NEW YORK - Crude oil and global equity markets tumbled on Friday after U.S. President Donald Trump upped the ante in a trade dispute with China, reviving investor jitters about the impact a tariff war could have on the world economy.

MSCI's gauge of worldwide equity markets fell more than 1 per cent and stocks on Wall Street skidded more than 2 per cent after Trump threatened late on Thursday to add another US$100 billion of tariffs on Chinese goods.

China warned it was fully prepared to respond with a "fierce counter strike" of fresh trade measures if the United States follows through on Trump's latest threat.

The U.S. equity rout picked up during a speech by Federal Reserve Chairman Jerome Powell in Chicago on the U.S. economy. Powell said it was too early to tell if the threatened tariffs would materialize or the effect they might have.

"What Powell is signaling to market participants is that the Fed is not swayed or rattled by equity market volatility at this point. That's the reason for the additional selling pressure," said Chad Morganlander, a portfolio manager at Washington Crossing Advisors in Florham Park, New Jersey.

"The Fed has the intestinal fortitude to wait until it creeps into credit conditions and causes financial stress," he said.

The pan-European FTSEurofirst 300 index, which closed before Powell's speech, fell 0.4 per cent, but ended the week 1.15 percent higher.

The STOXX Europe index of companies in 17 European countries fell 0.35 per cent, with the trade-exposed auto sector the leading sectoral loser, down 1.7 per cent.

Earlier in Asia, Japan's Nikkei nudged down slightly to regain a measure of calm after an initial knee-jerk reaction to Trump's latest tariff proposal.

Defensive stocks such as utilities or telecoms were among a handful of European sectors to end the day in higher.

MSCI's all-country index of stock performance in 47 countries fell 1.2 per cent, led lower by Apple, Microsoft, Amazon.com and JPMorgan - the same as on the benchmark S&P 500 index.

On Wall Street, the Dow Jones Industrial Average closed down 572.46 points, or 2.34 per cent, to 23,932.76. The S&P 500 lost 58.37 points, or 2.19 per cent, to 2,604.47 and the Nasdaq Composite dropped 161.44 points, or 2.28 per cent, to 6,915.11.

The market's decline is due more to its current vulnerable state than the prospect of a trade war, said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

"It's got higher values; financial liquidity is contracting. You came into the year with a little too much optimism. You got rising rates going on, you got rising inflation fears," he said.

Powell said the U.S. central bank will likely need to keep raising interest rates to keep inflation under control.

A weak U.S. unemployment report, which nonetheless highlighted underlying labor market strength, helped push U.S. Treasury prices higher as the economy created the fewest jobs in six months in March.

Oil prices tumbled, with U.S. crude falling more than 2 per cent.

Brent crude futures fell US$1.22 to settle at US$67.11 a barrel, while U.S. West Texas Intermediate (WTI) crude futures settled down US$1.48 at US$62.06.

U.S. Treasury and euro zone government bond yields dipped as the trade spat raised the prospect of a full-blown trade war between the world's two largest economies.

The yield on 10-year German government debt, the euro zone benchmark, dipped 2.7 basis points in late trading to 0.494 per cent, erasing much of Thursday's rise.

Benchmark 10-year notes last rose 15/32 in price to push yields down to 2.7753 per cent.

Mike Terwilliger, portfolio manager of Resource Liquid Alternatives for the Resource Credit Income Fund, said nearly every news event seems to register on the market's Richter scale, though investors have been dealing with some relatively weighty challenges this year.

"The recent decline in Treasuries is largely 'Tweet related' versus some fundamental shift in the view of inflation or economic growth," he said.

The dollar index fell 0.37 per cent, with the euro up 0.36 per cent to US$1.2282. The Japanese yen firmed 0.45 per cent at 106.90 per U.S.dollar.

U.S. gold futures for June delivery settled up 0.6 per cent at US$1,336.10 an ounce.

CANADIAN MARKETS

Canada's main stock index fell on Friday in a broad-based decline led by energy and financial shares as renewed U.S.-China trade tensions stoked investors' worries.

The Toronto Stock Exchange's S&P/TSX composite index closed down 148.64 points, or 0.97 peR cent, at 15,207.41. For the week, the index fell 1.0 per cent.

Losses for the index came as U.S. stocks dropped about 2 per cent, with the Dow falling more than 570 points. U.S. President Donald Trump's latest tariff threat against Chinese imports fueled increasing concern about the prospect of a U.S. trade war with China.

The energy group fell 1.4 per cent as crude oil prices tumbled. U.S. crude oil futures settled 2.3 per cent lower at US$62.06 a barrel.

Financials, which account for more than one-third of the weight of the TSX, fell 1.1 per cent. Industrials declined 1.0 per cent as railroad shares lost ground.

Canadian Pacific Railway conductors and locomotive engineers voted to authorize a strike action that could have workers walk off the job as early as April 21, Teamsters Canada said in a statement. The company's shares were down 1.8 per cent at C$221.26.

All of the TSX's 10 main groups ended lower. The index posted one new 52-week high and two new lows.

The largest percentage gainer on the TSX was Torex Gold Resources Inc, which rose 51.0 per cent, while the largest decliner was NexGen Energy Ltd, down 8.7 per cent.

Among the most active Canadian stocks by volume were Neovasc Inc, up 45.5 per cent to $0.08; Aurora Cannabis, down 4.0 per cent to $8.10 and Nemaska Lithium, up 17.1 per cent to $1.37.