NEW YORK (Reuters) - 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 percent and stocks on Wall Street skidded more than 2 percent after Trump threatened late on Thursday to add another $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 percent but ended the week 1.15 percent higher.

A trader on the floor of the New York Stock Exchange watches the stock market drop on his screen shortly before the closing bell in New York, U.S., April 6, 2018. REUTERS/Lucas Jackson

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

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 percent, 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 percent, to 23,932.76. The S&P 500 lost 58.37 points, or 2.19 percent, to 2,604.47 and the Nasdaq Composite dropped 161.44 points, or 2.28 percent, 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 percent.

Brent crude futures fell $1.22 to settle at $67.11 a barrel, while U.S. West Texas Intermediate (WTI) crude futures settled down $1.48 at $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 percent, erasing much of Thursday’s rise.

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

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 percent, with the euro up 0.36 percent to $1.2282. The Japanese yen firmed 0.45 percent at 106.90 per dollar.

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