The benchmark Korea Composite Stock Price Index retreated 40.78 points, or 1.68 percent, to close at 2,368.85.

Trade volume was modest at 299.95 million shares worth 6.2 trillion won ($5.9 billion), with losers far outnumbering gainers 698 to 142.

Foreigners offloaded a net 404.4 billion won worth of local stocks, while individuals and institutions were net buyers by snatching up 356.8 billion won and 1 billion won, respectively.

Analysts said Seoul stocks had opened a tad lower but a further slip was triggered as investors were jittery over uncertainties following Donald Trump's signing of new sanctions on North Korea.

Also, the Seoul government on Tuesday announced its biannual tax revision plan, raising tax rates for the "super-rich" and big money-making companies.

"Geopolitical worries were heightened following Trump's announcement. In addition, the Seoul government's announcement of a tax code revision acted as a negative factor for investors," said Lee Yeong-gon, a Hana Financial Investment analyst.

Most large caps closed lower on the Seoul bourse, with tech and insurance shares pushing down the main index

Top cap Samsung Electronics ended at 2,389,000 won, down 2.48 percent from the previous session's close and global chipmaker SK hynix lost 3.68 percent to 65,500 won.

Naver, the country's leading Internet portal operator, surrendered 2.14 percent to 778,000 won.

Insurers lost ground, with Samsung Life Insurance dropping 2.75 percent to 124,000 won.

The local currency closed at 1,128,80 won against the US dollar, down 4.80 won from the previous session's close. (Yonhap)