China introduced a powerful weapon to the trade war on Monday, letting its currency weaken sharply in a move that left financial markets lurching and investors worried about how the worsening hostilities between Beijing and Washington would affect corporate profits and the already slowing pace of global growth.

On Wall Street, stocks experienced their steepest drop of the year, conclusively ending a period of steady trading during which the market notched record after record.

The recent calm was first punctured last week by President Trump’s threat to impose new tariffs on $300 billion of imports from China. But it was Beijing’s decision to allow its currency to cross the psychologically important barrier of 7 per dollar that pushed investors to abandon any lingering hope that a trade truce — worked out in a face-to-face meeting between Mr. Trump and Xi Jinping, China’s leader, a little over a month ago — would hold.

“That has just totally disintegrated,” said Ryan Detrick, senior market strategist at LPL Financial. “Now China is just clearly firing back, and that has people uncomfortable.”