Market benchmarks in Shanghai, Tokyo and Hong Kong all retreated.
U.S. investors dumped stocks, sending the Dow into its biggest one-day drop of the year, after the yield on the 10-year Treasury crossed a threshold that has correctly predicted many past recessions.
That erased the previous day's gains from a rally that began after President Donald Trump delayed tariffs on about $160 billion in Chinese goods due to take effect on Sept. 1.
"U.S. recession risks have increased from U.S. aggressive trade policies on China hurting the rest of the world," said Eugene Leow and Philip Wee of DBS Group in a report.
Weak economic data from Germany and China added to signals of a global slowdown.
The Shanghai Composite Index lost 0.6% to 2,791.60 and Tokyo's Nikkei 225 sank 1.5% to 20,392.99. Hong Kong's Hang Seng lost 0.2% to 25,259.68.
Australia's S&P-ASX 200 fell 2.7% to 6,415.90. Markets in Taiwan, New Zealand and Southeast Asia also retreated.
South Korean markets were closed for a holiday.
On Wall Street, the benchmark Standard & Poor's 500 fell 2.9% to 2,840.60. The Dow sank 800.49 points, or 3%, to 25,479.42. The Nasdaq composite lost 3% to 7,773.94.
Also Wednesday, European markets fell after Germany's economy contracted 0.1% in the spring due to the global trade war and troubles in the auto industry. In China, the world's second-largest economy, growth in factory output, retail spending and investment weakened in July.
Tech stocks and banks led the broad sell-off. Retailers came under especially heavy selling pressure after Macy's issued a dismal earnings report and cut its full-year forecast.
Investors have been plowing money into the safety of U.S. government bonds for months amid growing anxiety that weakness in the global economy could sap American growth.
Uncertainty about the U.S.-Chinese tariff war has spurred a return of volatility to the stock market in August. The Dow has dropped more than 5% and the S&P 500 is down more than 4%.
Traders tend to shift money to the safety of U.S. government bonds when they're fearful of an economic slowdown. That causes the market price to rise and yields — the difference between the current price and the payout when the bond matures — to shrink.
When the yield on longer-term Treasurys falls below that of shorter-term issues, economists call that an "inverted yield curve." It suggests bond investors expect growth to slow so much that the Federal Reserve feels compelled to cut short-term interest rates to support the economy.
The yield on the 10-year Treasury dropped from 2.02% on July 31 to below 1.60%. On Wednesday, it briefly fell below the two-year Treasury's yield for the first time since 2007.
Each of the last five times the two-year and 10-year Treasury yields have inverted, a recession has followed.
AUSTRALIAN JOBS: Australia added a stronger-than-expected 41,000 jobs in July, rebounding from the previous month's contraction. Unemployment held steady at 5.2%.
ENERGY: Benchmark U.S. crude lost 28 cents to $54.95 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.82 on Wednesday to close at $55.23. Brent crude, used to price international oils, fell 38 cents to $59.10 per barrel in London. It lost $1.82 the previous session to $59.48.
CURRENCY: The dollar gained to 105.93 yen from Wednesday's 105.86 yen. The euro edged up to $1.1142 from $1.1138.