China stocks drop 5.5%, leading Asia markets lower as U.S.-China trade deal appears in jeopardy

China stocks suffered their worst one-session loss in more than two years, as Asian stock markets plunged Monday on fears trade negotiations between the U.S. and China were on the verge of collapse.

On Sunday, President Donald Trump tweeted that he would raise tariffs on $200 billion of Chinese goods from 10% to 25% this week, apparently taking Chinese officials by surprise. In response, China may withdraw from the next round of trade talks scheduled to begin Wednesday in Washington. U.S. officials had indicated progress had been made at talks last week in Beijing, and said it was possible a deal could be reached by the end of this week.

But the sudden hard line by Trump spooked investors. U.S. stock market futures sank, with Dow Jones Industrial Average futures YMM9, -1.77%  , S&P 500 futures ESM9, -1.60%   and Nasdaq Composite futures NQM9, -1.98%   all falling around 2% by Sunday and into Monday.

The worst losses in Asia were seen in China, with the Shanghai Composite SHCOMP, -5.58%  closing down about 5.6%, which marked its worst one-day loss since a 6.4% slump in February 2016. The smaller-cap Shenzhen Composite 399106, -6.76%   plunged 7.4%, also the worst one-day percentage fall since February 2016. Hong Kong’s Hang Seng Index HSI, -2.90%   fell 2.8%.

Australia’s S&P/ASX 200 XJO, -0.82%  closed down 0.8%, Taiwan’s benchmark Y9999, -1.80% fell nearly 1.8% and Singapore’s STI, -3.00% key index dropped 3.2%. Japan’s Nikkei and South Korea’s Kospi were closed for holidays.

The decline in Shanghai, which came after an extended market holiday last week, was led by port and shipping companies like Ningbo Zhoushan Port Co. 601018, -9.91%  and China Merchants Energy Shipping Co. 601872, -10.08%  , which both fell by close to the maximum 10% daily limit.

In Hong Kong, Geely Automotive

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