China markets led losses in Asia on Tuesday after U.S. President Donald Trump fired a fresh salvo in the ongoing trade spat between the U.S. and China.
Trump said on Monday that he had asked the U.S. Trade Representative to identify $200 billion worth of Chinese products that will be subject to additional tariffs of 10 percent. Those tariffs will take effect if China did not “change its practices,” Trump added in a statement.
In turn, China said it would take countermeasures if the U.S. went ahead with the additional tariffs it had threatened.
Greater China markets dropped on the back of that news. Hong Kong’s Hang Seng Index fell 2.18 percent while on the mainland, the Shanghai composite fell 2.97 percent. The smaller Shenzhen composite sank more than four percent.
Other Asian markets were mixed, with Japan’s Nikkei 225 lower by 1.34 percent and South Korea’s Kospi declining 0.79 percent. Australian stocks, however, shrugged off those concerns to tack on 0.2 percent.
U.S. stock index futures were lower, with Dow Jones industrial average futures down 252 points in Asia morning trade. S&P 500 e-mini futures were lower by 0.94 percent.
Safe-haven plays like the Japanese currency firmed. The yen traded at 109.68 to the dollar at 12:25 p.m. HK/SIN, compared to the 110.5 handle seen during the New York session.
The elevated trade tensions between the U.S. and China have had investors nervous over the trade dispute between the world’s two largest economies having an effect on the broader economy.
“The threats will affect stock markets, obviously … But neither side has actually imposed any significant tariff so it’s hard to see this as a trade war. It’s more like a financial war,” Derek Scissors, Asia economist at American Enterprise Institute, told CNBC’s “Street Signs.”
Trump’s most recent tariff threat came after the U.S. on Friday announced that it would impose a 25 percent tariff on up to $50 billion of Chinese products. Tariffs on an initial list of goods worth some $34 billion will kick in on July 6.
In response, China announced tariffs on the same total value of products, with duties on $34 billion of U.S. goods expected to be implemented in July.
“There is a gradual adjustment taking place in markets- investors have gotten used to the stream of trade-related headlines coming out of the U.S. and are being more judicious in reacting to them,” Hannah Anderson, global market strategist at J.P. Morgan Asset Management, said in an email.
At the same time, with trade tensions now translating into action, investors were better off exercising a greater degree of discretion, she added.
On the commodities front, oil prices slipped after advancing on Monday. Analysts attributed the last session’s gains to reports that oil producers were discussing a smaller-than-expected increase in production.
Output cuts holding back some 1.8 million barrels per day have been in place since 2017 in a bid to prop up prices. Oil exporters, including Saudi Arabia and Russia, will meet in Vienna later this week to discuss those production limits.
Brent crude futures were lower by 0.78 percent at $74.75 per barrel and U.S. crude futures edged down by 0.67 percent to trade at $65.41.
Meanwhile, in corporate news, Japan’s Fujifilm Holdings sued Xerox on Monday for more than $1 billion after the latter dropped a proposed merger in May. Fujifilm shares fell 1.56 percent.
Elsewhere, shares of ZTE dropped more than 20 percent in Hong Kong after the U.S. Senate passed a bill that had implications for an agreement struck with the company to allow it to resume doing business with U.S. firms.