Stock markets have dropped with tech shares leading the plunge as investors fretted over the risk that US President Donald Trump's trade policies could nudge the United States into recession.

On Wall Street, the tech-heavy Nasdaq fell more than 3.6 percent after Trump himself declined to rule out the risk of a US recession.

"I hate to predict things like that," he told Fox News on Sunday when asked directly about a possible recession this year.

"There is a period of transition because what we're doing is very big — we're bringing wealth back to America," he said, adding: "It takes a little time."

Responding to the market sell-off on Monday, a White House official said there was "a strong divergence between animal spirits of the stock market and what we're actually seeing unfold from businesses and business leaders."

The official, speaking on condition of anonymity, was referring to the tendency for emotions to drive investor behavior, in contrast to other economic conditions.

Trump's on-off tariff threats against Canada, Mexico, China and others have left the US financial markets in turmoil and consumers unsure what the year might bring.

"President Trump seems to have abandoned the US stock market and is willing to put his political vision above the near-term outlook for the US economy," said Kathleen Brooks, research director at trading platform XTB, in a note.

The Nasdaq was bogged down by retreats in the so-called Magnificent Seven tech stocks, which include Google parent Alphabet, Amazon, Meta and Nvidia.

Stocks in electric carmaker Tesla, owned by Trump's billionaire advisor Elon Musk, slumped by more than 11 percent.

"Unease about the effect of Trump's tariffs hangs over financial markets at the start of the week," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

"The prospect of a recession in the US is lurking, with consumer confidence falling, companies facing increasing trade complexity and investors turning more nervous."

David Morrison, senior market analyst at financial services firm Trade Nation, added: "Risk sentiment has soured as investors react to President Trump's various tariff announcements and as the US economic outlook begins to cloud over."

German spending plan

The London, Paris and Frankfurt stock markets all closed lower.

The European Union's trade commissioner Maros Sefcovic complained that "the US administration does not seem to be engaging to make a deal" to avoid tariffs against the 27-nation bloc.

Brooks of XTB said investors were also reacting to news that Germany's chancellor-in-waiting, Friedrich Merz, could face opposition to a massive spending plan that boosted markets last week.

Germany's Green party said on Monday it would not give the votes necessary for Merz's proposals to partially lift spending limits on defence and establish a $540-billion infrastructure fund.

Tokyo earlier finished higher, but Hong Kong and Shanghai stock markets fell after weekend data from China showed that consumer prices fell 0.7 percent in February, the first drop in 13 months.

"The data only reinforces what's been clear for months -- deflationary pressures remain firmly entrenched in the world's second-largest economy, " said Stephen Innes at SPI Asset Management.

Beijing's retaliatory duties on certain US agricultural goods came into force on Monday after Chinese products were hit with 20 percent US tariffs.