Stocks declined, currencies wobbled because of the escalation of the US-China trade war

According to CNBC, the Nikkei 225 index in Japan fell 2.36% at the beginning of the trading session on August 26, while the TOPIX index fell 2.18%.

The South Korean market is also not immune to losses, with the KOSPI index falling 1.8%. Australia's S&P/ASX 200 index fell 1.18%.

Overall, the MSCI market index for the whole of Asia, excluding Japan, fell by 0.71%.

On August 25, US President Donald Trump announced that he regretted not raising tariffs on China further, as well as fully declaring a "state of emergency" for the current trade war.

Trump's latest statements come after both Beijing and Washington launched additional tariffs to escalate tensions.

U.S. stock futures on August 25 immediately fell after that, according to CNBC.

Futures trading of the Dow Jones Industrial Average fell 224 points on August 25. This means that the trading session on August 26 will open with a decrease of 169.90 points.

Experts predict that S&P500 and NASDAQ 100 futures will not escape the same fate.

"The escalation of retaliation shows how difficult it has become to achieve the goal of reaching a trade deal and reducing tensions," said Louis Kuijs, head of Asia economics at Oxford Economics.

"It is very difficult for trade barriers, both existing and planned, to be removed anytime soon. Other restrictive measures may even be introduced soon," Kuijs predicted.

World currencies wobble

In the face of the current complicated developments, investors are rushing to find a self-defense plan from the Japanese yen.

According to Bloomberg on August 26, the yen against the dollar has risen to a record high price since 2016. Japan's currency is the largest currency with the best performance this year.

Meanwhile, CNH (yuan used in the foreign market) is at the lowest level. The Australian and New Zealand dollars also fell sharply.

The 5% tariff on $550 billion of Chinese goods was launched by President Trump just as the Friday trading session on August 23 ended.

The warning that the US economy will face "enormous risks" by the Chairman of the US Federal Reserve (Fed), Jerome Powell, immediately became a reality after that.

The market now expects trade tensions to unleash a deflationary punch and the market will suffer more trauma than last week, Bannockburn Global Forex's chief market strategist, Marc Chandler, forecasts.

"We should anticipate that the exchange rate of the yuan against the US dollar will be weaker. Reserve currencies, such as the Japanese yen and the Swiss franc, will be hunted. In addition, currencies that are closely tied to growth, including those of Australia, New Zealand and Canada, will be under a lot of pressure," Chandler added.