While less severe in Europe, investors continued to react as the FTSE 100 dropped 1.2% on Thursday to its lowest level since December 2016.
On Friday morning, the Euro Stoxx 50 index fell 1.6%, while the FTSE 100 was also down 0.9%, respectively.
China responded to Trump’s confirmation by announcing its own plans to place tariffs on $3bn of US imports, including fresh fruit and wine.
In a statement, it said: “China will never sit idly and let its lawful rights and interests be undermined and will surely take all necessary measures to firmly safeguard its legitimate rights and interests.
“We hope that the US can be fully aware of the mutually beneficial and win-win nature of China-US economic and trade relations and refrain from moves that will hurt both itself and others.”
The response saw US indices Dow Jones and S&P 500 drop 2.9% and 2.5%.
Adrian Lowcock, investment director at Architas said the level of tariffs introduced by the US are “lower than expected” and China’s response is “very restrained.”
He said that trade wars have a way of escalating quickly, especially as Trump has shown he doesn’t like to back down and as such, things could spiral before politicians are able to negotiate.
Kames Capital’s chief investment officer Stephen Jones argued that it could just be “more noise than substance”.
He said while Trump’s decision to disrupt trade flows could be a threat to long term economic growth, it is something Kames think is unlikely.
“The operating model of President Trump is to shout loud and then row back on implementation,” he added.
“This is already happening quietly with exemptions around steel and aluminium tariffs, where NAFTA members are exempt, and where there is scope for a delay in implementation with the EU.
“Whilst the situation may be tougher with China and when dealing with a wider range of goods, there is every chance that the past pattern of behaviour wins out.”
Global growth still healthy
Investors could use market sell-offs invest in areas such as emerging markets as they are “ripe for potential profit”, according to Lowcock.
He said: “Markets have started to price in the potential impact of a trade war but there is the potential for further sell-offs if things escalate. Any sell-off is likely to create potential investment opportunities as global growth is still healthy.
“Investors should ensure they have some protection should things deteriorate while being prepared to take advantage of the inevitable opportunities that market volatility will throw up.”