The FTSE 100 index slumped 1.8% by 0800 GMT, set for its worst day in more than four months, while the FTSE 250 midcap index weakened by 1.1%.

All of the major constituent sectors on both indexes were in negative territory.

Asia-focussed bank stocks, including HSBC, and oil majors Shell and BP led losses on the main index after Trump vowed to impose a 10% tariff on $300 billion worth of Chinese imports from Sept. 1.

Industrials Melrose and Ashtead, typically more exposed to global trade conditions, slumped 7.6% and 5%, respectively.

RBS dropped 5%, its biggest one-day fall in nine months, as it warned that deteriorating economic conditions before Brexit were likely to derail next year's profitability and cost targets.

British Airways owner IAG, however, climbed 4% after reporting strong profit numbers for the first half of its key summer period.

MARKET WHIPLASH

The last major escalation of the U.S.-China trade tensions was behind a sharp drop in the FTSE 100 in May, but the index is still on course for its biggest annual rise since 2016 as Brexit-driven weakness in the pound helps the index's largely internationally-focused companies.

"Anyone trying to determine the next move in stock markets in the last 24 hours would be justified in feeling like they've just experienced a bit of whiplash," said CMC Markets analyst Michael Hewson.

"It is not hard to underestimate how much this abrupt escalation has caught markets unawares."

Miners slumped 3% to a two-month low as Chinese iron ore futures dropped after Brazil announced a rebound in exports of the steelmaking material in July. The index, which includes global players Glencore and Rio Tinto, is on course for its steepest weekly fall since March.

The long-drawn out trade war has also weighed on the sector as China is the world's top metals consumer.

Among a handful of gainers on the midcap index was pet supplies retailer Pets at Home which rose 3% after saying it expects underlying profit to be slightly above current market expectations.