A sell-off in the US stock market gathered steam on Monday, fuelled by rising concern about the cost of the trade war to the world’s largest economy.

The S&P 500, which tracks the biggest American companies, fell about 2% in early trade, while the Dow Jones dropped 0.9% and the Nasdaq sank more than 3.5%.

The falls came after President Donald Trump ducked questions about whether the US economy was facing a recession or price rises as a result of tariff moves, warning instead of a “period of transition”.

Commerce Secretary Howard Lutnick, however, insisted there would be no contraction in the US, although he acknowledged that the price of some goods may rise.

New tit-for-tat tariffs from China, which target some US farm products, came into effect on Monday.

Speaking to Fox News in an interview broadcast on Sunday but recorded on Thursday, Trump responded to a question about a recession: “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.”

“It takes a little time, but I think it should be great for us,” he added.

Last week, the US imposed new 25% tariffs on imports from Mexico and Canada but then exempted many of those goods just two days later.

Trump also doubled a blanket tariff on goods from China to 20%. In response, Beijing announced retaliatory taxes on some imports of agricultural goods from the US.

From today, certain US farm products going into China – including chicken, beef, pork, wheat, and soybeans – face new tariffs of 10 to 15%.

Han Shen Lin, China country director at consultancy firm The Asia Group, told the BBC’s Today programme: “You’re seeing a lot of tit for tat between both sides to demonstrate that neither side will back off easily.

“That said China has realised it probably can’t export its way to GDP growth in the way that it used to so it is focusing a lot more on the domestic economy right now.”

The US president has accused China, Mexico and Canada of not doing enough to end the flow of illegal drugs and migrants into the US. The three countries have rejected the accusations.

Stocks on Wall Street have fallen since Trump sparked a trade war with the US’s top trading partners.

Investors fear tariffs will lead to higher prices and ultimately dent growth in the world’s largest economy.

Speaking on NBC on Sunday, Lutnick said: “Foreign goods may get a little more expensive. But American goods are going to get cheaper”.

But when asked whether the US economy could face a recession Lutnick added: “Absolutely not… There’s going to be no recession in America.”

Former US Commerce Department official, Frank Lavin, told the BBC that he thinks the trade war is unlikely to escalate out of control.

Tariffs will eventually “fade a bit” but still be an “extra burden on the US economy,” he said.

Rachel Winter, investment manager at Killik & Co, told the Today programme she thought the US was likely to have a period of higher inflation.

“Tariffs are theoretically inflationary and the level of tariffs that Trump is imposing, I think no doubt, will have to cause inflation somewhere down the line,” she said.