European leaders warned on Monday that U.S. President Donald Trump's threat to expand tariffs to the EU risked setting off a trade war that would cause economic harm on both sides of the Atlantic.

European stocks tumbled Monday on the back of sharp falls on Asian bourses overnight as fears of a global trade war escalated after the European Union said it would respond in kind if the United States imposed tariffs.

But if Mr Trump hits Europe with hefty tariffs, as he has just done on Canada, Mexico and China, the EU will aim to find common ground and respond with a mix of playing tough, giving in and embracing a degree of drama.