The S&P/ASX200 sank 191.9 points, or 2.44 per cent, to 7,667.8 on Friday, while the broader All Ordinaries tanked 205.1 points, or 2.55 per cent, to 7,847.6.
"It's an absolute bloodbath out there," IG Markets analyst Tony Sycamore told AAP.
"The concerns around China seem to be coming really to the surface now."
More than $97 billion was wiped from the top-500's $2.8 trillion market cap since Thursday, after US President Donald Trump's 'Liberation Day' tariff announcement came in more hawkish than expected.
Friday's downturn followed a brutal Wall Street session, which erased an eye-watering $US2.4 trillion ($A3.8 trillion) from the S&P500.
To make matters worse, it was confirmed the reciprocal tariffs would be lumped on top of existing import taxes, which in many cases were already extended in recent weeks.
"We're talking about a 64 per cent tariff rate on China, on an economy which is struggling. It hasn't been in the best shape since the COVID days and lockdown, and they're our largest trading partner," Mr Sycamore said.
Markets are keenly watching for Beijing's next move, which could involve retaliatory tariffs and potentially lead to a tit-for-tat global trade war.
"Or they get on the front foot, and announce bigger stimulus measures than were previously anticipated and look to devalue their currency," Mr Sycamore said.
Investment giant JP Morgan on Friday lifted 2025 global recession expectations to 60 per cent from 40 per cent.
Ten of 11 local sectors closed lower, with energy stocks tanking eight per cent as crude demand expectations sent oil futures plummeting.
Brent crude futures have fallen more than eight per cent since Mr Trump's announcement on Thursday morning, losing the $US70 level and falling to three-week lows.
IT stocks also took a battering, down 6.4 per cent, while the traditionally defensive utilities buckled under falling energy prices to give up 4.4 per cent.
Consumer staples were the only winner, up 2.4 per cent as investors flocked to grocery giants Coles and Woolworths for save haven. Both were up more than 3.4 per cent.
Financials - which make up almost a third of the Australian bourse's value and are considered a bellwether for the broader market - were down 2.8 per cent on Friday and more than 12 per cent lower than mid-February's peak.
Materials stocks were also suffering as China's growth worries swelled, losing 1.3 per cent on Friday and down more than 7 per cent for the week.
AMP economist Shane Oliver said Australian shares were expected to see far more constrained returns this year after double-digit returns in 2023 and 2024.
"But central banks, including the RBA, still cutting rates and Trump's tax and deregulation policies ultimately supporting US shares, should still mean OK investment returns through the year as a whole," Dr Oliver said.
"But its likely to be a rough ride."
The Australian dollar gave up early gains against the greenback and was buying 62.49 US cents, down from 62.88 US cents on Thursday at 5pm.
ON THE ASX:
* The benchmark S&P/ASX200 index fell 191.9 points, or 2.44 per cent, to 7,667.8 on Friday
* The broader All Ordinaries lost 205.1 points, or 2.55 per cent, to 7,847.6
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 62.49 US cents, from 62.88 US cents on Thursday
* 91.14 Japanese yen, from 92.47 Japanese yen
* 56.37 euro cents, from 57.46 euro cents
* 47.71 British pence, from 57.47 British pence
* 109.10 NZ cents, from 109.24 NZ cents
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