The main FTSE 100 index was trading down 1.1% at its lowest level since March 8 by 0755 GMT, while the midcap index lost 1%.

China warned the United States at the weekend not to meddle in security disputes over Taiwan and the South China Sea, after while President Donald Trump threatened to impose tariffs on all Mexican goods.

Sectors that are more vulnerable to a disruption in international trade were hit, with 1% falls for oil majors Shell  and BP leading losses among blue-chip shares.

"The trade war is not cooling down. In fact, it looks like the rhetoric is heating up and further escalation seems likely," said Markets.com analyst Neil Wilson.

Builder Kier was the biggest faller on the midcap FTSE 250 index, down 40% and at its lowest level since early 1999 after warning on profits.

Ocado slipped nearly 4pc to the bottom of the FTSE 100 after Jefferies cut its rating on the stock, saying the online grocer's fixed central costs, high capex and limited sales fee income could lead to significant cash outflows.

Investors will keep an eye on Trump's contentious visit to Britain, which begins on Monday and comes at a time of deep political uncertainty ahead of Prime Minister Theresa May's resignation this week.

Trump, over the weekend, repeated his backing for candidates to succeed May who have said Britain must leave the European Union on the due date of Oct. 31 with or without a deal.

The more domestically focused small-cap index eked out small gains, led by telecoms group KCOM, which jumped 13.4pc after it ditched plans to sell itself to British pension fund-backed Humber Bidco in favour of a higher offer backed by investment firm Macquarie's European Infrastructure Fund.