that not only will the trade war dent business confidence and economic growth, but with further escalation and no end in sight, it could do massive damage to the entire global economy.

What they're saying: "These types of beggar-thy-neighbor policies were a hallmark of the Great Depression and caused a much larger economic downturn in its aftermath," said Joe Brusuelas, chief economist at consulting firm RSM.

Jim Paulsen, chief investment strategist at The Leuthold Group, wrote in a note to clients: "If the stimulus introduced about the globe in the last six to nine months does not trigger at least some bounce in the economic and earnings recovery, it won’t be recession fears that will spike, it will be depression fears."

Driving the news: The U.S. Treasury Department officially declared China a currency manipulator Monday night. It's a meaningless designation that the Trump administration has passed on before and is now making without any real evidence. In response, the Chinese Ministry of Commerce confirmed Chinese companies have stopped purchasing U.S. agricultural products.

By the numbers: Stocks have continued to fall around the world.

Asian stocks fell further overnight, with China's Shanghai Composite Index down 1.6%, Japan's Nikkei 0.6% lower, Australian stocks down 2.4% and South Korea's KOSPI off by 1.5%.

That followed losses of 3% on the S&P 500 with the Nasdaq dropping 3.5% and the Dow closing 767 points, or 2.9%, lower on Monday, the worst day for the U.S. stock market of 2019.

Of note: Other markets, including bonds, currencies and commodities, have had more subdued reactions, as investors in those assets had priced in more downside risk already.

The U.S. Treasury yield curve, which first inverted in March, moved further negative, with 3-month T-bills holding yields 32 basis points higher than 10-year notes.

Be smart: “The fundamentals are impacted by the trade war and by tariffs, but that’s not the only reason for the sell-off," Peter Cecchini, global chief market strategist at Cantor Fitzgerald, told Bloomberg.

"I think it’s a deeper wound in the global economy that the market is suffering right now."

Editor's note: This piece was clarified to describe RSM as a consulting firm (rather than asset manager).