The Dow Jones industrial average plunged 700 points as worries over trade tensions between China and the United States rattled financial markets.

The Trump administration announced trade sanctions against China Thursday, and Beijing has said it will defend itself.

Read more: Trump accuses China of stealing trade secrets, imposes $69 billion in tariffs.

Industrial and technology companies, which depend heavily on foreign trade, took some of the worst losses.

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Boeing, Caterpillar and Microsoft all fell sharply.

Bond prices surged as investors sought cover, sending yields lower. That helped push bank stocks sharply lower too.

High-dividend stocks like utilities, another safe-play investment, rose.

The S&P 500 index dropped 68 points, or 2.5 percent, to 2,643.

The Dow plunged 713 points, or 2.9 percent, to 23,964. The Nasdaq composite sank 158 points, or 2.2 percent, to 7,181.

Trump took the first steps toward imposing tariffs on US$50 billion (NZ$69 billion) in Chinese goods and limiting China's ability to invest in the US technology industry Thursday, saying the moves were a response to Beijing's history of forcing US companies to surrender their trade secrets to do business in China.

The president directed US Trade Representative Robert Lighthizer to announce a proposed list of products to be hit with tariff increases within 15 days. After a public comment period, the final list, designed to target Chinese products that benefited from improper access to US technology, will be made public.

"The end objective of this is to get China to modify its unfair trading practices," said Everett Eissenstat, deputy assistant to the president for international economic affairs.

The White House expects the new taxes, which could reach up to 1,300 specific imports, will have a "minimal impact" upon consumers, but markets have reacted swiftly to the news.

- Associated Press