Trump’s abrupt threat last week to hit Mexico with tariffs over immigration concerns did little to reassure investors (Jim WATSON)

Hong Kong (AFP) – Asian markets largely tumbled on Monday, tracking global losses as Wall Street clocked its worst month this year, with investors opting for safe-haven assets in the wake of intensifying trade tensions.

US President Donald Trump’s abrupt threat last week to hit Mexico with tariffs over immigration concerns did little to reassure investors, who were already anxious about the increasingly fractious US-China trade war.

The tariffs, which are set to kick off on June 10, will begin at five percent and rise up to 25 percent, unless Mexico substantially reduces the flow of illegal immigration to the United States, Trump warned.

“People have been saying for years that we should talk to Mexico. The problem is that Mexico is an ‘abuser’ of the United States, taking but never giving,” the US leader tweeted Sunday.

He followed up the threats against Mexico with an announcement that Washington would no longer offer preferential trade treatment to India, starting Wednesday, in a bid to pressure New Delhi to increase market access to US goods.

Coming on the back of a months-long trade spat with China, Trump’s latest salvos rattled markets, prompting a flight from equities to safe-haven investments.

That saw the yen strengthen which in turn weighed on Japanese shares, with Tokyo’s main index plummeting 1.2 percent. 

Hong Kong fell 0.5 percent, while Shanghai dropped 0.6 percent. Sydney lost 0.9 percent while Singapore edged down 0.2 percent. But Seoul eked out gains of 0.6 percent.

– ‘Never-ending tariff tag’ –

Beijing’s imposition of duties on $60 billion worth of US goods came into effect Saturday — the move, which emerged in retaliation for Washington raising its penalties on $200 billion in Chinese goods, is the latest round in a bruising battle between the two superpowers.

Referring to “the never-ending game of tariff tag”, OANDA senior market analyst Edward Moya said there were fears “we could see a global recession by the middle of next year if the US imposes additional tariffs on China and Mexico”.

“The threats to global growth seem to be here to stay as markets appear convinced the new normal will be constant trade negotiations around the world.”

“Instead of focusing on one trade deal at a time, the US has overplayed its dominant hand and appears vulnerable to only finalising temporary solutions,” he said. 

Since Trump fired the first shot, China and the US have deployed tit-for-tat tariffs on two-way trade worth hundreds of billions of dollars.

As talks have stalled, the dispute has spread beyond trade, with the US blacklisting Chinese tech giant Huawei over national security concerns, and Beijing threatening to unveil its own list of “unreliable” foreign companies.

In a sign of its unwillingness to cede too much ground, Chinese defence minister General Wei Fenghe said Sunday that “if the US wants to talk, we will keep the door open. If they want to fight, we are ready”.

There are hopes that Trump and Chinese President Xi Jinping will meet at the G20 summit this month to jumpstart negotiations.

The row has seen oil markets plunge due to its effect on demand, cancelling the positive impact of the OPEC+ production cuts.

“The month of May was a disaster for crude prices — the worst May performance in seven years — as the escalation of the global trade war saw the global growth outlook crumble,” said OANDA analyst Moya.

“Crude will need to rely on some positive outcomes on the trade front for prices to begin stabilising”, he added.

– Key figures around 0310 GMT –

Tokyo – Nikkei 225: DOWN 1.2 percent at 20,361.76 (break)

Hong Kong – Hang Seng: DOWN 0.5 percent at 26,771.23

Shanghai – Composite: DOWN 0.6 percent at 2,881.88 

Pound/dollar: UP at $1.2655 from $1.2629 at 2100 GMT Friday

Euro/dollar: UP at $1.1189 from $1.1167

Dollar/yen: DOWN at 108.11 yen from 108.35 yen 

Oil – Brent Crude: DOWN 77 cents at $61.22 per barrel

Oil – West Texas Intermediate: DOWN 41 cents at $53.09 per barrel

New York – Dow: DOWN 1.4 percent at 24,815.04 (close)

London – FTSE 100: DOWN 0.8 percent at 7,161.71 (close)

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.