(Bloomberg) -- A selloff in equities spread to Asia after President Donald Trump’s pledge to impose tariffs on trading partners raised the specter of a trade war hitting global economic growth. Treasury yields tumbled to the lowest in more than four months.
Asian shares sank to the lowest level in a month after the S&P 500 saw its worst selloff this year as the US president said Mexico and Canada couldn’t negotiate a reprieve from tariffs set to take effect Tuesday. Trump also signed an order doubling a levy on China to 20%. Oil dropped to the weakest level in three months and a gauge of the largest 100 digital tokens tumbled.
Investors are seeking safer havens as they become wary about rising geopolitical tensions and the prospect of tit-for-tat tariffs worsening the global trade spat. US Treasuries are now outperforming stocks since Trump’s win. Canada announced a sweeping package of levies in response and China’s Ministry of Commerce reiterated countermeasures against US tariffs on Tuesday.
“Markets were hoping there was potential for more wiggle room, more negotiation or the possibility of an extension but those hopes have been dashed,” said Prashant Newnaha, a senior rates strategist at TD Securities in Singapore. “For markets, the concern is tariffs are coming into play just as cracks are showing in US growth.”
Trump said he would plow ahead with new tariffs on Canada and Mexico starting Tuesday, a broadside against the two biggest US trading partners that underscores his push to remake global trade. The long-promised duties would easily be among the most sweeping of the Trump era, applying to around $1.5 trillion in annual imports.
Trump also said Monday that the US would impose tariffs on “external” agricultural products starting on April 2, adding another layer of threats to impose trade barriers on imported goods. He didn’t detail which products would be affected, or if there would be any exceptions.
That drove prices of Chinese soymeal — used in food and animal feed — to close 2.6% higher on Monday, the most in more than three weeks. A disruption to US soybean shipments could tighten the market further.
The S&P 500 fell 1.8% on Monday, and a gauge of the Magnificent Seven megacaps sank 3.1%.
The Bloomberg Dollar Spot Index was steady. The Canadian dollar and Mexican peso slipped. The outlook for emerging Asian currencies is worsening again after the new tariffs on China. Regional currencies have tumbled over the past week, with the Thai baht and South Korean won both sliding about 2%. Trump said Monday that Japan and China are putting the US at an unfair disadvantage when they weaken their currencies.
“Market anxiety levels have been dialed up, and we see traders having to react aggressively and dynamically,” wrote Chris Weston, head of research at Pepperstone Group Ltd., in a note. “Either way, volatility in markets is on the rise and we need to be prepared for headlines to break at any moment.”
In Asia, investors are also focusing on the annual National People’s Congress meeting, which starts in Beijing Wednesday, amid expectations China will spell out measures to stimulate the economy.
Communist Party-backed news outlet Global Times reported Monday that Beijing is considering retaliatory measures on US agriculture and food products in response to the president’s latest actions.
Investors are looking to China’s National People’s Congress for clues on how the country will boost economic growth. Policymakers are expected to push its official budget deficit target to the highest in over three decades, pumping trillions of yuan into a system battling deflation, a property crash and now a trade war with the US.
Still, some investors see opportunities.
“There are plenty of opportunities across Asia,” said Vikas Pershad, an Asian equities portfolio manager at M&G Investments said in a Bloomberg TV interview. “We like China and Japan and India for the medium to long term term for different reasons.”
In economic data, Monday’s manufacturing reading was the latest in a slew of disappointing US economic reports in the last two weeks, showing weaker housing, rising unemployment claims and a drop in personal spending.
There is a “very small” chance that the US economy tips into a recession, despite the uncertainty surrounding global trade policy, according to Goldman Sachs Group Inc. Chief Executive Officer David Solomon at the Australian Financial Review Business Summit in Sydney on Tuesday.
Crypto currencies remained volatile after Trump stepped up calls for a digital-asset stockpile. Bitcoin declined for a second day after sinking more than 9% on Monday. The MV Dig Assets 100 index slipped as much as 9.8%.
In geopolitics, Trump ordered a pause to all military aid to Ukraine, turning up the heat on Volodymyr Zelenskiy just days after an Oval Office blowup with the Ukrainian president left the support of his country’s most important ally in doubt.
In commodities, oil extended losses from the lowest in almost three months as OPEC+ said it will proceed with plans to revive halted production. Gold steadies after having advanced the previous day.
Key events this week:
Eurozone unemployment, Tuesday
President Donald Trump’s speech to a joint session of Congress, Tuesday
China Caixin services PMI, Wednesday
Eurozone HCOB services PMI, PPI, Wednesday
US ADP employment, ISM services index, factory orders, Wednesday
