Investors started the new week on a downbeat tone after Trump said via Twitter that he planned to raise tariffs on imports from China to 25% from 10% as of Friday. Complaining that trade talks with China were moving too slowly, he also said he would impose tariffs on $325 billion worth of products from China, accounting for all of its exports.
He said: "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" That knocked sentiment immediately in Asia, where the Shanghai Composite index closed 5.6% lower at 2,906.46 after plunging more than 6% earlier in the session. Hong Kong's Hang Seng index sank 2.9% to 29,209.82.
That selling carried through into the European session and is expected to weigh on U.S. stocks at the bell. In Europe, the CAC 40 in France was down 2% at 5,441 while Germany's DAX skidded 1.8% to 12,187. London's markets were closed for a bank holiday. U.S. stocks were also headed for a lower opening with Dow futures and the broader S&P 500 futures both down 2%.
Trump's comments in tweets Sunday came as a Chinese delegation was due to resume talks in Washington on Wednesday aimed at resolving a tariffs battle that has rattled world markets. The Wall Street Journal, citing unidentified sources, said China's government was considering canceling this week's talks. But a Chinese Foreign Ministry spokesman, Geng Shuang, said Monday that the delegation was still planning to go. He would not say exactly who might attend the talks.
Though Trump's tweet has weighed on market sentiment on Monday, there is still a prevailing view that a deal will get done. "Although Trump's strategy is risky, because the Chinese could refuse to negotiate at gunpoint and decide to walk out on the trade talks, both sides have invested too much political capital in the negotiations to let this happen," said Raoul Leering, head of international trade analysis at ING.
Elsewhere in Asia on Monday, the A-share index on China's smaller market in Shenzhen plummeted 7.4 percent. Japan's markets were closed for a holiday, but the future contract for the benchmark Nikkei 225 index lost 2.4%.
Shares also fell sharply in Taiwan, Singapore, Australia and Indonesia. The revived tensions over trade pulled oil prices lower. Benchmark U.S. crude shed 36 cents, or 0.6%, to $61.58 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gave up 21 cents, or 0.3%, to $70.64 per barrel. It rose 10 cents on Friday to $70.85 per barrel.
In currency markets, the euro was flat at $1.12 while the dollar fell 0.3 percent to 110.80 yen.
Associated Press writer Alice Fung contributed from Hong Kong.