Stock markets in Asia and Europe slumped Monday after Donald Trump slapped tariffs on Canada, Mexico and China, sparking fears over another bruising ‘America First’ trade war that could hit global economic growth.

US stocks were also set for a selloff, based on falls in stock futures.

“Trade war 2.0 begins,” UBS strategists wrote in a note Monday.

Japan’s Nikkei stock index closed 2.7% lower and South Korea’s KOSPI was 2.5% down at market close. Hong Kong’s Hang Seng was broadly flat.

The Shanghai index was closed for the Lunar New Year holiday. China’s markets will resume trading Wednesday.

On Sunday evening, Trump also threatened to enact additional tariffs on the European Union, accusing the EU of being “really out of line.”

Europe’s benchmark Stoxx Europe 600 index was 1.4% lower on Monday morning. Germany’s DAX and France’s CAC both fell 1.9%, while London’s FTSE 100 was trading 1.3% lower on the day.

“Tariffs and counter-tariffs will be inflationary and lead to weaker growth prospects, both of which are negative for equities,” said Mohit Kumar, economist at Jefferies.

The US dollar soared to a record high against the Chinese yuan.

“For the moment it looks like the dollar is the only winner,” said Chris Beauchamp, chief market analyst at IG, an online trading provider.

Trump announced over the weekend a 25% duty on all imports from Mexico and most goods from Canada, and an additional 10% tariff on Chinese goods imported into the US.

The tariffs – which Trump says are needed to combat the flow of migrants and fentanyl into the US – are expected to come into effect Tuesday.

Canada and Mexico have announced retaliatory tariffs, and China has said it will challenge the move at the World Trade Organization.

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