At 0213 GMT, the S&P/ASX 200 index was down 1.5%, or 94.4 points to 6,428.7, wiping out most of the 1.8% tacked on last week.

Banks led losses, and iron ore miners that account for Australia's biggest export also registered sharp falls.

On Friday, U.S. President Donald Trump announced a 5% additional duty on $550 billion in targeted goods from China, hours after China unveiled retaliatory tariffs on $75 billion worth of U.S. products.

"Prospects for a U.S.-China deal in the horizon have dwindled dramatically," said Mizuho in a note to clients.

China is the biggest buyer of Australia's exports, rendering domestic markets especially vulnerable to developments in the trade war saga, which have hurt demand and fuelled doubts about the outlook for world economic growth.

Financial stocks, the biggest part of the benchmark by market capitalization, lost as much as 2.1% to touch their weakest in a more than one week.

The "Big Four" banks declined between 2.1% and 2.7%. Australia and New Zealand Banking Group reached its weakest level in more than three months.

Iron ore miners BHP Group and Rio Tinto hit their lowest in over six months and declined as much as o 2.7% and 2.8%, respectively.

The overall mining index, however, eked out small gains as heavy buying of gold stocks outpaced losses for other miners.

Gold miner Resolute Mining Ltd was the top gainer on the benchmark, and was on track for its best session in more than three years after gaining as much as 16.9%.

Australia's largest building materials maker Boral led declines on the main index, after flagging weaker profit in the coming year. It also announced a two-stage deal with Germany's Gebr Knauf KG.

New Zealand's benchmark S&P/NZX 50 index was 1.7% lower at 10,438.45, with healthcare firm EBOS Group Ltd leading losses with a decline of more than 5%, causing it to head for its worst day in over 10 months.