The biggest faller among Europe's leading indices was Frankfurt, down a hefty 1.8 percent in midday deals.
And the yield on 10-year German government bonds hit a record low as investors piled into haven assets following the exacerbation of global trade tensions.
The rate of return for investors on 10-year German government bonds, or Bunds, hit minus 0.211 percent in the secondary market Friday, breaking the previous record of minus 0.205 percent set in July 2016.
Tokyo's main stocks index meanwhile tumbled 1.6 percent by the close as the yen rallied against the dollar, making Japanese exports more expensive.
The dollar hit a six-month low at 19.76 Mexican pesos.
Oil prices meanwhile dived to the lowest levels since early March on Trump's intervention over Mexico and after a smaller-than-expected drop in US crude supplies, traders said.
"Showing up Thursday's rebound as a display of investor naivety, the markets sank on Friday as a new front opened up in Trump's trade war on the world," noted Connor Campbell, analyst at Spreadex trading group.
Trump on Thursday kick-started the process of ratifying the new North American trade pact, but he has now put the accord at risk, according to experts.
Trump's Twitter announcement of a five percent tariff on all goods from Mexico starting June 10 was aimed at tackling "illegal migrants" crossing the border into the US.
Mexico's under-secretary for North American affairs called the move "disastrous" and vowed to retaliate.
Carmakers were among the hardest hit by Trump's announcement, with shares in Mazda plummeting 7.1 percent, Nissan tumbling 5.3 percent, Renault shedding 4.6 percent and Volkswagen losing 3.6 percent.
Trump's action comes amid a protracted trade war between the United States and China.
The president's tariff hike on $200 billion in Chinese goods earlier this month "may already be undermining foreign demand", analyst Julian Evans-Pritchard of consultancy Capital Economics wrote in a research note.
China is retaliating by raising tariffs on $60 billion worth of US goods on Saturday, while official data Friday showed that the Asian nation's manufacturing activity contracted more than expected in May.
In Europe, figures showed Italy's GDP grew just 0.1 percent in the first quarter of this year, slightly revising downward an earlier forecast in bad news for the government as it locks horns with Brussels.
Data also showed that Turkey exited recession with 1.3 percent growth in the first quarter.
- Key figures around 1030 GMT -
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London - FTSE 100: DOWN 1.0 percent at 7,144.23 points
Frankfurt - DAX 30: DOWN 1.8 percent at 11,686.71
Paris - CAC 40: DOWN 1.5 percent at 5,169.68
EURO STOXX 50: DOWN 1.6 percent at 3,264.17
Tokyo - Nikkei 225: DOWN 1.6 percent at 20,601.19 (close)
Hong Kong - Hang Seng: DOWN 0.8 percent at 26,901.09 (close)
Shanghai - Composite: DOWN 0.2 percent at 2,898.70 (close)
New York - Dow: UP 0.2 percent at 25,169.88 (close)
Euro/dollar: UP at $1.1152 from $1.1130 at 2100 GMT
Pound/dollar: DOWN at $1.2587 from $1.2613
Dollar/yen: DOWN at 108.74 yen from 109.61 yen
Oil - Brent Crude: DOWN $1.99 at $64.88 per barrel
Oil - West Texas Intermediate: DOWN $1.29 at $55.30 per barrel