World stock markets sank again yesterday on heightened China-US tensions before make-or-break trade talks in Washington, dealers said.

The two-day gathering has taken on huge significance after US President Donald Trump threatened to more than double punitive tariffs on $200 billion of imports today, arguing that Beijing “broke” their previously agreed commitments on trade.

European stocks continued firmly in the red in the afternoon, getting no comfort from Wall Street where the Dow Jones index also fell at the opening bell.

“US stocks are lower in early action, with trade worries festering as the US and China are set to resume talks, while the US has threatened to increase tariffs on Chinese goods tomorrow,” brokers Charles Schwab said in a note. 

Chinese trade envoy Liu He returns to the bargaining table in the US capital yesterday under a tense atmosphere with far-ranging ramifications for the world's two biggest economies.

Beijing has rejected US accusations of backtracking and warned it would not “capitulate to any pressure” as the pair enter into eagerly-awaited negotiations.

“Stocks have endured a major sell-off... as trade tensions between the US and China have ratcheted up,” said CMC Markets analyst David Madden.

“President Trump claims that China ‘broke the deal’, and traders have taken that as a sign that the relationship between Washington DC and Beijing is going to get worse.

“Trade discussions between the two sides will continue today, but investors are not holding out much hope,” Madden added.

In Asia yesterday, Hong Kong stocks were hammered more than two per cent while Shanghai ended 1.5 per cent lower and Tokyo sank 0.9 per cent.

Trump's remarks have battered global equities and fuelled fears the economic superpowers who appeared just last week to be nearing a deal could become entangled in a brutal trade war with worldwide consequences.

For its part, Beijing said an escalation was “not in the interests of the two countries' people” but warned it would impose “necessary countermeasures” if the tariffs were more than doubled today.

Fears of a worsening trade crisis sent many investors scurrying to haven assets like the yen and gold, dealers said.

“Global equities along with US stock futures continue to face pressure with time running out for U.S tariffs to escalate between the world's two largest economies,” noted Oanda analyst Dean Popplewell.

“Safe haven trading dominates proceedings with yen, gold and sovereign debt climbing as investors continue to seek sanctuary.”