Asia Pacific stocks tumbled in Monday morning trade following a re-escalation in U.S.-China trade tensions as President Donald Trump declared an impending increase in tariffs rates on $200 billion of Chinese goods.
The mainland Chinese markets plunged in morning trade. The Shanghai composite and Shenzhen composite both dropped more than 4% each, while the Shenzhen component plunged beyond 5%.
Over in Hong Kong, the Hang Seng index slipped 3.47%.
Australia’s ASX 200 dropped 1.01%, as almost all the sectors declined.
The MSCI Asia-ex Japan index also tumbled 1.95%, as of 10:43 a.m. HK/SIN.
Meanwhile, futures pointed to steep opening declines stateside. Dow Jones Industrial Average futures implied an opening decline of more than 500 points as of Sunday evening stateside. S&P 500 and Nasdaq-100 Index futures also pointed to declines for the two indexes at Monday’s open.
Trump said in a tweet Sunday afternoon that the current 10% levies on $200 billion worth of Chinese goods will rise to 25% on Friday. He also threatened to impose 25% tariffs on an additional $325 billion of Chinese goods “shortly.”
Meanwhile, China is considering cancelling its trade talks with the U.S. this week in light of Trump’s latest threats, sources told CNBC.
“President Trump set the tone for the new week expressing dissatisfaction at the pace of China trade negotiations amid Beijing’s attempt to renegotiate,” Rodrigo Catril, senior foreign exchange strategist at National Australia Bank, wrote in a morning note.
“An increase in tariffs would be bad news for risk assets and would (threaten) the prospect of a global growth recovery,” Catril said.
“This is reckless … most people thought we’d get something by the end of May,” said Greg Valliere, chief U.S. policy strategist at AGF Investments.
“There’s a risk this tactic could blow up on him. I don’t think the Chinese would like to get bullied,” Valliere said.
The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 97.526 after seeing highs above 97.8 last week.
The Japanese yen, widely seen as a safe-haven currency, strengthened to 110.54 against the dollar after seeing lows above 111.6 in the previous week.
The Australian dollar declined to $0.6972 after touching highs above $0.704 last week. The Aussie dollar is often seen as an investment proxy for China’s economic prospects, with the country being Australia’s largest trading partner.
The offshore Chinese yuan also declined 1.02% to 6.8011 against the dollar, from highs of around 6.72 last week. Its onshore counterpart changed hands at 6.7868 against the greenback, from around 6.73 last week.
Oil prices declined in the morning of Asian trading hours, with the international benchmark Brent crude futures contract dropping 2.06% to $69.39 per barrel. U.S. crude futures also fell 2.29% to $60.52 per barrel.