The US President said he would "love to solve things (the North Korean problem) diplomatically but it's very difficult".
"There is a chance that we could end up having a major, major conflict with North Korea, absolutely," he added.
Mr Trump was speaking during an Oval Office interview with Reuters ahead of his 100th day in office on Saturday.
The North Korea nuclear threat is one of the biggest challenges facing the Trump administration, with some experts saying the country could have a nuclear missile capable of reaching the US some time after 2020.
Mr Trump also praised Chinese President Xi Jinping, who he met in Florida earlier this month, for his efforts in deterring North Korea from its nuclear programme.
"I believe he is trying very hard," he told Reuters.
"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."
Meanwhile, Secretary of State Rex Tillerson has revealed China has warned North Korea that it will impose its own "sanctions actions" if there is another nuclear test.
Mr Tillerson was speaking to Fox News and his words suggest that China has made its toughest threat yet against its defiant neighbour and ally Pyongyang.
He said that China had asked North Korea not to conduct any more nuclear tests, adding: "In fact, we were told by the Chinese that they informed the regime that if they did conduct further nuclear tests, China would be taking sanctions actions on their own."
He did not give any details about what sort of sanctions those might be and there was no immediate comment from China.
China has previously called for more talks between the parties.
In February it banned North Korean imports of coal, which is Pyongyang's most vital export. China's media have said oil shipments to North Korea could also be restricted.
Meanwhile, Mr Tillerson has dismissed the idea that North Korea's leader Kim Jong-Un is crazy, indicating he might be someone who could be negotiated with.
He told Fox News: "He may be ruthless, he may be a murderer.
"He may be someone who, in many respects, we would say by our standards is irrational.
"But he is not insane."
Mr Trump was asked by Reuters if he considered Mr Kim to be rational, to which he replied: "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."
