Oil Prices and Commodities Plunge Amid Escalating US-China Trade War

The US-China trade conflict intensified on Monday as China fired back with steep tariffs on American goods, leading to a dramatic downturn in Asian stock markets and stoking fears of a looming global recession.

Markets witnessed a sharp sell-off, marking the worst day for equities since the COVID-19 pandemic. Investor anxiety triggered heavy losses in major Asian indices: Hong Kong dropped 10%, Tokyo briefly lost 8%, and Taipei fell over 9%.

The ripple effects extended to Wall Street futures and commodities markets, which also declined amid growing concerns over weakened global demand.

Just days earlier, Donald Trump had rattled markets by imposing sweeping tariffs on US trading partners. Defending his decision, he asserted that the US had endured years of unfair treatment and claimed other countries were now ready to strike new deals with Washington.

Soon after Friday’s market close in Asia, China hit back with a 34% tariff on all US imports, set to begin April 10.

Additionally, China rolled out export restrictions on seven rare earth elements, including gadolinium widely used in MRIs and yttrium, which is essential in the production of consumer electronics.

Hopes that President Trump might change course in response to the financial turbulence were dashed on Sunday when he insisted that negotiations with other nations would only occur if trade deficits were resolved.

Trump dismissed accusations of intentionally triggering the market slide, stating that predicting market behavior was beyond his control.

“Sometimes you have to take medicine to fix something,” he said, referring to the massive value losses across global equities.

The sell-off in Asia was comprehensive, with every sector suffering steep losses. Tech firms, automakers, financial institutions, casino operators, and energy companies were all hit hard as investors moved away from risk-heavy assets.

Chinese tech giants Alibaba and JD.com saw massive drops of over 14% and 13%, respectively. Japan’s SoftBank plunged more than 10%, while Sony declined by 9.6%.

The Shanghai Composite Index slid more than 6%, Singapore’s market sank 8%, and Seoul fell by over 5%. The downturn in South Korea triggered a rare “sidecar mechanism” — a temporary pause in trading — for the first time in eight months.

Markets in Sydney, Wellington, Manila, and Mumbai also suffered steep declines.

Steve Cochrane, chief Asia-Pacific economist at Moody’s Analytics, commented: “We could see a recession happen very quickly in the US, and it could last through the year or so, it could be rather lengthy.

“And if there’s a recession in the US, of course, China will feel it as well because demand for its goods will be hit even harder. Harder than they would have been hit just because of the tariffs.”

Oil prices slumped by more than 3% on Monday, adding to Friday’s 7% decline, pushing both benchmark crude contracts to their lowest levels since 2021.

Copper, a key metal for the green energy transition — including electric vehicles, solar panels, and wind turbines — also extended its losses.

“The market is in free-fall mode again, punching through floors,” said Stephen Innes of SPI Asset Management. “Trump’s team isn’t blinking. The tariffs are being treated as a victory lap, not a bargaining chip.”

These steep market losses followed a dismal session on Wall Street last Friday, where the major US indexes all sank nearly 6%.

Federal Reserve Chair Jerome Powell warned that the US tariffs are likely to drive up inflation and hamper economic growth, while also increasing the chances of higher unemployment.

Trump’s tariff strategy is now complicating the Federal Reserve’s efforts to support the economy with potential interest rate cuts while also keeping inflation in check.

Despite these risks, Trump reaffirmed his commitment to his trade stance and called on the Fed to cut rates.

“Powell’s hands are tied,” said Innes. “He’s acknowledged the obvious — that tariffs are inflationary and recessionary — but he’s not signalling a rescue.

“And that’s the problem. This time, the Fed’s inflation mandate is forcing it to keep the safety net rolled up while asset prices get torched.”

Tim Waterer, chief market analyst at KCM Trade, added: “Traders are nervously watching the two biggest economies going toe to toe on tariffs and are fearing that both could receive knockout blows from a prolonged economic fight.

“Neither the US nor China are backing down when it comes to slapping new tariffs on each other and in this escalatory environment it’s not surprising to see that risk assets are being avoided like the plague.”

– Key Market Figures as of 0400 GMT –

• Tokyo – Nikkei 225: DOWN 6.2% at 31,699.95
• Hong Kong – Hang Seng Index: DOWN 10.7% at 20,405.96
• Shanghai – Composite: DOWN 6.3% at 3,130.17
• West Texas Intermediate (WTI): DOWN 2.7% at $60.31 per barrel
• Brent Crude (North Sea): DOWN 2.7% at $63.84 per barrel
• Dollar/Yen: DOWN to 146.33 from 146.98
• Euro/Dollar: DOWN to $1.0950 from $1.0962
• Pound/Dollar: DOWN to $1.2889 from $1.2893
• Euro/Pound: DOWN to 84.96 pence from 85.01 pence
• New York – Dow Jones: DOWN 5.5% at 38,314.86 (close)
• London – FTSE 100: DOWN 5.0% at 8,054.98 (close)