Japan’s Nikkei and Hong Kong’s Hang Seng saw the biggest drop, tumbling more than 2% and 1.5% respectively.
It comes after the White House said Trump had signed yesterday an executive order to increase a previously imposed 10% tariff on China, to 20%.
The US president also stressed that Canada and Mexico would not avoid being hit with 25% levies, causing US stocks to fall yesterday.
Canada responded today by putting 25% tariffs against US$155 billion worth of American goods.
Beijing also warned today that it would take countermeasures against new US tariffs on Chinese imports.
“China is strongly dissatisfied with this and firmly opposes it, and will take countermeasures to resolutely safeguard its own rights and interests,” a commerce ministry spokesman said in a statement.
Fears the retaliatory tariffs could escalate into a full-blown trade war, drove markets down across Asia today.
Japanese automakers with Mexican factories in their supply chain suffered, with Nissan (-2.11%), Toyota (-2.25%), or Honda (-2.12%) among the major losers.
Exchanges across Asia mirrored the downward trajectory, with Thailand, Australia, New Zealand and Taiwan dropping around 1%.
South Korea, the Philippines and Malaysia also fell.
“The spectre of a full-blown trade war is once again looming, threatening to choke global economic growth just as investors were starting to regain confidence,” said Stephen Innes, SPI Asset Management.
Investors are hoping China will announce a huge stimulus package at its key parliamentary meeting tomorrow, the National People’s Congress, to stimulate the economy.
“In the upcoming National People’s Congress, Chinese policymakers could provide more pro-growth measures including announcing a larger budget deficit target and maintaining a 5% growth target for this year,” said Lloyd Chan, from MUFG bank.
Trump expressed outrage yesterday over the weakening of certain currencies and accused Beijing and Tokyo of using it as a trade strategy – a claim fiercely refuted by the Japanese government.
The oil market also saw sharp declines with US WTI crude oil falling 0.54% to US$68 per barrel, and Brent crude from the North Sea dropping 0.77% to US$71.06 per barrel.
Bitcoin’s price plunged nearly 10% yesterday as concerns of an escalating trade war pushed investors to seek safer investments.
Bitcoin and similar digital assets had surged over the weekend after Trump suggested creating a national cryptocurrency reserve.
“Everything is getting sold,” Forexlive manager Adam Button said, adding that there’s a de-risking that’s unfolding” among crypto investors.