HONG KONG (AFP) - Asian markets largely tumbled on Monday (June 3), 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 in on June 10, will begin at five per cent and rise up to 25 per cent, unless Mexico substantially reduces the flow of illegal immigrants 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 on 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 for 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 falling 0.9 per cent.
Hong Kong edged down 0.1 per cent, while Shanghai dropped 0.3 per cent and Sydney lost 1.2 per cent. But Seoul rose 1.3 per cent.
European stocks fell at the open, with London and Frankfurt down 0.6 per cent while Paris retreated 0.7 per cent.
'NEVER-ENDING TARIFF TAG'
Beijing's imposition of duties on US$60 billion worth of US goods came into effect on Saturday.
The move, which came in retaliation for Washington raising its tariffs on US$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.