Asian markets extended a global sell-off on Tuesday following hefty losses on Wall Street that came in response to China’s hike in tariffs on $60 billion of US imports, ramping up tensions in a trade war between the global economic titans.
The move by Beijing was followed by a warning of further action such as dumping US Treasuries and came days after Washington more than doubled levies on $200 billion of Chinese goods and Donald Trump said he was looking at more than $300 billion more.
The stand-off has sent shockwaves through trading floors, where most dealers had a little over a week ago been confident the two sides were close to a deal.
World markets have rallied for most of the year on the back of optimism about an agreement.
Hong Kong led losses as the market reopened after a long weekend. The Hang Seng Index sank 1.7 per cent while Shanghai shed 0.7 per cent and Tokyo ended down 0.6 per cent, marking its seventh straight loss.
Sydney and Singapore each dropped 0.9 per cent, with Manila and Jakarta both down 1.4 per cent.
There were also losses in Taipei and Wellington, though Seoul edged up slightly.
In early trade London rose 0.3 per cent, Paris added 0.6 per cent and Frankfurt gained 0.2 per cent.
“Uncertainty and short-term sentiment impact is likely to stay,” Medha Samant, director of investment at Fidelity International, told Bloomberg TV.
“In the short term, it looks like volatility is here to stay and we could see this risk-off, risk-on going on for a long time.”
The retreat came after the Nasdaq on Wall Street suffered its worst day of 2019 and the Dow ended at its lowest point in more than three months.