NEW YORK (AFP) - President Donald Trump's shock decision ending a trade truce with China sent US stocks lower on Friday (Aug 2), with two major indices posting their biggest weekly losses of the year.

All three major Wall Street indices fell to their lowest levels since late June, with investors still disappointed by the escalating trade conflict, new tariffs and this week's fuzzy signals on monetary policy from the Federal Reserve.

The benchmark Dow Jones Industrial Average fell 0.4 per cent on the day to 26,485.01, losing 2.6 per cent for the week.

The broader S&P 500 fell 0.7 to 2,932.04 and the tech heavy Nasdaq lost 1.3 per cent, closing at 8,004.07. It was the worst week since December of 2018 for the two indices which lost 3.1 per cent and 3.9 per cent, respectively.

Trump on Thursday stunned financial markets by ending by announcing fresh punitive duties on US$300 billion (S$400 billion)in Chinese imports - meaning nearly all goods from China will be subject to tariffs as of Sept 1.

This came a day after the Fed shook markets, announcing a smaller-than-hoped-for cut in interest rates and offering conflicting hints as to whether the central bank is likely to cut again.

Shaw Cruz, manager of trader strategy at TDAmeritrade, told AFP the trade war news had investors fearing a hit to corporate profits later this year.

"It can affect the third- and fourth-quarter earnings. It can be expensive for companies to switch up their supply chains," he said.

"It's not something you can do overnight."

Among individual companies, industrials Deere and Caterpillar, both seen as exposed to trade, fell 1.6 per cent and 1.8 per cent respectively.

Exxon Mobil fell about 1 per cent while fell petroleum supermajor Chevron ended about flat after the two companies reported mixed quarterly results.

The stock price moves followed volatility in oil prices tied to the US-China trade war escalation.