U.S. stocks closed lower on Tuesday as investors closely monitored the latest development of U.S.-China trade relations as well as major economic data.

The Dow Jones Industrial Average fell 285.26 points, or 1.08 percent, to 26,118.02. The S&P 500 was down 20.19 points, or 0.69 percent, to 2,906.27. The Nasdaq Composite Index fell 88.72 points, or 1.11 percent, to 7,874.16.

Tuesday marked the first trading day after the latest round of tariff hikes between the United States and China took effect on Sept. 1.

China on Monday announced that it had filed a case at the World Trade Organization against the United States following its implementation of the additional 15-percent tariffs imposed on 300 billion U.S. dollars worth of Chinese imports on Sept. 1.

The tariffs imposed by the United States severely violated the consensus reached by the two heads of state in Osaka, a statement released by the Ministry of Commerce said, adding that China is extremely dissatisfied with and resolutely opposes the tariffs.

On the data front, a gauge of U.S. manufacturing from the Institute for Supply Management (ISM) showed the sector contracted in August.

The U.S. manufacturing PMI (purchasing managers' index) registered 49.1 percent, a decrease of 2.1 percentage points from the July reading, according to the Manufacturing ISM Report On Business released on Tuesday.

Timothy Fiore, chair of ISM Manufacturing Business Survey Committee, said in a statement that comments from the panel reflect a notable decrease in business confidence. August saw the end of the PMI expansion that spanned 35 months, with steady expansion softening over the last four months.