The S&P/ASX200 fell 26.4 points, or 0.31 per cent, to 8,408.3 in Monday morning trade, as the broader All Ordinaries slipped 27.9 points, or 0.31 per cent, to 8,633.1.
US President Donald Trump on Friday threatened to double tariffs on imported steel to 50 per cent, while accusing Beijing of violating an agreement to mutually roll back trade restrictions on critical minerals.
Trade worries helped send several Asian indexes lower, with Japan's Nikkei down 1.4 per cent and Hong Kong's Hang Seng index falling more than two per cent.
"Trade policy has returned as the primary driver for the markets, with US President Trump's hot rhetoric regarding China and its adherence to previous trade agreements sparking a sell-off on Friday night," Capital.com market analyst Kyle Rodda said.
"Along with the typical trade policy uncertainty, there may be an element of market participants taking risk off the table before such a data heavy week."
All but three of 11 local sectors were trading lower by lunchtime with utilities, energy stocks and minerals leading losses.
Financials were also dragged, falling 0.3 per cent as ANZ, NAB and Westpac sold off more than 0.8 per cent each, while CBA was the best performer, eking a 0.1 per cent gain to $176.10 per share.
Macquarie Group was down 1.4 per cent to $211.26.
Large cap miners weighed heavily, with Fortescue (down 2.4 per cent), Rio Tinto (down 2.3 per cent) and BHP (down 1.1 per cent) all sliding as iron ore prices slipped more than three per cent to $US96.15 a tonne since Friday as trade tensions escalated.
Goldminers were mixed, after futures whipsawed over the weekend to settle slightly higher on Monday around $US3,325 ($A5,150) an ounce.
Energy stocks slipped 0.9 per cent as OPEC+ confirmed an oil supply hike of 411,000 barrels per day (bpd) in July.
Brent crude futures are trading at $US64.07 a barrel, up roughly 1.7 per cent since Friday afternoon as US Treasury Secretary Scott Bessent expressed confidence the US and China would "iron out" trade tensions soon.
Soul Patts and Brickworks were the top-200's best performers after announcing a $14 billion merger, their share prices rallying 11.6 per cent and 21.1 per cent respectively.
Mineral Resources was at the other end of the table, slipping more than 7.5 per cent to $20.52.
The Australian dollar has edged higher against the greenback, buying 64.60 US cents, up from 64.23 on Friday at 5pm.
The greenback has been fading against most major currencies since Friday, after a US trade court decision to block Liberation Day tariffs was held back by a federal appeals court.
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