European stock indexes lost up to 2% in value in early deals on Friday as U.S. President Donald Trump's warning of new tariffs on China sank stock markets worldwide and sent trade-sensitive sectors like mining and carmakers into a tailspin.
Abruptly ending a temporary trade truce between the two countries, Trump said he would impose a 10% tariffs on $300 billion of Chinese exports to the United States from September 1.
Spooking investors further, Bloomberg reported that Trump is scheduled to make a statement on trade with the European Union at 1745 GMT on Friday.
By 0711 GMT, the pan-European benchmark stocks index STOXX 600 was down 1.6% with the basic material sector plunging 4.3%, followed by the auto and tech sectors both down more than 2.5%.
Germany's DAX, often regarded as among the most sensitive markets to trade nerves, fell 2% while France's CAC 40 fell similarly.
Italian tyremaker Pirelli added to the car industry woes, slipping 4.7% after it cut revenue guidance for the second time this year, the latest of a string of suppliers to be hit by a broader auto industry downturn.
The trade escalation spurred flight to safer asset which saw rally in German bonds, whose yields hit all time lows.
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