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Asian markets slid and gold hit a fresh record on Monday morning after the US and China escalated a trade war over the weekend.
US President Donald Trump threatened to slap 100 per cent tariffs on China after Beijing said it would expand export restrictions on rare earths, materials used in a range of critical technologies from semiconductors to batteries.
Hong Kong’s Hang Seng index, among the best performing major indices worldwide this year, fell by almost 3.5 per cent while the CSI 300 was down 1.8 per cent by mid-morning. The index was on track for its worst one day fall since April.
South Korea’s Kospi was down 1.4 per cent on Monday morning while Taiwan’s broad stock exchange slid 1.8 per cent. Japan’s markets are closed for a national holiday.
The spot gold price hit an all-time high of $4,060 per troy ounce, extending a rally that has sent prices up more than 50 per cent this year.
US stock futures pointed higher. Contracts tracking the S&P 500 were up 1 per cent, after the index lost 2.7 per cent on Friday in its worst decline since April 10, when markets were hit by Trump’s initial “liberation day” tariff announcements.
Bitcoin recovered over the weekend to about $115,000, after falling below $105,000 following Trump’s tariff threat. It had been trading above $120,000 before the threat.
On Sunday, Trump appeared to take a more conciliatory tone, writing in a post on Truth Social: “Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
China last week launched an antitrust investigation into US chipmaker Qualcomm, imposed reciprocal fees on American-owned ships docking at Chinese ports and announced restrictions on shipments of some battery parts.
Beijing criticised Trump’s plan to impose additional tariffs on Chinese exports and threatened new countermeasures on Sunday. “China’s position on tariff wars has been consistent: we do not want to fight, but we are not afraid to fight,” said the commerce ministry.
“Given higher volatility there should be some profit-taking,” said Jason Lui, head of Asia-Pacific equity and derivative strategy at BNP Paribas.
“China has also clarified that its export control is not an export ban and has not retaliated with an equal tariff on US goods after Trump announced 100 per cent additional tariffs on Chinese exports,” Hao Hong, chief investment officer of offshore Chinese hedge fund Lotus Asset Management, wrote in a Monday note.
“This is a de-escalation move and will cushion the downside for Chinese markets.”
China fixed the renminbi at close to its strongest level in a year, at Rmb7.1007 to the dollar, in a move analysts said signalled it was not planning a devaluation in response to Trump’s tariff threat.