Asian markets tumbled on Tuesday as back-and-forth exchanges over possible higher US tariffs for the auto sector deepened concerns that a trade war is brewing.

The US and China, the world's two largest economies, are set to impose tariffs on billions of dollars of each other's products starting Friday.

Hong Kong's Hang Seng, reopening after a market holiday on Monday, plunged 3.0 per cent to 28,091.91 as investors reacted to weaker than expected economic data. Japan's benchmark Nikkei 225 index lost 0.8 per cent to 21,631.27 and South Korea's Kospi fell 0.3 per cent to 2,264.86. The Shanghai Composite index sank 1.3 per cent to 2,740.26. Australia's S&P/ASX 200 bucked the regional trend, adding 0.4 per cent to 6,205.10, ahead of an interest rate decision by the Reserve Bank of Australia later Tuesday. The rate is expected to remain unchanged at 1.5 per cent. Taiwan's benchmark fell and Southeast Asian indexes were mixed.

Major US benchmarks closed higher Monday, buoyed by a last-minute rally from technology companies. The S&P 500 index rose 0.3 per cent to 2,726.71 and the Dow Jones Industrial Average gained 0.2 per cent to 24,307.18. The Nasdaq composite jumped 0.8 per cent to 7,567.69. The Russell 2000 index of smaller-company stocks rose 0.7 per cent to 1,655.09.

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The European Union on Monday slammed the Trump administration for considering higher tariffs on auto imports, saying they could lead to global retaliation against some US$300 billion ($447b) in US goods.

European Commission spokesman Margaritis Schinas said the US investigation into the possibility of auto tariffs "lacks legitimacy, factual basis and violates international trade rules," like last month's US tariffs on steel and aluminum imports.

The EU has retaliated against those tariffs with measures of its own, which hit around €2.8b ($4.8b) worth of American-made products. President Donald Trump cited national security concerns for the previous tariffs.

On Monday, Trump said the World Trade Organisation has treated the US "very badly" and the country will be "doing something" if the organisation doesn't change its ways. But he denied reports he plans to pull out of the WTO.

The US will start imposing a 25 per cent tariff on US$34b in Chinese imports this Friday. It won't target 284 additions, worth US$16b, until it gathers further public comments. China is expected to strike back with tariffs on a like amount of US exports. The Trump administration is also identifying an additional US$200b in Chinese goods for 10 percent tariffs, which could take effect if Beijing retaliates.

"In the lead up to the July 6 tariffs implementation date, uncertainties continue to loom and with that, Asian equity markets look set to be braced for another day of lackluster trading," said Jingyi Pan of IG. She added that investors, bracing themselves for US-China tariffs, may turn to defensive stocks in industries like utilities, telecommunications and real estate.

- AP