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.