Trump's announcement of 10% tariffs on $300 billion of Chinese goods, due to take effect Sept. 1, surprised investors after the White House said Beijing promised to buy more farm goods.
That announcement came as their latest round of trade talks ended in Shanghai. China's government added to investor unease by threatening unspecified retaliation if Trump's tariff hike goes ahead.
"It goes without saying that Trump's latest batch of tariffs are taking their toll on markets at the end of the week, with Europe deep in negative territory and the U.S. on course for another bumpy session," said Craig Erlam, senior market analyst at OANDA.
"The announcement, which came after a week of talks in Shanghai, came as a bit of a shock to investors, not because we weren't preparing for the possibility of more or because we were optimistic about the outcome of this week, but the knee jerk nature of it."
In Europe, Britain's index of leading British shares was down 1.7% at 7,453 while Germany's DAX fell 2.5% to 11,947. France's CAC was performing even worse, down 2.7% at 5,408.
Wall Street is set for some further selling at the bell with Dow futures and the broader S&P futures down 0.3%.
How U.S. stocks open could hinge on monthly payrolls data, which have the potential to alter the market mood. Economists are predicting that around 163,000 jobs were added in July, roughly in line with the average monthly gain of 172,000 this year.
"The U.S. jobs market is also showing few signs of slowing, which makes today's July payrolls report all the more important, particularly in light of Wednesday's Federal Reserve decision," said Michael Hewson, chief market analyst at CMC Markets.
Trump's announcement came as markets were already under pressure by Wednesday's Fed developments when Chairman Jerome Powell disappointed traders by suggesting the U.S. central bank had no plans for an extended cycle of interest rate cuts.
Earlier in Asia, the Shanghai Composite Index lost 1.4% to 2,867.84 while Tokyo's Nikkei 225 declined to 21,087.16. Hong Kong's Hang Seng fell to 26,918.58 while Seoul's Kospi shed 1% to 1998.13. Sydney's S&P-ASX 200 retreated 0.3% to 6,768.60.
ENERGY: Benchmark U.S. crude jumped $1.38 to $55.33 per barrel in electronic trading on the New York Mercantile Exchange. The contract plunged $4.53 on Thursday — its biggest drop in more than four years. Brent crude, used to price international oils, soared $1.72 to $62.22 per barrel in London. It fell $4.55 the previous session to $60.50.
CURRENCY: The euro was up 0.1% at $1.1098 while the dollar fell 0.5% to 106.84 yen.