The German and French stock markets fell by approximately 2%, with carmakers' shares being among the hardest hit. London's FTSE 100 also dropped by over 1%.
The US dollar strengthened on the currency markets, reaching a record high against China's yuan, while the Canadian dollar plummeted to lows not seen since 2003.
Investors are preparing for a turbulent period that could impact major companies' earnings and global growth.
Canada and Mexico face 25% tariffs on their exports to the US, while Chinese goods will encounter an additional 10% levy on top of existing tariffs.
President Trump claims the tariffs are essential to curb illegal drug trafficking and immigration into the US.
Trump hinted at imposing tariffs on the EU, stating that the UK is "out of line," yet suggesting a potential deal.
Investors are concerned about the possibility of a full-blown trade war, remarked Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Carmakers witnessed significant declines due to their vulnerability to tariff disruptions.
Toyota shares in Japan fell by 5%, Honda by 7.2%, Stellantis in Europe (Chrysler, Citroen, Fiat, Jeep, and Peugeot) by 7%, and VW by 6%.
Diageo, a drinks maker exporting tequila from Mexico to the US, saw a 3% drop in its shares.
Russ Mould, investment director at AJ Bell, noted a widespread market decline.
Tariffs could lead to increased inflation, halting further interest rate cuts and potentially dampening economic activity.
The expectation of prolonged higher interest rates bolstered the dollar's strength.
In addition to the dollar's rise against the yuan and the Canadian dollar, the euro depreciated to a two-year low against the US dollar.
Oil prices climbed post-tariff news, amid speculation on the impact of tariffs on Canada and Mexico, major US oil import sources.
Brent crude oil prices rose about 1% to $76.50 per barrel.
The newly imposed tariffs target the US's top three trading partners.
Charu Chanana, chief investment strategist at Saxo bank, cautioned about the long-term risks of tariffs despite short-term benefits.
Trump plans to discuss tariffs with Canadian and Mexican leaders before they go into effect at midnight on Tuesday.