The S&P 500 share index was also down 2%, while the Nasdaq fell 3%.
The Dow dove 711 points, or 2.7%, to 25,230 as of 1:24 p.m.
The tech-heavy NADAQ stock index was down 1.3 per cent in early morning trading.
Materials rose as the June gold contract was up US$14.40 at US$1,301.80 an ounce and the July copper contract was down 5.55 cents at US$2.72 a pound.
The result has been a volatile week-long roller coaster with no end in sight.
Apple, which is viewed as highly exposed due to its extensive Chinese supply chain and assembly lines in the country, suffered a fall of more than 5pc in early trading, wiping tens of billions of dollars from the company's value.
Industrials gained as WestJet Airlines shares closed up almost 60 per cent after Onex Corp. announced a friendly $3.5-billion takeover bid for the airline, plus assuming $1.5 billion of debt.
Beijing said on Monday it would "never surrender" to external pressure, and its state media kept up a steady drum beat of strongly-worded commentary, reiterating that the door to talks was always open, but vowing that China would defend its national interests and dignity. China has said that it will hit back with "necessary countermeasures".
"We're going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about $15 billion, and do something reciprocal to our farmers so our farmers can do well", Trump said while speaking to reporters at the White House. "If there was a situation where there wasn't some type of trade deal, you would see markets much worse, and it would be across the board".
The move comes in retaliation to the decision by President Donald Trump last week to more than double levies on $200bn worth of Chinese imports to 25%.
Tariffs on Chinese goods increased from 10% to 25% on Friday, making the underlying cost of those items higher for US customers.
"From June 1, tariffs on $60 billion worth of imported U.S. goods will be increased", the statement read.
In a commentary, state television said the effect on the Chinese economy from the USA tariffs was "totally controllable". On Monday, he Tweeted, that consumers could avoid the effects of tariffs by buying goods from a "non-tariffed" country. That's Zero Tariffs. Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia.
Trump, who has embraced protectionism as part of an "America First" agenda, added that he had not yet decided whether to go ahead with tariffs on roughly another $325bn in goods from China. There will be nobody left in China to do business with'.
Until last week, there were expectations Trump and Xi would sign a trade deal at the summit. Investors expect tariffs could lift corporate costs and lower profit margins, while continued uncertainty surrounding a trade deal will hinder the ability of companies to plan or make capital expenditures. Kudlow undercut that in an interview on "Fox News Sunday".
Chinese Vice Premier Liu He talks with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin as they depart a round of trade talks in Washington on Friday.