Trump had threatened on Thursday last week to raise tariffs by 10 percent on another $300 billion in Chinese exports to the US, after US-Chinese trade talks in Shanghai failed to lead to progress.
“Given the fragile state of markets, this is likely to be viewed as an escalation of the trade war and exacerbate the market sell-off,” wrote Steve Englander, head of global G10 FX research at Standard Chartered Bank, according to a Reuters report.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.5 percent early on Tuesday to its lowest level since January.
Overnight on Wall Street, the Dow Jones Industrial Average fell 767.27 points, or 2.9%, to 25,717.74, the S&P 500 lost 87.31 points, or 2.98%, to 2,844.74 and the Nasdaq Composite dropped 278.03 points, or 3.47%, to 7,726.04.
Oil prices traded lower on Monday as an escalating trade war between the world’s biggest two economies hit investor sentiment.
Brent crude fell $2.08, or 3.36 percent, to settle at $59.81 a barrel.
U.S. West Texas Intermediate (WTI) crude futures fell 97 cents, or 1.74 percent, to settle at $54.69 a barrel.
Prices edged up early on Tuesday by close to 0.2 percent, failing to recover most of the losses.
“Oil prices can’t shake off falling demand concerns, as China’s latest escalation with devaluing the yuan and limiting U.S. agricultural purchases derail hopes for a trade deal to be reached this year,” Edward Moya, senior market analyst at OANDA in New York, told Reuters.
“Right now markets are ignoring the Middle East situation, but if we see the situation in the Persian Gulf remain volatile and if U.S. inventories extend their streak of declines, oil should see some support here,” Moya added.
US crude oil exports surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd.
Middle East markets
Saudi Arabia’s stock market index fell 1.1 percent weighed down by the banking sector. Banque Saudi Fransi shed 3.6 percent.
In Dubai, the index fell 2 percent with Dubai Islamic Bank slipping 2.1 percent and Emaar Properties, dropping 3.3 percent.
In Abu Dhabi, the index was down 1.9 percent. Market heavyweight lender First Abu Dhabi Bank dropped 2.2 percent, while Emirates Telecommunications Group lost 2.6 percent.
Qatar’s index plunged 4.2 percent with Qatar National Bank dropping 6 percent, while petrochemical maker Industries Qatar fell 5.8 percent.
Egypt's blue-chip index EGX30 edged 0.1 percent lower with Qalaa Holdings losing 4.3 percent.
Kuwait’s premier market index was flat, Bahrain’s index dropped 0.3 percent and Oman’s index edged up 0.2 percent.
The Japanese yen, perceived as a safe haven, touched a seven-month high of 105.520 per dollar before slipping back to 106.290.
The euro rose 0.3% versus the dollar to $1.1238, its strongest level since July 19.
Spot gold advanced to a six-year peak of $1,474.80 an ounce as investors shifted from risky assets to safe havens.
(Reporting by Gerard Aoun; Editing by Seban Scaria)
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