Corrects Nasdaq index in fourth bullet to +0.48%

By Chibuike Oguh, Johann M Cherian and Sukriti Gupta

NEW YORK, March 4 (Reuters) - Wall Street's main indexes fell on Tuesday, with the tech-heavy Nasdaq on track to confirm a correction, as trade tensions escalated following U.S. President Donald Trump's new tariffs on Canada, Mexico and China.

The 25% tariffs on imports from Mexico and Canada, along with doubled duties on Chinese goods, took effect on Tuesday. China and Canada retaliated while Mexican President Claudia Sheinbaum vowed to respond likewise, without giving details.

The Nasdaq Composite was on track to veer into correction territory, with the index set to fall 10% from its record closing high on December 16.

"Equity valuations have been very elevated and there's been yellow flags all over the horizon given moves to cut government spending," said Ben McMillan, chief investment officer at IDX Insights in Tampa, Florida. "Now on top of that, we have all this rhetoric around tariffs."

Shares in financials .SPSY and industrials .SPLRCI were the biggest losers among the benchmark S&P 500's 11 main sectors.

Citigroup C.N and JPMorgan Chase & Co JPM.N fell 5.4% and 3.1%, respectively, sending the bigger banks index .SPXBK down 3.6%.

The CBOE market volatility index .VIX rose 0.70% to its highest since December 20.

"The fear here is that it's going to slow (economic) growth," said Adam Sarhan, chief executive of 50 Park Investments in New York.

"And when you have a slowdown in economic conditions, it's a situation where banks specifically make less money because fewer goods and services are traveling through the economy."

At 2:07 p.m. ET, the Dow Jones Industrial Average .DJI fell 304.66 points, or 0.70%, to 42,886.58. The S&P 500 .SPX lost 19.02 points, or 0.33%, at 5,830.70 and the Nasdaq Composite .IXIC rose 87.51 points, or 0.48%, to 18,437.70.

Car makers Ford F.N and General Motors GM.N, which have vast supply chains across North America, fell 1.7% and 2.8%, respectively. The domestically focused Russell 2000 index .RUT fell 0.3%.

Wall Street is really concerned, McMillan said. "The likelihood of tariffs will lead to higher prices and therefore lower spending."

Target TGT.N fell 2.8% after the retailer forecast full-year comparable sales below estimates.

Best Buy BBY.N fell 12% after the electronics retailer issued a downbeat forecast, while Walgreens WBA.O jumped 7.2% as a report hinted that the pharmacy chain is closing in on a take-private deal by Sycamore Partners.

Declining issues outnumbered advancers by a 2.51-to-1 ratio on the NYSE. There were 70 new highs and 433 new lows on the NYSE.

The S&P 500 posted 40 new 52-week highs and 43 new lows while the Nasdaq Composite recorded 27 new highs and 582 new lows.

(Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Maju Samuel and Richard Chang)

((johann.mcherian@thomsonreuters.com))