A global trade war touched off by Donald Trump's sweeping tariffs has escalated further, as the US president threatened to increase duties on China and the European Union proposed counter-tariffs of its own.

Financial markets across the globe posted a third day of losses as investors worried that steep trade barriers around the world's largest consumer market could lead to a recession. The S&P 500 closed lower after a rollercoaster session in which it touched its lowest level in more than a year.

Trump said the tariffs – a minimum of 10 per cent for all US imports, with targeted rates of up to 50 per cent – would help the United States recapture an industrial base that he says has withered over decades of trade liberalisation.

Trump says he won’t pause tariff plan as global markets plunge. – AP

"It's the only chance our country will have to reset the table. Because no other president would be willing to do what I'm doing, or to even go through it," he told reporters at the White House. "Now, I don't mind going through it because I see a beautiful picture at the end."

Trump spoke hours after he ratcheted up a confrontation with China, the world's No.2 economy.

Trump said he would impose an additional 50 per cent duty on US imports from China this week if Beijing did not withdraw the 34 per cent tariffs it had imposed on US products last week. Those Chinese tariffs had come in response to 34 per cent "reciprocal" duties announced by Trump.

"All talks with China concerning their requested meetings with us will be terminated!" he wrote on social media.

Beijing responded with defiance. Trump's threat was a "typical move of unilateralism, protectionism and economic bullying," Chinese embassy spokesperson Liu Pengyu said.

"We have stressed more than once that pressuring or threatening China is not a right way to engage with us," he added. "China will firmly safeguard its legitimate rights and interests."

The European Commission, meanwhile, proposed counter-tariffs of 25 per cent on a range of US goods, including soybeans, nuts and sausages – though other potential items like bourbon whiskey were left off the list.

Analyst: 'Game changer' tariff turmoil: 'Where do we go from here?' – Reuters

Officials said they stood ready to negotiate a "zero for zero" deal with Trump's administration.

"Sooner or later, we will sit at the negotiation table with the US and find a mutually acceptable compromise," EU Trade Commissioner Maros Sefcovic said at a news conference.

The 27-member bloc is struggling with tariffs on autos and metals already in place, and faces a 20 per cent tariff on other products on Wednesday. Trump has also threatened to slap tariffs on EU alcoholic drinks.

US Treasury Secretary Scott Bessent met with Trump in Florida on Sunday, Politico reported, to urge him to emphasise striking trade deals with partners in order to reassure the markets that there is an endgame to the US strategy.

Trump said his administration would open trade talks with Japan, one of Washington's closest allies in Asia, and administration officials say dozens of other countries have reached out as well with the hope of heading off the tariffs as high as 50 per cent due to take effect on Wednesday.

The back-and-forth injected further turbulence into global financial markets, which have fallen steadily since Trump's announcement.

Analyst: Markets fear "terrible" global recession, US should touch pause button. – Reuters

Trump administration officials say the president is following through on a promise to reverse decades of trade liberalisation that he believes has undercut the US economy.

"He's doubling down on something that he knows works, and he's going to continue to do that," White House economist Kevin Hassett said on Fox News.

"But he is also going to listen to our trading partners, and if they come to us with really great deals that advantage American manufacturing and American farmers, I'm sure he'll listen."

China's retaliatory levies are the firmest response yet to Trump's announcement, which has been met with bewildered condemnation from other leaders.

After stocks in mainland China and Hong Kong cratered on Monday, China's sovereign fund stepped in to try to stabilise the market.

Japan PM says he told Trump to rethink tariff policies. – AP

Shares in Taiwan plummeted almost 10 per cent – the biggest one-day percentage fall on record.

The announcement injected further turbulence into global financial markets, which have fallen steadily since Trump's announcement. 

US stocks briefly stopped their downward slide after a report that Trump was considering a 90-day tariff pause, then turned negative again after the White House dismissed the report as "fake news". The S&P 500 index was headed toward a 20 per cent drop from its February high.

Asian and European shares also plunged as investors feared the duties Trump has likened to "medicine" could lead to higher prices, weaker demand and potentially a global recession. Goldman Sachs raised the odds of a US recession to 45 per cent.

Wall Street leaders issued warnings on US tariffs, with JPMorgan Chase CEO Jamie Dimon saying they could have lasting negative consequences, while fund manager Bill Ackman, said they could lead to an "economic nuclear winter."

Asian markets plunge after the big meltdown on Wall St. – AP

Ackman is one of a handful of Trump supporters who questioned the strategy. Billionaire Elon Musk, who is leading Trump's effort to slash government spending, called for zero tariffs between the US and Europe over the weekend.

Trump trade adviser Peter Navarro dismissed the Tesla CEO as a "car assembler."

Tactics or new regime?

Investors and political leaders have struggled to determine whether Trump's tariffs are part of a permanent new regime or a negotiating tactic to win concessions from other countries.

Some in the EU worry that a forceful response risks even more blowback on European exporters of everything from French Cognac and Italian wine to German cars.

Volkswagen's Audi is holding back cars that arrived in US ports after April 2 because of the newly imposed 25 per cent autos tariff.

Aircraft parts supplier Howmet Aerospace may halt some shipments if they are impacted by tariffs, according to a letter seen by Reuters.

Prime Minister Shigeru Ishiba of Japan, one of Washington's closest allies in Asia, held a phone call with Trump to push for a deal and said he would visit Washington at an appropriate time.

Other governments in Asia have also signalled a willingness to engage.

Taiwan's President Lai Ching-te has offered zero tariffs as the basis for talks, while an Indian government official said Delhi does not plan to retaliate.

Investors are now betting the growing risk of recession could see the US Federal Reserve cut rates as early as next month. Trump today repeated his call for the central bank to lower rates, but Fed chief Jerome Powell has so far indicated he is in no rush.