(Sharecast News) - Asia-Pacific markets tumbled sharply on Monday, led by a steep sell-off in Hong Kong, as renewed fears of a global trade war drove investors into risk-off mode.
The downturn followed last week's announcement of heavy tariffs on essentially all US imports and increasingly hawkish rhetoric from the Trump administration, which had signalled no retreat from its trade stance despite market turmoil.
"Asian stock markets are in a bloodbath on Monday, following another significant sell-off from Wall Street on Friday, amid ongoing concerns about a global trade war after China announced retaliatory tariffs on US goods in response to president Donald Trump's new levies, which could fuel inflation and harm the global economy," said TickMill market strategy partner Patrick Munnelly.
"China announced that a 34% tariff will be put on all imported goods from the United States beginning 10 April, while Canada and the European Union are also contemplating countermeasures.
"The new duty equals Trump's planned 'reciprocal tariff' on China, but when the new charges are combined with current duties, the country will face a 54% effective rate."
Munnelly noted that Beijing had described Trump's tariff plan as a "typical unilateral bullying practice" that was "inconsistent with international trade rules".
"In a post on Truth Social, Trump said that China 'played it wrong' and 'panicked', calling the action 'the one thing they cannot afford to do'.
Markets plunge across the region
The Hang Seng Index in Hong Kong plunged 13.22% to 19,828.30, its worst single-day drop in years.
Losses were led by WuXi Biologics, which fell 30.36%, Lenovo Group, down 28.89%, and BYD Electronic International, which dropped 29.15%.
The sell-off in Hong Kong outpaced declines elsewhere in the region, reflecting investor anxiety over the territory's exposure to escalating US-China tensions.
In Japan, the Nikkei 225 slumped 7.83% to 31,136.58, with technology and industrial shares among the hardest hit.
Yaskawa Electric plunged 20.22%, Renesas Electronics fell 16.67%, and Kawasaki Heavy Industries dropped 16.46%.
The broader Topix index was down 7.79%.
Mainland Chinese markets also faced heavy losses, with the Shanghai Composite falling 7.34% to 3,096.58 and the Shenzhen Component sinking 9.66%.
Several major Chinese tech firms, including Suzhou HYC Technology and ArcSoft Corp, lost 20% on the day.
South Korea's Kospi 100 fell 5.82% to 2,330.54, with double-digit losses for names like Hyundai Electric Energy Systems and SK Square.
In Australia, the S&P/ASX 200 declined 4.23% to 7,343.30, with resource and tech stocks leading losses.
New Zealand's S&P/NZX 50 dropped 3.68% to 11,775.88.
Currency markets reflected growing risk aversion, with the dollar last down 0.46% on the yen to trade at JPY 146.26.
The greenback was meanwhile 0.7% stronger against the Aussie to AUD 1.6672, as it advanced 0.53% on the Kiwi, changing hands at NZD 1.7963.
Oil prices were on the back foot, with Brent crude futures last down 3.51% on ICE at $63.28, and the NYMEX quote for West Texas Intermediate sliding 3.71% at $59.69.
Japanese government bond yields decline
The yield on five-year JGBs slipped to 0.761%, after touching an intraday low of 0.725%, the lowest since December, while the 10-year yield hovered around 1.405%, after briefly falling to a three-month low of 1.12%.
Falling yields typically signal stronger demand for government debt as investors seek safer assets.
In response to the shifting economic environment, Nomura downgraded its growth forecast for Japan's 2025 financial year to 0.6%, from a previous estimate of 0.9%.
Analysts at the bank warned that the impact of the tariff hikes would likely become more pronounced from the April-June quarter onward, due to weaker external demand and reduced export competitiveness in the US market.
Nomura estimated that Japanese real export growth could take a one percentage point hit, with overall GDP growth trimmed by 0.3 percentage points compared to a scenario without the tariffs.
While the forecast included a degree of uncertainty, the bank noted that the extent of the impact would depend in part on the availability of alternatives to Japanese goods in US supply chains.
Reporting by Josh White for Sharecast.com.
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