Asian markets suffered a severe bout of the jitters on Tuesday amid trade war fears and growing unrest in Hong Kong.

Lingering concerns about the aftershocks of the year-long dispute between China and the United States are starting to emerge with Singapore cutting its GDP, or gross domestic product, forecast for this year to between 0% to 1%.

“The growth prospects of key emerging markets and developing economies … and China have worsened, partly due to the escalation of the US-China trade conflict in recent months,” the Ministry of Trade and Industry said.

“Uncertainties and downside risks in the global economy have increased since three months ago. This could severely dent global business and global confidence, with adverse implications on global trade and global economic growth,” it added in a statement.

During the past month, the rhetoric from Beijing and Washington has increased after US President Donald Trump slapped 10% tariffs on Chinese imports worth another US$300 billion. The extra duties are due to kick in on September 1.

Coupled with the mass demonstrations in Hong Kong that at times have paralyzed the city, investors are in “bunker mode” when it comes to the Hang Seng, which has plunged 20% from an April peak.

Controversial bill

“It looks like the situation will get worse,” Airy Lau, an investment director at Fair Capital Management, told the AFP news agency. “Together with the higher global recession risk from US-China friction, the Hang Seng Index is likely to have [between] 5% [to] 10% more downside.”

The protests began two months ago in response to a controversial extradition bill between Hong Kong and mainland China. But they have since morphed into a broader movement, urging authorities to reverse a slide in democratic freedoms.

Still, in the past four weeks, the city has been brought to a standstill in a series of strikes, marches and protests, which have sent shockwaves through the financial district.

At the close on Tuesday, the Hang Seng was down 2.10%, or 543.42 points, while Singapore’s Straits Times Index dipped nearly 1% because of the specter of a technical recession.

Elsewhere, Tokyo’s benchmark Nikkei-225 index dropped 1.11% with Sydney’s ASX 200 shedding 0.33% and Seoul’s Kospi falling 0.9%.

The downward trend continued in Jakarta, Taipei, Bangkok and Wellington while the Shanghai Composite slipped 0.63% and the Shenzhen Component declined 0.85%.

“Singapore’s sobering downward assessment of 2019 growth outlook is a perhaps the most telling sign that the world is now bracing for [the] worse, even as it hopes for [the] better,” Vishnu Varathan, the head of economics and strategy at Mizuho Bank, wrote in a note.

Cold War

At the weekend, Trump upped the ante with Beijing into what is becoming a new Cold War when he made it clear that planned trade talks with China in the US next month could be shelved after resuming in July.

His remarks came after the yuan fell below the sensitive seven-to-one ratio with the dollar, prompting the White House to brand China “currency manipulators.”

In response, President Xi Jinping’s administration denied the claim, insisting it was part of the government’s fiscal policy as the world’s second-largest economy slows.

“The recent sudden devaluation of the [yuan] sounds like deja vu and brings us to review the August 2015 experience [in a move to shore up its economy and boost exports],” Alicia Garcia Herrero, the chief economist for the Asia Pacific at Natixis, wrote in an earlier note.

“This is in line with our view that there is no point of defending a psychological level under the priority of growth,” she added.

In the meantime, investors look to be in for another white-knuckle ride in the weeks and months ahead.