President Donald Trump says the market slide due to his decision to impose tariffs was expected and the step was needed to heal the US economy, which he called a sick patient.
At the White House, Trump told reporters the US economy would "boom", as he stood by his decision to impose a minimum 10 per cent tariff on imports,
Trump also said he was open to tariff negotiations if other countries offered something "phenomenal."
The penalties announced by Trump on Wednesday triggered a plunge in world markets and drew condemnation from other leaders reckoning with the end of a decades-long era of trade liberalisation.
The S&P 500, which tracks 500 of the biggest American firms, plunged 4.8 per cent - its worst day since COVID-19 crashed the economy in 2020.
But there were conflicting messages from the White House about whether the tariffs were meant to be permanent or were a tactic to win concessions, with Trump saying they "give us great power to negotiate."
The US tariffs amount to the highest trade barriers in more than a century: a 10 per cent baseline tariff on all imports and higher targeted duties on some of the country's biggest trading partners.
Canadian Prime Minister Mark Carney said the United States had abandoned its historic role as a champion of international economic cooperation.
"The global economy is fundamentally different today than it was yesterday," he said as he announced a limited set of countermeasures.
Elsewhere, China vowed retaliation for Trump's 54 per cent tariffs on imports from the world's No.2 economy, as did the European Union, which faces a 20 per cent duty.
French President Emmanuel Macron called for European countries to suspend investment in the United States.
Other trading partners, including South Korea, Mexico and India, said they would hold off for now as they seek concessions.
Washington's allies and rivals alike warned of a devastating blow to global trade.
The tariffs "clearly represent a significant risk to the global outlook at a time of sluggish growth," IMF Managing Director Kristalina Georgieva said in a statement.
"It is important to avoid steps that could further harm the world economy. We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty."
