Asian markets tumble with China, US towards trade war

US President Donald Trump (NICHOLAS KAMM / AFP)
US President Donald Trump (NICHOLAS KAMM / AFP)

Hong Kong - Hong Kong and Shanghai stocks led a sell-off across most Asian markets Tuesday on rising trade war fears after Donald Trump threatened fresh tariffs on Chinese imports and Beijing warned of countermeasures.

Investors were already on edge after the world's top two economies on Friday announced tit-for-tat measures on goods valued at about $50bn as the US president pushes ahead with his protectionist America First agenda.

Trump said he had asked the US Trade Representative to identify $200bn worth of imports to be targeted, adding he would hit a further $200bn if Beijing retaliates.

"The trade relationship between the United States and China must be much more equitable," he said in explaining his decision.

China slammed the threats as "blackmail" and warned that if the US followed through with the tariffs it would "have no choice but to take comprehensive measures of a corresponding number and quality and take strong, powerful countermeasures".

The development took some by surprise and stoked fears of a potentially damaging trade war between the economic superpowers.

"That was quick and sudden, reminding us just how quickly things can get right out of hand," said Stephen Innes, head of Asia-Pacific trading at OANDA.

"Indeed, this is moving beyond 'tit-for-tat' levels and, predictably, investors are running for cover under the haven umbrellas as global equity indices are crumbling under the weight of an escalating trade war.

"Buckle up as this could get messy."

Hong Kong and Shanghai each plunged more than 2% in the morning session as traders returned from a long weekend.

Hong Kong-listed shares in Chinese telecoms equipment maker ZTE plunged more than 20% after US senators voted to reimpose a seven-year ban on hi-tech chip sales to the company.

The move defied the White House's decision this month to replace the ban with a $1.4bn fine, providing a lifeline to the firm, which was threatened with collapse as it relies on the crucial US hardware.

ZTE has now lost around 60% since trading in it resumed last week after a two-month suspension that came in following the initial ban.

Tokyo ended the morning session 0.9% lower while Seoul sank 0.8%, Taipei fell 1.4% and Manila lost 1.7%. However, Sydney rose 0.4% and Singapore edged 0.1% higher.

"Will it escalate from here? We'd certainly hope not, but it's certainly a risk," Craig Vardy, head of fixed income in Australia for BlackRock, said.

"The numbers we think at the moment are pretty small. These are just warning shots going across the bows as some of these countries try and correct some of the trading numbers."

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