Hong Kong and mainland stocks fared badly on Tuesday, as trading resumed after a public holiday, amid fears of an escalating trade war between the United States and China. About 1,000 Chinese shares – nearly a third of the 3,000 stocks traded on the mainland – dropped to the 10 per cent trading limit. On Monday, US President Donald Trump said he had asked US Trade Representative Robert Lighthizer to identify Chinese products that will be subject to a new 10 per cent tariff, which would affect Chinese exports worth US$200 billion, after Beijing retaliated with its own tariffs on US$50 billion worth of US goods, following a first round of US tariffs on Friday. In Hong Kong, the Hang Seng Index tumbled by 2.78 per cent, or 841.34 points, to 29,468.15, while the Hang Seng China Enterprises Index plunged by 3.18 per cent, or 377.41 points, to 11,492.77. “The US-China trade negotiations are only the beginning of the story, and both governments have made adverse decisions during the talks. Current investor sentiment is not positive due to the uncertainty of the negotiations, and overall market sentiment is still affected by interest rate concerns,” said Gordon Tsui, head of fixed income at Hong Kong-based Taikang Asset Management. The steep losses on the Hang Seng Index were led by the transport and infrastructure sectors – shares in Beijing Airport plummeting by 27.13 per cent to HK$8.57 and Geely Auto shares dropped by 5.39 per cent to HK$21.95. “All sectors, including property and the new economy, have been badly affected by the adverse market situation. The Hang Seng Index will stay between 29,000 and 30,000 for now, with no big rebound likely to happen in the short term,” said Tsui. “For the rest of this month, the conditions will not improve to a bright outlook.” Technology stocks performed poorly. ZTE shares, which resumed trading last week for the first time in two months, sank by 22.6 per cent to HK$10.14 after US lawmakers voted on Monday to uphold a ban on selling crucial parts to the Chinese telecoms manufacturer, putting its future in serious doubt. The US Senate passed a defence policy bill that could overrule the Trump Administration’s latest deal with ZTE and reimpose sanctions on the company. The Trump Administration had previously agreed to impose a US$1.9 billion fine instead of an absolute ban on purchases of US-made chips that power ZTE’s mobile handsets. The latter would have effectively shut down its business. However, Republicans in the senate broke with the administration to restore the ban on chip sales to ZTE after fierce criticism of the deal, which was regarded as putting US national security in danger. Tencent Holdings dropped by 3.17 per cent to a five-day low of HK$397, and Sunny Optical lost 6.7 per cent to HK$153, another five-day low. HSBC slid by 2.29 per cent to HK$74.60. In addition to the mounting US-China trade tensions, Chinese stocks were dealt a further blow by home-grown technology giant Xiaomi, which decided on Monday to postpone raising capital on the mainland via Chinese depository receipts, part of Beijing’s plan to have Chinese unicorns list at home. The Shanghai Composite Index fell by 3.78 per cent, or 114.08 points, to 2,907.82, dipping under 3,000 points for the first time since September 2016. Meanwhile the CSI 300, which tracks blue chips listed in Shanghai and Shenzhen, dropped by 3.53 per cent, or 132.31 points, to 3,621.13. The Shenzhen Composite Index plunged by 5.31 per cent, or 528.37 points, to 9,414.76, while the Nasdaq-style ChiNext dropped 5.76 per cent, or 94.51 points, to 1,547.15, its lowest level since January 2015.