Hong Kong stocks close sharply lower on Friday after US President Donald Trump said he would double the tariff on Chinese imports, escalating the trade war with Beijing and raising the risk of slowdowns in the world’s two largest economies.

The Hang Seng Index fell 3.3%, while the Hang Seng Tech Index dropped 5.4%.

In terms of star technology stocks, Li Auto and XPeng fell 8%; SMIC and BYD fell 7%; Meituan, Alibaba, and Kuaishou fell 6%; Bilibili, Baidu, and NIO fell 5%; JD.com fell 4%; Tencent fell 3%; Xiaomi fell 2%; NetEase fell 1%.

The declines tracked an overnight rout in US stocks and losses for Asia-Pacific markets on Friday, as global traders rotated out of equities and into Treasuries on concerns that entrenched inflation in the US and the Trump administration’s tariffs would lead to stagflation in the American economy. The new tariff also risks disrupting China’s exports, which were the biggest contributor to the nation’s economic growth last year.

The new US tariffs on China come on top of a 10% duty that took effect earlier this month, a move that is set to aggravate concerns about the world’s No. 2 economy that is already struggling with a property crisis and deflationary pressures. Increased trade frictions also threaten to derail a nascent rally induced by optimism about Chinese artificial intelligence breakthroughs.

“The additional 10% tariffs introduce near-term risks but don’t significantly alter the current narrative around China markets which have been supported by AI broadly,” said Charu Chanana, chief investment strategist at Saxo Markets. “There could be an offset from expectations that tariffs could be a negotiating tool, and China’s administration has the stimulus tools to respond.”