Asian share markets tumble as tariff tensions flare

Asian stocks and the US dollar have slipped as US-China trade tensions bubbled and investors turned defensive ahead of US jobs data and a widely expected cut in European interest rates.

Shares in Asian and European steelmakers, which export metal to the United States, dropped on Monday in reaction to President Donald Trump's threat late on Friday to double tariffs on imported steel and aluminium to 50 per cent, starting June 4. The move drew criticism from European Union negotiators.

Speaking on Sunday, Treasury Secretary Scott Bessent said Trump would soon speak with Chinese President Xi Jinping to iron out a dispute over critical minerals.

Beijing then forcefully rejected Trump's trade criticism, suggesting a call might be some time coming.

With tensions rising again over tariffs and trade, sentiment looked fragile in Europe, where the STOXX 600 fell 0.5 per cent on the day and euro zone government bonds sold off, while the euro benefited from an investor push out of dollar holdings.

"The flip-flopping on trade policy looks set to continue and it appears the uncertainty this creates does not bother President Trump at all. That is likely to give investors the reason to renew selling of the US dollar," MUFG strategist Derek Halpenny said.

In Asia, Hong Kong's Hang Seng initially plunged more than two per cent before the index closed just 0.6 per cent lower. Markets in mainland China were shut for a holiday.

Japan's Nikkei index lost 1.3 per cent to finish at 37,470.67, while the Kospi in Seoul added 0.1 per cent to 2,698.97. Australia's S&P/ASX 200 retreated 0.2 per cent, India's Sensex lost 0.4 per cent and Taiwan's Taiex fell 1.6 per cent.

The dollar has lost nine per cent in value against a basket of six major currencies so far this year. The index was last down 0.6 per cent on the day at 98.77.

White House officials also continued to play down a court ruling that Trump had overstepped his authority by imposing across-the-board duties on imports from US trading partners.

Investors will be watching for signs to indicate whether Trump will go ahead with the 50 per cent tariff on Wednesday or back off as he has often done before.

Safe-haven assets found plenty of demand on Monday, with the likes of the Japanese yen and Swiss franc staging a robust rally, as did gold.

In US markets, S&P 500 futures fell 0.5 per cent, while Nasdaq futures lost 0.7 per cent, suggesting a retreat at the opening bell later. The S&P had climbed 6.2 per cent in May, while the Nasdaq rallied 9.6 per cent on hopes that final import levies will be far lower than the sky-high levels initially touted by Trump.

Front-running the tariffs has already caused wild swings in the US economy, with a contraction in the first quarter likely turning into a jump this quarter as imports fall back.

The Atlanta Fed GDPNow estimate is running at an annualised 3.8 per cent for April-June, though analysts assume this will slow sharply in the second half of the year.

Data this week on US manufacturing and jobs will offer a timely reading on the pulse of activity, with payrolls seen rising 130,000 in May while unemployment stays at 4.2 per cent.

A rise in unemployment is one of the few developments that could get the Federal Reserve to start thinking of easing again, with investors having largely given up on a cut this month or next.

A move in September is seen at around a 75 per cent chance, though Fed officials have stopped well short of endorsing such pricing.

Fed Governor Christopher Waller said on Monday that cuts remain possible later this year as he saw downside risks to economic activity and employment and upside risks to inflation from the tariffs.

The Senate will this week start considering a tax-and-spending bill that will add an estimated $US3.8 trillion to the federal government's $US36.2 trillion in debt.

Across the Atlantic, the European Central Bank is considered almost certain to cut its rates by a quarter point to two per cent on Thursday, while markets will be sensitive to guidance on the chance of another move as early as July.

The Bank of Canada meets Wednesday and markets imply a 76 per cent chance it will hold rates at 2.75 per cent, while sounding dovish on the future given the tariff-fuelled risk of recession there.

On Monday, the dollar fell 0.8 per cent on the yen to below 143, and fell 0.6 per cent to 0.8179 Swiss francs. The euro was up 0.6 per cent to $US1.1423, the most since late April.

In commodity markets, gold rallied nearly two per cent to $US3,353 an ounce, having lost 1.9 per cent last week. Brent crude oil rose 2.4 per cent to $US64.25 a barrel after OPEC+ decided to increase output in July by the same amount as in each of the prior two months, a relief to some who had feared an even bigger increase.

with AP