Beijing on Thursday planned to impose a new security law in Hong Kong, raising prospects of fresh protests in the global financial hub and drawing a warning from US President Donald Trump that Washington would react "very strongly".
Rising tensions between the world's two largest economies have stalled a recovery in equity markets in recent weeks after Trump accused China of mishandling the coronavirus outbreak.
The pan-European STOXX 600 fell 1.4pc, with Asia-exposed stocks such as HSBC Holdings Plc tumbling 5pc and Prudential Plc sliding 8.3pc.
UK's FTSE 100 lagged its European peers with a 1.8pc drop.
"The China-Hong Kong dispute has deepened losses, but it is a relatively slow moving issue," said Chris Bailey, European strategist at Raymond James.
"With the long weekend coming, people's propensity to close positions have been increased, resulting in some profit taking."
Most markets in UK and the US are closed on Monday for public holidays.
Oil stocks and miners were among the top decliners as commodity prices took a hit after China dropped its annual growth target for the first time, stoking concerns that the pandemic will overshadow demand in the world's second-largest oil user.
Luxury goods makers including LVMH and Kering SA , which draw a major part of their revenue from China, fell about 2pc.
Shares in France's Renault SA slid 4.1pc after Finance Minister Bruno Le Maire said he had not signed off on a 5 billion euros ($5.47 billion) state-guaranteed loan to help the company cope with the pandemic fallout.
Shares in Britain's Burberry rose 2.7pc after its chief executive officer said the company was encouraged by a "strong rebound in some parts of Asia" and is well-prepared to navigate through the COVID-19 situation despite reporting a fall in first-quarter sales.
Despite Friday's weakness, the STOXX 600 is on course to end the week with a modest 2pc gain amid hopes that a COVID-19 treatment and easing of coronavirus-driven lockdowns will spur a swifter economic recovery.