Europe's main equity benchmarks sank 1 to 1.5 per cent and Wall Street futures were pointing to similar declines, while government bonds and the Japanese yen rallied as investors sought protection.
Hong Kong also faced an "unquantifiable impact from the spillover" of the dispute between the United States and Europe, which could trigger trade to divert from Hong Kong to other countries, he said. They are probably getting in defensive mode after seen that U.S president Trump not stepping back. "China has, for example, always been engaging in several unfair practices related to the acquisition of American intellectual property and technology", Trump declared last week.
President Donald Trump threatened to escalate the trade fight with China into an all-out trade war on Monday, promising to impose massive tariffs on Chinese goods unless Beijing reverses course on its own trade actions. "Like five times more". That follows brisk selling in worldwide markets.
The declines weighed on the S&P industrials index, which fell more than 2 percent, the biggest one-day percentage drop in almost two months. The Japanese Nikkei 225 lost 1.77 per cent. European markets opened down across the board.
Still, the TSX is up 0.7 per cent for the year.
Chinese markets were hit hard by the news. The Stoxx Europe 600 was down 0.71 per cent and France's CAC 40 had slipped more than 1.1 per cent.
"As I've said from the beginning, China will back off its industrial plans only when USA trade measures are large and lasting enough to threaten the influx of foreign exchange".
The White House said that if China goes through with its promise to retaliate against the U.S. tariffs announced last week, the United States will impose tariffs on an additional Dollars 200 billion worth of Chinese goods.
"The trade relationship between the United States and China must be much more equitable", Trump said. A small handful of countries were given exemptions, but China was not one of them.
President Donald Trump threatened to impose a 10 per cent tariff on another US$200 billion of Chinese goods, and Beijing warned it would retaliate.
The commodities market also took a hit from the latest tariff threat.
In a statement published shortly after Monday's announcement, China's Ministry of Commerce called the move "blackmail".
"If the US side becomes irrational and issues the list, China will have to adopt comprehensive measures in quantity and quality in order to make strong countermeasures", said the statement.
Derek Scissors, a China scholar at the American Enterprise Institute, a Washington think tank, spelled out the reality of the situation when he said that Beijing has almost exhausted USA imports to target. "China trade remains a lingering theme, at least until the USA tariffs take effect early in July", said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.
In New York, the Dow Jones industrial average ended down 287.26 points at 24,700.21. "The idea that they will knowingly drive the economy into recession seems unlikely". "But it would come at a time when the global economy is already grappling with various other challenges, which could potentially magnify the impact on business confidence and investment".
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