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 per cent to 2,877.71, and the Hang Seng in Hong Kong sank 3.3 per cent to 29,089.77.
The future contract for the Dow Jones Industrial Average fell 1.7 per cent to 26,042.00, while that for the S&P 500 gave up 1.6 per cent 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 cancelling this week's talks.
Chinese officials did not respond immediately to requests for comment. Chinese leaders have emphasised they would not negotiate under pressure.
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Without fresh reassurances, markets were swooning.
On China's smaller market in Shenzhen, the A-share index dropped 7.2 per cent.
Japan's markets were closed for a holiday, but the future contract for the benchmark Nikkei 225 index lost 1.9 per cent.
Shares also fell sharply in Taiwan, Singapore, Australia and Indonesia.
Apparently catching Beijing by surprise, Trump said he would raise import taxes on USD 200 billion in Chinese products to 25 per cent from 10 per cent 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 colour, 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."