The Australian sharemarket wiped off over $30 billion on Wednesday after US President Donald Trump ruled out tariff exemptions for the country and threatened to double levies on steel and aluminium from Canada.

The S&P/ASX 200 Index dropped 1.3 per cent or by 103.9 points to 7786.2 at the closing bell, with 10 out of the 11 sectors in the red, extending a seven-month low. The All Ordinaries fell 1.2 per cent.

Local shares extended losses and briefly lurched into a correction when the index hit an intraday low of 7733.5 at lunchtime to be down more than 10 per cent from a record high in February.

The sell-off tracked a decline on Wall Street, where all three major indices dropped and after the White House confirmed that Australia would not be exempt from 25 per cent tariffs on steel and aluminium exports to the US that went into effect Wednesday afternoon.

Trump rattled morning trade in New York by saying he would increase tariffs on those materials from Canada to 50 per cent, only to later say he might rethink the hike. The European Union also said it was planning to impose counter tariffs on US goods.

Banks sold off

“A combination of factors, including Trump surprising everyone with following through on tariffs, especially when valuations have been very high has fuelled the correction,” TMS Capital portfolio manager Ben Clark said.

“We haven’t had a correction in several months, which is an unusually long period of time. The longer markets don’t have corrections, they tend to be nastier when they do happen,” he added.

All the major banks declined, with index heavyweight Commonwealth Bank down 1.4 per cent to $144.80 at the close after tumbling more than 2 per cent at one stage. National Australia Bank lost 2.1 per cent to $33.38, Westpac 2 per cent to $30.07 and ANZ dropped 2.1 per cent to $28.41.

The materials sector was also sold off, falling 1.1 per cent. Mining giants BHP dropped 1.8 per cent to $38.95 and Rio Tinto 1.9 per cent to $117.23. Separately, Rio said it was looking to sell up to $US9 billion of bonds to help cover the cost of acquiring Arcadium Lithium.

Elsewhere in commodities, gold held an advance as bullion traded near $US2915 an ounce, supported by haven demand. Gold producer Evolution Mining climbed 0.8 per cent to $6.21, while Newmont rallied 1.5 per cent to $68.82.

Stocks to watch

The consumer discretionary sector was the worst performing sector on the ASX, tumbling 2 per cent amid concerns about the outlook for economic growth. Retail conglomerate Wesfarmers lost 2.6 per cent to $69.66.

Nickel Industries, the biggest pure-play nickel producer listed on the ASX, rebounded 8.3 per cent to 65¢ on Wednesday. It had lost nearly one quarter of its value the prior session after one of its major shareholders dumped half of its stock below the asking price.

Patent and trademark firm IPH tumbled 10 per cent to $4.23 and was the worst performing stock on the ASX 200. The company announced that long-time chief financial officer John Wadley was leaving the company.