At 1500 GMT the Dow Jones Industrial Average had lost 190.34 (1.56 percent) at 12,022.75, while the broader S&P 500 was down 21.43 (1.62 percent) to 1,298.59.

The tech-heavy Nasdaq Composite lost 47.17 (1.71 percent) to 2,704.55.

The unexpectedly large increase in the US trade deficit and China turning in its own rare trade shortfall in February helped send a range of stocks tumbling, especially those linked to primary commodities, capital goods and energy.

Miner Freeport-McMoran dropped 3.9 percent as key ore prices fell.

New York-traded shares of Brazilian mining giant Vale SA were off 3.6 percent.

GM shares fell 3.0 percent after the company announced the departure of its chief financial officer.

"The US equity markets are under solid pressure in morning action, with concerns about the euro-area debt crisis being exacerbated by a sovereign debt rating cut of Spain by Moody's Investors Service," the brokerage Charles Schwab said in an early analysis.

"Also, weaker-than-expected trade data out of China, Germany, and the US are amplifying the negative tone on (Wall) Street, along with a larger-than-forecasted increase in US weekly initial jobless claims."

Bond prices gained ground. The yield on the 10-year Treasury fell to 3.43 percent from 3.47 percent late Wednesday, while the 30-year note dropped to 4.58 percent from 4.60 percent.

Bond prices and yields move in opposite directions.