SHANGHAI - Global financial markets tumbled on Monday after U.S. President Donald Trump unexpectedly jacked up pressure on China to reach a trade deal, saying he would hike U.S. tariffs on Chinese goods this week.
Equity markets, which had been largely expecting a trade accord, fell sharply across export-reliant Asia as further talks were thrown into doubt.
Chinese shares plunged more than 4 percent at one point, while U.S. stock market futures fell close to 2 percent. Oil prices plunged and the Chinese yuan tumbled.
Trump sharply escalated tensions between the world's two largest economies with tweeted comments on Sunday that trade talks with China were proceeding "too slowly", and that he would raise tariffs on $200 billion of Chinese goods to 25 percent on Friday from 10 percent.
He also said he would target a further $325 billion of Chinese goods with 25 percent tariffs "shortly".
The tweets upended the previously calm market mood that had benefited from signs of improving growth in China and the United States, and from comments from Trump and other senior U.S. officials that trade talks were going well.
The Wall Street Journal reported on Monday that China was considering cancelling trade talks scheduled for this week following Trump's threats.
"I think this has got the potential to be a real game-changer," said Nick Twidale, Sydney-based analyst at Rakuten Securities Australia.
"There is still a question of whether this is one of the famous Trump negotiation tactic, or are we really going to see some drastic increase in tariffs. If it's the latter we'll see massive downside pressure across all markets," he said.
MSCI's broadest index of Asia-Pacific shares outside Japan was down 1.6 percent shortly after China's markets reopened from a three-day national holiday.
Chinese blue-chips shed 4.2 percent in early trade, having closed higher before the holiday amid expectations that pressures on China's economy were easing.
The drop in Chinese shares came despite a move on Monday by China's central bank to cut reserve requirements for smaller banks to help boost lending to small and private firms.
Australian shares were off 1.2 percent.
Japanese financial markets remain closed until Tuesday for a national holiday, but Nikkei 225 futures dropped 2.4 percent to 21,955.
E-Mini futures for the S&P 500 slid 1.9 percent, erasing memories of gains on Friday after the U.S. payroll data had helped to lift Wall Street.
Treasury futures jumped 21 ticks. Data from CME Group showed the market sees a nearly 58 percent chance of a Federal Reserve rate cut by the end of the year.
Chinese 10-year treasury futures also jumped, with the most-traded contract, for June delivery rising 0.5 percent to 97.010.
"The intensified trade and geopolitical risks are likely to prompt the regional central banks for more stimulatory policies," analysts at ING said in a note. "We expect the majority of Asian central banks meeting this week to cut their policy rates."
As investors flocked to the safe-haven yen, the dollar dropped 0.6 percent against the Japanese currency to 110.43.
But China's yuan plunged, with the offshore unit weakening to 6.8215 per dollar, its weakest level since January 10, before paring some of its losses.
The onshore yuan weakened to 6.7980 per dollar before bouncing back to 6.7923.
The single currency was down 0.1 percent on the day at $1.1189. The dollar index, which tracks the greenback against a basket of six major rivals, was flat at 97.523.
In commodity markets, U.S. crude plunged 2.9 percent at $60.17 a barrel and Brent crude fell 2.6 percent to $69.01 per barrel.
Spot gold jumped 0.3 percent to trade at $1,282.91 per ounce.