Last week, China threatened to retaliate if President Trump’s planned tariff hikes go ahead.
China allowed its yuan to sink to an 11-year low, fueling concern Beijing might use its currency as a weapon in the tariff war.
Dow Jones industrial futures are down more than 300 points or 1.2 percent, S&P 500 futures fell 1.3 percent and Nasdaq futures plunged 1.7 percent.
Market benchmarks in London and Paris fell 2 percent while Tokyo closed down 1.6 percent. Hong Kong declined 2.9 percent and Frankfurt, Shanghai and Sydney also retreated.
Trump ratcheted things up last week with a surprise announcement of 10 percent tariffs on $300 billion of Chinese imports, effective Sept. 1.
Trump’s announcement surprised investors after the White House said Beijing promised to buy more farm goods. It came as their latest trade talks ended in Shanghai with no sign of a deal. Talks are expected to resume in September.
The S&P 500 ended the week down 3.1 percent, its worst performance since December, while the blue-chip index finished 2.6 percent lower, its worst week since May.
The tech-heavy Nasdaq Composite ended the week 3.9 percent lower.
Shares of Boeing and Caterpillar fell in the premarket.
Tariff threats are also impcting tech stocks such as Apple, Advanced Micro Devices, Nvidia, Micron Technology and Intel.
It will be another busy week for earnings. Dow member Disney will report Tuesday. In all, 59 companies in the S&P 500 will announce results.
On the economic agenda, investors will get a measure of the services sector on Monday and inflation-related reports during the week.
The Associated Press contributed to this article.