The escalation shook world markets as nervous investors looked for safe places to park their money. Wall Street suffered its worst day of the year, with the S&P 500 closing down nearly 3 percent.

Details: Yields on U.S. Treasuries, which fall as prices rise, dropped as investors sought safety in government-backed bonds. Benchmark indexes in Asia and Europe also fell.

Explainer: A weaker currency can make goods cheaper to sell abroad, allowing businesses and consumers to help offset the additional tariffs planned by the U.S. for September.

Context: In a tweet in July, Mr. Trump accused China and Europe of playing a “big currency manipulation game and pumping money into their system” in order to compete with the U.S.