Asian stock markets were the heaviest fallers, playing catch-up after European indices and Wall Street had already slumped in Thursday trading on the latest developments.
Europe extended those losses on Friday and at around 0940 GMT, London’s benchmark FTSE 100 index was down 1.0 percent.
In the eurozone, Frankfurt’s DAX 30 slumped 1.9 percent and the Paris CAC 40 lost 2.0 percent compared with Thursday’s closing levels.
Tokyo closed down 4.5 percent Friday, hitting a near six-month low, with Japanese exporters also hammered by a surging yen, which is considered the go-to currency in times of turmoil and uncertainty.
Hong Kong’s main stocks index shed 2.5 percent, Shanghai gave up a hefty 3.4 percent and Sydney fell 2.0 percent.
The dollar meanwhile dropped below 105 yen for the first time since Trump was elected president in November 2016, while the greenback was down also against the euro.
“A rough week for the markets… as fears of a trade war between the US and China ratchet up,” said Russ Mould, investment director at AJ Bell.
– China ‘not afraid’ –
Trump has announced levies on up to $60 billion (49 billion euros) of imports from China for what he describes as the “theft” of American intellectual property, fuelling speculation that a strong recovery in the world economy could be thrown off course.
Thursday’s move comes just weeks after the White House announced stinging taxes on steel and aluminium products entering the US — causing equities to plunge — as Trump drives through with his America First protectionist agenda.
China responded by saying it was “not afraid of a trade war”, and also released a list of potential tariffs on $3.0 billion worth of US goods, from pork to fruits and wine and including some steel and aluminium goods.
The news boosted Chinese pork producers though shares in Hong Kong-listed WH Group, which owns US giant Smithfield, plunged more than 4.7 percent on Friday.
There was little positive reaction meanwhile to the US saying late Thursday it would suspend duties on metals imports from the EU, Argentina, Australia, Brazil, Canada, Mexico and South Korea.
– Wall Street slump –
Wall Street was sent spiralling by Thursday’s news with all three main indices shedding between 2.4 percent and 2.9 percent.
“The effects are likely to be felt more strongly in the US and increase both consumer and producer prices, ” said Hannah Anderson, global market strategist at JP Morgan Asset Management.
“Exports are extremely important to the Chinese economy, but have been trending less so in recent years and the US has been shrinking as a share of China’s export market.”
Analysts said traders were also spooked also by the fact China is the biggest buyer of US government bonds, which the US needs to keep its economic wheels greased.
Adding to the uncertainty was news that Trump’s national security advisor HR McMaster — seen as a moderating hand in the administration — had stepped aside and been replaced by nationalist John Bolton.
– Key figures around 0940 GMT –
London – FTSE 100: DOWN 1.0 percent at 6,885.23 points
Frankfurt – DAX 30: DOWN 1.9 percent at 11,874.1
Paris – CAC 40: DOWN 2.0 percent at 5,066.27
EURO STOXX 50: DOWN 1.7 percent at 3,291.05
Tokyo – Nikkei 225: DOWN 4.5 percent at 20,617.86 (close)
Hong Kong – Hang Seng: DOWN 2.5 percent at 30,309.29 (close)
Shanghai – Composite: DOWN 3.4 percent at 3,152.76 (close)
New York – Dow: DOWN 2.9 percent at 23,957.89 (close)
Dollar/yen: DOWN at 104.87 yen from 105.35 yen at 2100 GMT
Euro/dollar: UP at $1.2324 from $1.2308 at 2100 GMT
Pound/dollar: DOWN at $1.4097 from $1.4103
Oil – Brent North Sea: UP 19 cents at $69.10 per barrel
Oil – West Texas Intermediate: UP 33 cents at $64.63