Asian markets skidded lower Thursday as U.S.-China trade tensions rose, with President Donald Trump saying China “broke the deal” and China vowing to retaliate if the U.. raises tariffs on Friday.

The U.S. is set to raise tariffs on $200 billion of Chinese goods to 25% from 10% on Friday. “You see the tariffs we’re doing? Because they broke the deal. They broke the deal,” Trump said at a rally in Florida on Wednesday night. “They can’t do that, so they’ll be paying.” Still, Trump predicted “it will all work out.”

Beijing will be forced to retaliate if the increases go ahead Friday as planned, China's Commerce Ministry said Thursday. It gave no details of possible penalties. “China deeply regrets that if the U.S. tariff measures are carried out, China will have to take necessary countermeasures,” said a Commerce Ministry statement.

The Wall Street Journal reported Wednesday night that China had been emboldened to take a harder line on trade talks after comments by Trump — specifically, his attacks on Fed Chairman Jerome Powell to cut interest rates, which China reportedly interpreted as a sign of weakness in the U.S. economy, and a signal that the U.S. was ready to compromise.

China’s Vice Premier Liu He will lead a delegation for ongoing trade talks in Washington on Thursday and Friday, and it is believed to be possible that a final trade deal can still be reached.

China’s latest economic data showed new loans in April at 1.02 billion yuan ($149 million), below both expectations (1.2 billion yuan) and the previous month (1.69 billion).

On Wall Street, a late-afternoon reversal added to the market’s losses following a steep sell-off a day earlier as investors worry that the costly trade dispute between the world’s two biggest economies will escalate. Only the Dow industrials DJIA, +1.08% closed with a small gain. Stock futures fell anew on Thursday, indicating another tough day for Wall Street.

Japan’s Nikkei NIK, -1.10% closed down 0.9%, and Hong Kong’s Hang Seng Index HSI, -1.81% lost 2.3%. The Shanghai Composite SHCOMP, -1.72% finished down 1.5% while the smaller-cap Shenzhen Composite 399106, -2.45% fell 1.2%. South Korea’s Kospi 180721, -2.59% tumbled 3%, and benchmark indexes in Taiwan XX:Y9999 , Singapore STI, -1.22% and Indonesia JAKIDX, -1.52% all sank. Australia’s S&P/ASX 200 XJO, -0.81% was one of the few gainers, up 0.4%.

Among individual stocks, Yahoo Japan 4689, -4.49% soared after SoftBank Group 9984, -4.51% said it will spend $4 billion to increase its stake in the company. Rakuten 4755, -2.70% , Toyota 7203, -2.16% and Sony 6758, -0.59% fell in other Tokyo trading. In Hong Kong, food processor WH Group 288, +0.15% sank, along with tech firms AAC 2018, -3.44% and Sunny Optical 2382, -2.03% and China Life Insurance 2628, -3.15% . Chip maker SK Hynix 000660, +0.83% dropped in South Korea and Foxconn 2354, -2.14% slid in Taiwan. Beach Energy BPT, -5.71% and Oil Search OSH, -3.87% rose in Australia.



“The pressure looks to continue amid the trade concerns found within the market with heightened volatility a new normal this week,” said Jingyi Pan, market strategist with IG in Singapore.

The U.S. and China have raised tariffs on tens of billions of dollars of each other’s goods in their dispute over U.S. complaints about China’s technology ambitions and practices. Investors have been anticipating a deal throughout this year, which contributed to double-digit gains in all the major indexes. But the latest tough talk is raising anxiety and casting more doubt about a resolution.

Benchmark U.S. crude US:CLM9 fell 60 cents to $61.55 a barrel. Brent crude UK:LCON9 , the international standard, lost 69 cents to $69.69.