Trump's announcement, which came on Thursday, means virtually all of the $660 billion in annual merchandise trade between the world's two biggest economies will be subject to punitive tariffs, with the latest duties due to take effect September 1.
The news saw all three major Wall Street indices slump to their lowest levels since June, with the S&P 500 and Nasdaq recording their worst weekly losses of 2019 on Friday.
In China, the yuan dropped to its lowest level to the dollar since August 2010, fuelling speculation that Beijing was devaluing its currency to support exporters and offset Trump's latest threat to hit $300 billion in Chinese goods with 10 percent tariffs.
The US leader regularly accuses the Chinese central bank of artificially weakening the yuan -- charges long denied by Beijing.
The onshore yuan tumbled to 7.0307 against the dollar -- its lowest level since 2008 -- while the more freely traded offshore yuan tumbled to 7.1085, breaching the 7.0 level which investors see as a key threshold in the currency's value.
Multiple rounds of tit-for-tat tariffs between the world's top two economies have already battered trade, with China's American imports shrinking 30 percent in the first half of the year.
Beijing has vowed to hit back if Washington goes ahead with its latest threat, while news that demand for US exports had weakened underscored concern that trade was becoming a trouble spot for economies worldwide.
- 'A lot messier' -
===================
"China is likely to drag out their response and retaliate in many ways against the US trade measures," warned Edward Moya, senior market analyst at OANDA.
Negotiators from both nations are expected to reconvene in Washington in early September for another round of talks after last week's discussions in Shanghai, but investors remain nervous, Moya said.
"Financial markets are still working on pricing in a complete collapse of trade talks amongst the Chinese and Americans," he said.
"The base case still remains for a deal to get done, but talks are likely to get a lot messier before we see anything... that resembles a deal."
The yuan's depreciation spurred a sell-off across Asian markets.
Hong Kong lost more than three percent before staging a modest recovery as pro-democracy protesters targeted the financial hub's transport network in a citywide strike aimed at forcing concessions from its embattled pro-Beijing government.
Tokyo shed 1.7 percent while Shanghai fell 1.6 percent. Singapore dropped 1.8 percent while Taipei, Seoul and Manila were also down.
European markets also extended a pre-weekend slump in early trade. London and Paris dropped 1.1 percent while Frankfurt sank 1.0 percent.
- Key figures around 0700 GMT -
===============================
Tokyo - Nikkei 225: DOWN 1.7 percent at 20,720.29 (close)
Hong Kong - Hang Seng: DOWN 2.7 percent at 26,194.08
Shanghai - Composite: DOWN 1.6 percent at 2,821.50 (close)
London - FTSE 100: DOWN 1.1 percent at 7,324.76
Pound/dollar: DOWN at $1.2111 from $1.2162 at 2100 GMT Friday
Euro/dollar: UP at $1.1119 from $1.1106
Dollar/yen: DOWN at 106 yen from 106.59 yen
Brent North Sea crude: DOWN 94 cents at $60.95 per barrel
West Texas Intermediate: DOWN 67 cents at $54.99 per barrel
New York - Dow: DOWN 0.4 percent at 26,485.01 (close)