"There is a chance that we could end up having a major, major conflict with North Korea. Absolutely," the president told Reuters in an Oval Office interview ahead of his 100th day in office on Saturday (29 April).
The Trump administration is looking at a new array of economic sanctions against Pyongyang but is adamant on not taking the military option off the table.
"We'd love to solve things diplomatically but it's very difficult," he said, acknowledging that China may not be able to help defuse the situation.
On Wednesday, the Trump administration declared North Korea "an urgent national security threat and top foreign policy priority". The president, together with his top national security advisers, briefed US lawmakers on the threat at the White House.
The US has sent an aircraft carrier and a nuclear-powered submarine to East Asia in a show of force, causing concern in South Korea, China and Japan.
Is Kim Jong-un rational?
When asked by Reuters whether he considered North Korean leader Kim Jong-un to be rational, Trump said that he was operating on the assumption that he is, pointing out that Kim had taken over the leadership of the country at an early age.
"He's 27-years-old. His father dies, took over a regime. So say what you want but that is not easy, especially at that age.
"I'm not giving him credit or not giving him credit, I'm just saying that's a very hard thing to do. As to whether or not he's rational, I have no opinion on it, I hope he's rational," he told Reuters.
Trump says Xi Jinping is a 'very good man'
The president also lavished praise on Chinese President Xi Jinping, who he met in Florida in early April, for trying to rein in Kim.
"I believe he is trying very hard. He certainly doesn't want to see turmoil and death. He doesn't want to see it. He is a good man. He is a very good man and I got to know him very well."
Trump continued: "With that being said, he loves China and he loves the people of China. I know he would like to be able to do something, perhaps it's possible that he can't."
On his dealings with Taiwan, Trump appeared reluctant to irk Beijing again.
Taiwanese President Tsai Ing-wen had told Reuters that a direct phone call with Trump could take place again. Their first tele-conversation in December, 2016, a month after the president's election victory, was the first between the leaders of the US and Taiwan in 37 years.
Trump explains: "My problem is that I have established a very good personal relationship with President Xi. I really feel that he is doing everything in his power to help us with a big situation.
"So I wouldn't want to be causing difficulty right now. So I would certainly want to speak to him first," Trump said.