The msci Asia Pacific index fell 0.8 percent as South Korea’s stock market fell, while Japan’s nikkei fell 2.4 percent.
Asian steel stocks fell, with South Korea’s posco down 3 per cent and Nippon steel 4 per cent.
On Wall Street, the standard & poor’s 500-stock index fell 36.16 points, or 1.33 percent, to 2,677.67 on Thursday, a sharp sell-off as expectations of a fed rate increase exceeded expectations this year.
ING Singapore asia-pacific research director Robert carnell, said: “due to Donald trump announced a strict tariff on steel and aluminium, so forget the yield curve – this is how the recession began.” The world is on the brink of a trade war.
“Trade is the only thing economists agree on – the only better.”
Mr Trump said 25 per cent of steel and 10 per cent of aluminium tariffs would be formally announced next week, although White House officials later said there were some details to be removed.
Investors are worried that Mr Trump’s decision could trigger retaliation from China, Europe and major trading partners such as neighbouring Canada, hitting the global economy.
Canada’s rapid response underscores this concern, and Ottawa officials say they will retaliate against any U.S. tariffs on steel and aluminum products.
Harmful trade war fears that overshadowed the upbeat U.S. economic data released on Thursday, including manufacturing index rose to 14 years high, another data showed U.S. jobless claims hit a 48 year low.
With the PCE price index, a measure of underlying inflation, rising 0.3 per cent in January – the biggest gain since January 2017 – us inflation has picked up. That year, the index rose 1.5%, unchanged from the previous two months.
“Even if you produce a product, if someone doesn’t buy them, you have to scale back your production, leading to a slowdown in global economic activity,” said Daisuke Uno, chief strategist at sumitomo mitsui bank.
“I expect the market to enter another period of correction,” he added.
The reason for the fall in Treasury yields is that the risk of a trade war seems to be driving up inflation, a theme that shocked global financial markets earlier this year.
The yield on the 10-year Treasury note fell to 2.811 per cent, its lowest level in three weeks and extended further to a four-year high of 2.957 per cent hit on February 21.
On the other hand, some say, markets may overreact.
“Trump has repeatedly bragged about the rise in share prices. If that leads to a sustained fall in share prices, I would bet he is likely to change his position, “said Nobuyuki Rashihara, head of research at asset management.
The dollar rallied on Tuesday after the new fed chairman, Jerome Powell, gave a bullish view of the U.S. economy, leaving the currency markets unpowered.
The euro rose to $1.2271 after hitting a seven-week low of $1.21545 on Thursday.
The dollar fell to 106.14 yen, falling to a 15-month low of 105.545 on February 16.
The dollar index is still down 2.1 per cent this year, as the trump administration prefers a weaker dollar to compensate for the ballooning trade deficit. Fears that Mr Trump’s big tax cuts and spending plans could boost the deficit and weaken confidence in us debt also weighed on the dollar.
Oil prices have also been under pressure, falling more than 1 per cent the day before, amid concerns about the global economy caused by Mr Trump’s trade moves.
U.S. crude traded at $61.19 a barrel on Friday, while Asia rose 0.4 percent to a two-week low of $60.18 on Thursday. It is down 3.7 percent so far this week.