US President Donald Trump threatened to further increase tariffs on China on Monday, raising the possibility of further escalation in a trade war that has already wiped trillions of dollars from global markets.

Trump said he would impose an additional 50% duty on US imports from China on Wednesday if the world's No 2 economy did not withdraw the 34% tariffs it had imposed on US products last week. Those Chinese tariffs had come in response to 34% "reciprocal" duties announced by Trump.

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

The announcement injected further turbulence into global financial markets, which have fallen steadily since Trump's announcement. A 10% tariff took effect on all imports into the world's largest consumer market on Saturday, and targeted duties of up to 50% are due to snap into place on Wednesday.

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% drop from its February high.

Also Read: US starts collecting Trump's 10% tariff, smashing global trade norms

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%.

The European Union said it would start collecting retaliatory duties on some US goods next week, even as 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.

Trump aides say Trump is following through on a promise to reverse decades of trade liberalization that he believes has undercut the US economy. But they also said he is willing to negotiate with dozens of countries that have reached out for talks.

"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 Trump 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. Beijing called Trump's behaviour "economic bullying".

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

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

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."

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.

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

Also Read: Trump justifies tariff blow as 'necessary medicine' amid market rout

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 on Sunday 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 U.S. Federal Reserve cut rates as early as next month. Trump repeated his call for the central bank to lower rates on Monday, but Fed chief Jerome Powell has so far indicated he is in no rush.