US stock futures, Asian shares drop as Trump slaps new tariffs on China

TOKYO (Reuters) - US stock futures and Asian shares fell on Tuesday after US President Donald Trump said he will impose tariffs on an additional $200 billion worth of Chinese imports, in a sharp escalation of the trade conflict between the world’s two biggest economies. The tariffs will be set at 10 percent. Trump spared smart watches from Apple  and some other consumer products such as bicycle helmets, but he warned that if China takes retaliatory action he will pursue tariffs on approximately $267 billion of goods. “Considering his latest comments as well as recent falls in his support, it is hard to expect Trump to soften his stance on trade in the near future,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS dropped 0.15 percent in early trade but Japan's Nikkei bucked the trend to gain 0.4 percent. S&P500 E-mini futures ESc1 dropped 0.3 percent in Asian trade on Tuesday. That came after all three major US indexes fell on Monday, with the tech-heavy Nasdaq posting its biggest percentage loss since late July. Apple Inc  and Amazon.com , the world’s top two companies by market capitalization, fell 2.6 percent and 3.2 percent respectively, marking their biggest fall since late April, on worries about new tariffs, which were unveiled after US market close . Still, many market players expect the US economy to ride out the impact for now. “Tariffs on another $200 billion will mean about 12 percent of US imports have seen a tariff hike. That means an average tariff increase of 1.6 percent across all imports, so tiny compared to the 1930s, when they were 20 percent,” said Shane Oliver, chief economist at AMP Capital Investors in Sydney. “I still don’t see a resolution between China and the US until after US mid-terms elections in November to early 2019.” In the currency market, the yen gained slightly while the risk-sensitive Australian dollar dropped. The yen strengthened slightly to 111.74 per dollar , off Friday's two-month low of 112.175. The Australian dollar shed as much as 0.5 percent in early trade to $0.7144 . The euro stood little changed at $1.1673 . Oil prices fell on worries rising trade tensions between the US and China could dent global crude demand. US West Texas Intermediate (WTI) crude futures CLc1 fell 0.4 percent to $68.61 a barrel while international benchmark Brent futures LCOc1 lost 0.4 percent to $77.72 per barrel. Yet the 10-year US Treasuries yield hit a near four-month high of 3.0220 percent on Monday, extending its rise on the back of a recent run of solid US data, before stepping back to 2.981 percent US10YT=RR. “US bond yields have been supported by strong US data, such as wages. Tariffs are not necessarily positive for bonds as they could be inflationary,” said Tomoaki Shishido, fixed income strategist at Nomura Securities.