Asian markets faced a downturn on Monday following U.S. President Donald Trump's decision to implement tariffs on imports from Canada, Mexico, and China. Additionally, he threatened potential tariffs on the United Kingdom and the European Union, signaling a major escalation in trade tensions.
In response, Canada and Mexico declared retaliatory tariffs on U.S. products, and China promised to implement countermeasures. The European Union also issued a warning of strong retaliation if targeted.
Investors are concerned that a potential trade war might affect the profitability of major corporations and slow down global economic growth.
Amidst the risk-averse atmosphere, the U.S. dollar strengthened, reducing the attractiveness of gold. Meanwhile, oil prices surged, with WTI crude futures increasing by over 2 percent due to fears of supply disruptions.
Mainland China markets remained closed in observance of the Lunar New Year holiday. Hong Kong's Hang Seng index ended slightly down at 20,217.26, recovering somewhat from the day's lows as weak Chinese manufacturing data highlighted the necessity for additional government policy support to bolster the economy.
A private survey indicated a slower expansion in China's manufacturing activity in January, whereas the official index fell into contraction, reaching a five-month low, partly influenced by the upcoming public holidays.
Japanese markets declined amid concerns over the intensifying tariff measures announced by Trump. The Nikkei average dropped 2.66 percent to 38,520.09, and the broader Topix index decreased by 2.45 percent to 2,720.39. Losses were led by the automotive sector, with companies like Toyota Motor, Honda, and Nissan falling between 5 and 7 percent.
In Seoul, stocks fell as the Korean won weakened to a three-week low due to U.S. tariff concerns. The Kospi average decreased by 2.52 percent to 2,453.95. Market leader Samsung Electronics fell by 2.7 percent, while competitor SK Hynix decreased by 4.2 percent. LG Electronics, which operates a production facility in Mexico, plummeted by 7.1 percent. Steel giant POSCO Holdings saw a 4.6 percent drop after reporting subdued earnings.
Australian markets also declined amid fears of a global trade war. The benchmark S&P/ASX 200 fell by 1.79 percent to close at 8,379.40, marking its biggest one-day decline since September 4. The broader All Ordinaries index also saw a 1.84 percent decline to 8,628.40, with banks and mining stocks leading the downturn.
In New Zealand, the benchmark S&P/NZX-50 index ended 1.42 percent lower at 12,810.32.
U.S. stock markets relinquished early gains and closed lower on Friday after the White House confirmed a 25 percent tariff on Canadian and Mexican imports, along with a 10 percent tax on Chinese goods, effective Tuesday. This raised worries about inflation and heightened interest rates.
Additionally, Trump announced plans for tariffs related to oil and gas expected around February 18, though specifics were not provided.
Positive earnings reports from Apple alongside data showing robust U.S. consumer spending and a moderate inflation increase in December helped mitigate some of the overall market decline.
The Dow Jones Industrial Average decreased by 0.8 percent, the S&P 500 fell by 0.5 percent, and the Nasdaq Composite edged down by 0.3 percent.
