Hong Kong stocks spearhead the sell-off in Asia-Pacific markets as concerns over the trade war trigger risk-off sentiment.

 Asia-Pacific markets continued their downturn on Monday, as concerns over a potential global trade war, sparked by U.S. President Donald Trump's tariffs, drove a risk-averse sentiment across the region.

Hong Kong led the losses, with the Hang Seng Index dropping 13.22% to 19,828.30. The Hang Seng Tech Index also suffered, falling 17.16% to 4,401.51. Mainland China's CSI 300 experienced a sharp decline of 7.05%, ending at 3,589.44, marking its largest one-day drop since last October.

According to Qi Wang, UOB Kay Hian's Chief Investment Officer for Wealth Management, Chinese markets have been severely impacted by Beijing's retaliation against Trump’s tariffs. He suggested that, in the short term, markets are likely to be volatile and react to these ongoing tensions.

Looking ahead, Wang is closely monitoring potential countermeasures from the European Union, which has indicated plans to respond to the U.S. tariffs. He is also attentive to U.S. reactions to China's latest moves and the political ramifications, particularly as American consumers grow increasingly dissatisfied, contributing to a decline in Trump’s approval rating.

In Japan, the Nikkei 225 dropped 7.83%, hitting an 18-month low of 31,136.58, while the broader Topix index fell 7.79% to 2,288.66. Japanese futures trading was halted earlier due to the market hitting circuit breakers. South Korea’s Kospi index slid 5.57% to 2,328.20, while the smaller Kosdaq dropped 5.25% to 651.30.

Australia’s S&P/ASX 200 fell 4.23% to close at 7,343.30, entering correction territory with an 11% decline since its February peak. In India, the Nifty 50 dropped 4.08%, and the BSE Sensex lost 3.91% by 1:50 p.m. local time.

As of the latest data:

• S&P/ASX 200: 7,343.30 (-4.23%)

• Hang Seng Index: 19,828.30 (-13.22%)

• KOSPI: 2,328.20 (-5.57%)

• Nikkei 225: 31,136.58 (-7.83%)

• Shanghai Composite: 3,096.58 (-7.34%)

Trump’s tariffs are projected to raise the U.S.'s effective tariff rate by 17.6 percentage points, bringing it to 25.3%, according to British asset manager Schroders. This could lead to a 2% rise in U.S. prices and reduce growth by 0.9%. Retaliatory tariffs from other countries would have a lesser impact, with China and Vietnam likely to see losses exceeding 0.5% of GDP, while the EU and Japan may face losses around 0.3% to 0.4%.

Investor optimism surrounding the Trump administration's potential for successful trade negotiations has dwindled, with U.S. futures also showing declines. Trump’s economic team has downplayed fears of inflation and recession, asserting that tariffs will remain in place despite market reactions.

The U.S. stock market suffered significant losses last Friday after China announced new tariffs on U.S. goods, heightening concerns of a global trade war that could drive the world’s largest economy into recession. The Dow Jones Industrial Average plunged by 2,231.07 points, or 5.5%, marking its biggest drop since June 2020, while the S&P 500 fell 5.97%, and the Nasdaq Composite dropped 5.8%, entering a bear market.

In other developments, the offshore Chinese yuan weakened by 0.38% against the dollar to 7.3227, while the Japanese yen, a traditional safe haven, gained 0.86% to 145.63. Other Asian currencies, such as the Korean won, Australian dollar, and Indian rupee, also lost ground against the U.S. dollar.

Singapore's Straits Times Index fell by 7.73%, reaching its lowest point since September 2024. Major banks in Singapore, including DBS Group Holdings, Oversea-Chinese Banking Corporation, and United Overseas Bank, saw steep declines, with their shares dropping between 6% and 10%.

The global market remains in a state of heightened uncertainty as tensions between the U.S. and its trading partners continue to mount.