Asian stock markets plunged in early trading Monday as trade negotiations between the U.S. and China appeared to be on the verge of collapse.

Early Sunday, President Donald Trump tweeted that he would raise tariffs on $200 billion of Chinese goods from 10% to 25% this week, apparently taking Chinese officials by surprise. In response, China may withdraw from the next round of trade talks scheduled to begin Wednesday in Washington. U.S. officials had indicated progress had been made at talks last week in Beijing, and said it was possible a deal could be reached by the end of this week.

But the sudden hard line by Trump spooked investors. U.S. stock market futures sank, with Dow Jones Industrial Average futures

YMM9, -2.01%

 , S&P 500 futures

ESM9, -1.98%

  and Nasdaq Composite futures

NQM9, -2.26%

  all falling around 2% by Sunday night.

Hong Kong’s Hang Seng Index

HSI, -3.31%

  dropped 3.7% Monday morning. The Shanghai Composite

SHCOMP, -5.19%

  fell 5.1% and the smaller-cap Shenzhen Composite

399106, -5.22%

  plunged about 6%. Australia’s S&P/ASX 200

XJO, -0.90%

  was down 1.1%, and benchmark indexes in Taiwan

Y9999, -1.88%

 , Singapore

STI, -3.57%

  and Indonesia

JAKIDX, -0.86%

  declined as well. Japan’s Nikkei and South Korea’s Kospi were closed for holidays.

Losses were spread across all sectors in Hong Kong, with Geely Automotive

0175, -7.52%

 , food processor WH Group

0288, -8.61%

  and Apple supplier AAC Technologies

2018, -7.92%

  among the biggest decliners. CSPC Pharmaceutical

1093, -6.83%

  and China Life Insurance

2628, -7.62%

  also sank. Apple manufacturer Foxconn

2354, -3.86%

  and Taiwan Semiconductor

2330, -2.45%

  dropped in Taiwan. In Australia, Beach Energy

BPT, -3.37%

  and Westpac Banking

WBC, -1.51%


“Arguably, Trump’s threat to lift tariffs ‘shortly’ if Beijing does not play ball on U.S. trade demands, may be more a negotiations tactics than an imminent trade action,” Mizuho Bank said in a commentary. “Nonetheless, Trump’s tweet allusions to tariffs being ‘partially responsible for … great (U.S.) economic results’ does raise the threat of misguided trade policy” from the U.S, it said.

After posting a second straight losing week Friday, crude oil prices continued to fall Monday. U.S.-based West Texas Intermediate crude for June delivery

CLM9, -2.41%

  was down more than 2% and global benchmark July Brent crude

LCON9, -2.23%

  fell by almost as much.

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