Futures markets moved swiftly to price in almost five quarter-point cuts in US rates this year, pulling Treasury yields down sharply and hampering the dollar on safe havens.
The carnage came as Trump told reporters that investors would have to take their medicine and he would not do a deal with China until the US trade deficit was sorted out. Beijing declared the markets had spoken on their retaliation plans.
The pain engulfed Europe, with the broad Stoxx 600 down 5.3 per cent and Germany's Dax plummeted by around 10 per cent at the start of trading on Monday.
Recent market darlings were particularly hurt as investors were forced to sell what they owned. Defence stocks tumbled 11.5 per cent with Rheinmetall down 21 per cent.
European banks were on pace to confirm a bear market with Commerzbank and Deutsche Bank shedding 10.7 per cent and 10 per cent, respectively.
In Asia, the Hang Seng's 12 per cent drawdown in Hong Kong was the largest since the height of the global financial crisis in 2008.
In mainland China, the blue-chip CSI 300 index was down more than seven per cent, finding a floor only when state media reported China's sovereign fund Central Huijin was a buyer.
Japan's Nikkei sank 7.8 per cent to hit lows last seen in late 2023, while South Korea dropped five per cent. MSCI's gauge of Asia-Pacific shares fell a gut-wrenching 7.8 per cent to head for its largest single-day drop since 2008.
All of emerging Asia was also under water, with India's Nifty 50 sinking four per cent.
The gloomier outlook for global growth kept oil prices under heavy pressure, following steep losses last week.
Brent fell $US2.20 to $US63.40 a barrel, while US crude dived $US2.75 to $US59.23 per barrel.
The flight to safe havens saw 10-year Treasury yields drop nine basis points to 3.90 per cent, while Fed fund futures jumped to price in an extra quarter-point rate cut from the Federal Reserve this year.
Markets swung to imply around a 54 per cent chance the Fed could cut interest rates as soon as May, even though Chair Jerome Powell on Friday said the central bank was in no hurry.
That dovish turn saw the dollar slip another one per cent against the safe-haven Japanese yen to 145.16 yen, and 1.45 per cent on the Swiss franc to 0.8484.
The euro rose 0.5 per cent to $US1.1005, seemingly benefiting from some nervousness about the US dollar, though the trade-exposed Australian dollar dropped a further 0.5 per cent.
Investors were also betting that the imminent threat of recession would outweigh the likely upward shove to inflation from tariffs.
US consumer price figures out later this week are expected to show another rise of 0.3 per cent for March, but analysts assume it is just a matter of time before tariffs push prices sharply higher, for everything from food to cars.
Rising costs will also put pressure on company profit margins, just as the earnings season gets underway with some of the big banks due on Friday. Around 87 per cent of US companies will report between April 11 and May 9.
"We expect during upcoming quarterly earnings calls fewer companies than usual will provide forward guidance for both 2Q and full-year 2025," analysts at Goldman Sachs said in a note.
"Rising tariff rates will force many companies to either raise prices or accept lower profit margins," they warned. "We expect negative revisions to consensus profit margin estimates in coming quarters."
Even gold was swept up in the sell-off, easing 0.3 per cent to $US3,026 an ounce.
with AP and DPA
