US President Donald Trump responded in a series of tweets, writing that “American companies are hereby ordered to immediately start looking for an alternative to China.”
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2 percent. Japan’s Nikkei lost 2.3%, while Shanghai blue chips fell 1.2%.
The Dow Jones Industrial Average fell 623.34 points on Friday, or 2.37 percent, to 25,628.9, the S&P 500 lost 75.84 points, or 2.59 percent, to 2,847.11 and the Nasdaq Composite dropped 239.62 points, or 3 percent, to 7,751.77.
“There is an uneasy feeling that the very fragile negotiations are spiraling out of control,” wrote analysts at ANZ in a note, according to a Reuters report.
“The escalation suggests uncertainty will continue to weigh on global trade, industrial production and investment, with no sign of a resolution.”
Oil prices also dropped on Monday on trade tensions between the world’s two biggest economies.
Brent crude was down 63 cents, or 1.1 percent, at $58.71 a barrel by 0232 GMT, having earlier touched $58.24, the lowest since August 15.
U.S. oil was down 68 cents, or 1.3%, to $53.49 a barrel, having earlier fallen to $52.96, the lowest since August 9.
“The only thing that will lift the storm clouds over oil markets this week will be if both China and the U.S. talk and decide to mutually take a step back,” Jeffrey Halley, a market analyst at Oanda, told Reuters. “I can’t see that happening.”
Middle East markets
Stock markets in the region fell on Sunday.
Saudi Arabia’s index dropped 2.4 percent as Islamic lender Alinma Bank fell 4 percent and Saudi Kayan Petrochemical Co lost 3.9 percent.
Dubai’s index dropped 1.9 percent with Emaar Properties retreating 3.9 percent. Abu Dhabi’s index shed 1.4 percent as Aldar Properties tumbled 4.1 percent.
The Egyptian index edged up 0.1 percent, as a 1.4 percent drop by Orascom Investment Holding was partly offset by a 3.7 percent spike in Egyptian Resorts Co.
Qatar’s index dropped 1 percent, Kuwait’s premier market index fell 1.7 percent while Bahrain’s index was flat and Oman’s index edged 0.2 percent lower.
The dollar dropped following the escalation in trade tensions.
The dollar index .DXY, which measures the greenback against a basket of six major currencies fell 0.47 percent on Friday.
On Monday, the yen surged to 104.46 per dollar, before paring gains to 104.70, up more than 0.5 percent.
Gold prices surged early on Monday.
Spot gold jumped 1.2 percent to $1,544 per ounce as of 0141 GMT, having earlier touched $1,554.56 an ounce, its highest since April 2013.
U.S. gold futures were up 1.1 percent at $1,554.90 an ounce.
(Reporting by Gerard Aoun; Editing by Mily Chakrabarty)
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