Brent crude futures fell 0.8 percent to $74.76 a barrel after rallying 2.5 percent overnight, while US light crude futures retreated 0.9 percent to $65.27. Britain's FTSE 100 gained 0.9 percent to 7,668.

Global stock markets skidded Tuesday after President Donald Trump threatened to put tariffs on another $200 billion in imports from China, and the Chinese government said it would retaliate, bringing tensions between the world's two largest economies closer to a boil.

Investors are also assessing the impact of tightening monetary policy by central banks after the US Federal Reserve raised interest rate last week and the European Central Bank said it planned to end its bond-purchase program at year-end.

Earlier Tuesday, the official Opposition called for an emergency debate in the House of Commons over the future of Canada-U.S. trade relations.

Hong Kong stocks were also hit hard, with the benchmark Hang Seng index dropping almost 3 percent to its lowest closing level in six months.

Aerospace company Boeing dropped 3.5 percent to $342.37 and construction and mining equipment maker Caterpillar shed 3.4 percent to $143.58.

Boeing, the single largest USA exporter to China, slipped 0.8 percent, while construction equipment maker Caterpillar fell 1.3 percent.

Oil prices were under pressure as China's retaliatory tariffs included USA crude oil.

"There are trade frictions not only between the USA and China but also between the U.S. and its allies".

Japan's Nikkei lost 1.8 percent, South Korea's KOSPI retreated 1.3 percent while Australian stocks bucked the trend and added 0.1 percent helped by a depreciating currency and an overnight bounce in commodity prices.

"When you get in a fight with your biggest buyer of agriculture, and the world's largest soybean buyer (China), even if (it) were to buy 20 percent less, it's a big deal", said Dan Basse, president of Chicago-based consultancy AgResource Co. Major stock indexes in Asia and Europe also took sharp losses.

The Trump administration on June 15 said that it will impose a 25 per cent tariff on $50 billion of Chinese exports. More than 800 exports, about $34 billion worth, will be subject to tariffs starting July 6.

Stirring memories of the 2015 equity market crash, more than 1,000 stocks slumped by their 10 percent daily limit as Chinese investors dumped stocks across the board, which sent jitters through China's retail investment community.

Its Hong Kong-listed shares tumbled 25 percent to a two-year-low in morning trade, while its Shenzhen shares fell by their daily limit of 10 percent for a fourth consecutive session.

The Canadian dollar averaged 75.32 cents USA, down 0.39 of a United States cent, as it continues to face the twin pressures of rising U.S. rates and trade fears, especially related to NAFTA. The yield on the USA 10-year Treasury fell to 2.89 percent from 2.92 percent.

Global stock markets fell with USA bond yields and agricultural commodities on Tuesday, while the dollar rose and investors flocked to safety in the face of a rapidly escalating U.S.

Futures are showing the Dow Jones industrials and S&P 500 each headed for a decline of at least 1 percent.

Neither the $200 billion tariff plan announced by Trump earlier this week nor the $50 billion tariffs slapped on US goods by China last week have mentioned Apple or the iPhone.

US tariffs on Chinese products including steel, aluminium, and those that benefit from China's industrial development subsidy programmes including the "Made in China 2025" technology upgrade plan, could hurt a broad number of China-listed companies, said fund manager Dai, who is general manager of Shanghai Wisdom Investment.

USA long-dated Treasury yields were volatile after a hectic week when the Federal Reserve struck an upbeat tone on the US economy.