Major stock markets across Asia Pacific region sank Monday amid mounting fears of a renewed trade war between the world’s two largest economies, after US President Donald Trump threatened to impose new triple-digit tariffs on Chinese imports.
Trump’s threat followed Beijing’s tightening of its control on rare earths, a group of critical minerals essential in the production of a wide range of electronics, automobiles and semiconductors. China dominates the global rare earth supply chain.
Those restrictions came after the US introduced a slew of its own export controls targeting China in late September, despite the two sides seemingly making progress in trade talks over the summer.
China’s sweeping new restrictions, some of which won’t take effect until November, could deal a huge blow to East Asian economies, such as Japan, South Korea and Taiwan, which play critical roles in the global tech and artificial intelligence supply chain, as well as the auto industries.
In early trade Monday, Hong Kong’s benchmark Hang Seng Index, dominated by some Chinese financial and tech firms, sank 2.4 percent. China’s Shanghai composite index fell 1.6 percent. South Korea’s benchmark index KOSPI lost 1.5 percent. Taiwan’s TAIEX slid 2.3 percent. Australia’s S&P/ASX 200 dropped 0.5 percent. But losses have eased in the hours after opening.
The Tokyo stock exchange was closed on Monday for a public holiday.
Trump appeared to have been caught off guard by China’s latest “hostile” move and on Friday said he would impose an additional 100 percent tariff on Chinese goods starting November 1, immediately reigniting the prospect of a damaging trade war between the world’s two top economies.
The new tariff would raise total duties on imports from China to around 130 percent – effectively a trade embargo and just shy of the 145 percent peak reached at the height of the trade war this spring.
The rapid escalation of trade tensions sank US stocks on Friday, with the S&P 500 and Nasdaq recorded their worst day since April. The Dow also suffered its steepest drop since May.
On Sunday, Beijing fired back, vowing countermeasures if Trump makes good on his threat. China’s commerce ministry said the country is “not afraid” of a trade war, but urged further negotiations between the two sides to resolve the issues.
China warns US of countermeasures if Trump doesn’t walk back 100 percent tariff threat
The ministry also defended the new rules on rare earths as a “legitimate move” and blamed Washington for the latest escalation, pointing to the Trump administration’s introduction of a series of new restrictive measures against China within two weeks of the latest round of trade talks in Madrid in September.
But the Trump Administration has appeared to soften its tone, opening doors for further talks.
In a Truth Social post, Trump said the US “wants to help China, not hurt it.”
“Don’t worry about China, it will be all fine!” he said, though he did not give further indication on what he meant specifically.
US stock futures rose Sunday after Trump’s comment on Sunday evening.
Dow futures were up 0.87 percent, S&P 500 futures rose 1.33 percent and Nasdaq futures climbed 1.86 percent, as of 10:10 pm ET.
Meanwhile, Vice President JD Vance appealed to China to “choose the path of reason,” while emphasizing that the US holds “far more cards” if Beijing chooses to respond aggressively.
“It’s going to be a delicate dance, and a lot of it is going to depend on how the Chinese response,” Vance said on Fox News on Sunday.
This is a developing story and will be updated.
CNN’s Auzinea Bacon contributed reporting.
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