Tensions grew after Washington rejected Beijing's disputed claims to the region.
The Trump Administration also plans to scrap a 2013 auditing agreement that could indicate a broader crackdown on U.S.-listed Chinese firms.
Stocks slipped, oil sagged and a safety bid supported the dollar.
Optimism was also capped by new lockdowns in California just as earnings season gets underway.
MSCI's All-Country World Index edged down 0.4%, after touching a 20-week high on Monday (July 13).
The pan-European STOXX 600 fell 1.3%, with technology stocks dropping 3.2%, on course for their biggest one-day selloff in over a month.
Software giant SAP was one of the biggest drags on the index, down over 4 percent.
One gainer though was German meal-kit delivery firm Hellofresh.
It added as much as 4.3% as it raised its full-year revenue forecast.
Chinese stocks were down despite better-than-expected trade numbers.
Global infections have surged by a million in five days, and top 13 million.
Oil prices reflected concerns over that.
New restrictions could threaten a recovery in fuel demand just as OPEC+ producers prepare to increase output from August.
U.S crude futures fell as much as 1.5% before regaining some ground.