Major stock markets across Asia Pacific region sank Monday amid mounting fears of a renewed trade war between the world’s two largest economies, after US President Donald Trump threatened to impose new triple-digit tariffs on Chinese imports.

Trump’s threat followed Beijing’s tightening of its control on rare earths, a group of critical minerals essential in the production of a wide range of electronics, automobiles and semiconductors. China dominates the global rare earth supply chain.

Those restrictions came after the US introduced a slew of its own export controls targeting China in late September, despite the two sides seemingly making progress in trade talks over the summer.

China’s sweeping new restrictions, some of which won’t take effect until November, could deal a huge blow to East Asian economies, such as Japan, South Korea and Taiwan, which play critical roles in the global tech and artificial intelligence supply chain, as well as the auto industries.

On Monday, key Asian stock indexes closed lower. Hong Kong’s benchmark Hang Seng Index, dominated by Chinese financial and tech firms, closed 1.7% down. China’s Shanghai composite index fell 0.2%. South Korea’s benchmark index KOSPI lost 0.72%. Australia’s S&P/ASX 200 dropped 0.84%.

The Tokyo stock exchange was closed Monday for a public holiday.

Trump appeared to have been caught off guard by China’s latest “hostile” move and on Friday said he would impose an additional 100% tariff on Chinese goods starting November 1, immediately reigniting the prospect of a damaging trade war between the world’s two top economies.

The new tariff would raise total duties on imports from China to around 130% – effectively a trade embargo and just shy of the 145% peak reached at the height of the trade war this spring.

The rapid escalation of trade tensions sank US stocks Friday, with the S&P 500 and Nasdaq recorded their worst day since April. The Dow also suffered its steepest drop since May.

On Sunday, Beijing fired back, vowing countermeasures if Trump makes good on his threat. China’s commerce ministry said the country is “not afraid” of a trade war, but urged further negotiations between the two sides to resolve the issues.

The ministry also defended the new rules on rare earths as a “legitimate move” and blamed Washington for the latest escalation, pointing to the Trump administration’s introduction of a series of new restrictive measures against China within two weeks of the latest round of trade talks in Madrid in September.

But the Trump Administration has appeared to soften its tone, opening doors for further talks.

In a Trust Social post, Trump said the US “wants to help China, not hurt it.”

“Don’t worry about China, it will be all fine!” he said, though he did not give further indication on what he meant specifically.

US stock futures rose Sunday after Trump’s comment on Sunday evening, and on Monday were also pointing to a stronger day ahead.

Dow futures were up 1.1% at 4:15 a.m. ET Monday, S&P 500 futures rose 1.5% and Nasdaq futures climbed 2%.

In Europe, most stock indexes were slightly higher in early trade. Germany’s DAX rose 0.5%, France’s CAC was up 0.7%, and London’s FTSE 100 was trading 0.2% higher on the day.

Meanwhile, Vice President JD Vance appealed to China to “choose the path of reason,” while emphasizing that the US holds “far more cards” if Beijing chooses to respond aggressively.

“It’s going to be a delicate dance, and a lot of it is going to depend on how the Chinese response,” Vance said on Fox News Sunday. (CNN)