Asian stocks skidded to a four-month low on Tuesday as US President Donald Trump threatened new tariffs on Chinese goods in an escalating tit-for-tat trade war between the world's two biggest economies that has rattled financial markets.

Trump warned on Monday that Washington would impose a 10 per cent tariff on $200 billion of Chinese goods after Beijing's decision to raise tariffs on $50 billion in US goods, which was in retaliation for US tariffs announced on Friday.

Trump said if China increases its tariffs again in response to the latest US move, “we will meet that action by pursuing additional tariffs on another $200 billion of goods.” China said it will take “qualitative” and “quantitative” measures if the US government publishes an additional list of tariffs on its products.

The trade frictions have kept financial markets on edge, with investors and businesses increasingly worried that a full-blown trade battle could derail global growth.

MSCI's broadest index of Asia-Pacific shares outside Japan lost more than 1 per cent to its lowest level since early June, dragged down by a slide in Chinese shares. The Shanghai Composite Index dropped 1.6 per cent and Hong Kong's Hang Seng shed 2 per cent.

Japan's Nikkei lost 0.8 per cent, South Korea's KOSPI retreated 0.85 per cent while Australian stocks added 0.3 per cent. S&P 500 futures were off 0.8 per cent, pointing to a another down day for Wall Street shares which slipped on Monday. The dollar fell 0.6 per cent to 109.885 yen following Trump's tariff comments. The yen is often sought in times of market turmoil and political tensions.

“The financial markets are trying to gain a breather after last week, when there were many news events, but US-China trade remains a lingering theme, at least until the US tariffs take effect early in July,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.

The euro was 0.1 per cent higher at $1.1635. The Australian dollar, often seen as a proxy to China-related trades, shed 0.2 per cent to $0.7409 after brushing a one-year low of $0.7394.

In commodities, crude oil markets remained volatile ahead of Friday's OPEC meeting at a time when Russia and Saudi Arabia are pushing for higher output. Brent crude futures fell 0.6 per cent to $74.91 a barrel after rallying 2.5 per cent overnight.

Lower-risk assets gained on the latest round of trade threats. Spot gold was up 0.4 per cent at $1,283.60 an ounce. The 10-year US Treasury note yield declined about 4 basis points to 2.881 per cent, its lowest since June 1.

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