People walk past a bank's electronic board showing the Hong Kong share index at Hong Kong Stock Exchange Monday, May 6, 2019. Shares tumbled in Asia early Monday after President Donald Trump threatened in a tweet to impose more tariffs on China, spooking investors who had been expecting good news on trade.(AP Photo/Vincent Yu)

Markets plunge after Trump threatens new China tariff hike

May 05, 2019 - 11:31 pm

BANGKOK (AP) — Shares and oil prices have tumbled after President Donald Trump jolted markets with a threat to raise more tariffs on imports from China, spooking investors who had been expecting good news this week on trade.

The Shanghai Composite index plunged 6.5% to 2,877.71, and the Hang Seng in Hong Kong sank 3.3% to 29,089.77. The future contract for the Dow Jones Industrial Average fell 1.7% to 26,042.00, while that for the S&P 500 gave up 1.6% to 2,900.10.

Trump's comments in tweets Sunday came as a Chinese delegation was due to resume talks in Washington on Wednesday aimed at resolving a tariffs battle that has rattled world markets.

The Wall Street Journal, citing unidentified sources, said China's government was considering canceling this week's talks. Chinese officials did not respond immediately to requests for comment. Chinese leaders have emphasized they would not negotiate under pressure.

Without fresh reassurances, markets were swooning.

On China's smaller market in Shenzhen, the A-share index dropped 7.2 percent. Japan's markets were closed for a holiday, but the future contract for the benchmark Nikkei 225 index lost 1.9%.

Shares also fell sharply in Taiwan, Singapore, Australia and Indonesia.

Apparently catching Beijing by surprise, Trump said he would raise import taxes on $200 billion in Chinese products to 25% from 10% as of Friday.

Trump said "The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!"

The comments unsettled many who had been anticipating a possible deal as early as this week in the dispute over Chinese industrial policies and technology.

"He (Trump) is trying to show the Chinese a little color, maybe a little punishment. Of course, the effect is catastrophic," said Francis Lun, a stock analyst based in Hong Kong.

A breakthrough in the trade talks could restore normality, he said. Failing that, "it will not be a good scenario for everybody."

The revived tensions over trade pushed oil prices lower. Benchmark U.S. crude shed $1.39, or 2.3%, to $60.55 per barrel in electronic trading on the New York Mercantile Exchange. It gained 13 cents to $61.94 per barrel on Friday.

Brent crude, the international standard, gave up $1.51, or 2.1%, to $69.34 per barrel. It rose 10 cents on Friday to $70.85 per barrel.

In currency trading, the Japanese yen, viewed as a safe haven for investors, advanced against the U.S. dollar. The greenback was trading at 110.75 Japanese yen by midday Monday, down from 111.11 yen on Friday.

The euro weakened to $1.1193 from $1.1200 on Friday.

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Associated Press writer Alice Fung contributed from Hong Kong.