
Hong Kong shares dropped from two-month highs, while US stock futures and the dollar declined Tuesday as the US and China squabbled over tariffs and increased the possibility of a wider, destructive trade war.
“The trade war narrative is still very much alive and well, and there is still a lot more to unfold,” Shane Oliver, chief economist at AMP in Sydney, stated as prices fluctuated on news headlines.
While the dollar index lost earlier gains to trade 0.1% down at 108.86, S&P 500 futures slumped to a 0.2% loss after having rebounded in relief that Mexico and Canada made last-minute arrangements to avert a US tariff impact. European equities dropped 0.87% on Monday before slipping 0.1% in the morning session. The German DAX index was unchanged.
With the expectation that China would likewise negotiate a tariff exemption with US President Donald Trump, Hong Kong’s Hang Seng rose to its highest level in 2025. However, it later trimmed its gains to trade 2.8% higher, supported by expectations that Beijing would increase stimulus expenditure in response to US actions.
At 0501 GMT, a further 10% US duty on Chinese exports went into effect. A few minutes later, Beijing declared it was looking into Google and enacting tariffs on US imports of vehicles, agriculture equipment, coal, petrol and oil starting on February 10.
Ben Bennett, Asia-Pacific investment strategist at Legal & General Investment Management in Hong Kong, stated, “I would say that there is disappointment that the US tariffs will be implemented following the last-minute reprieve of both Mexico and Canada.
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