(Updates prices ahead of European markets open)

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Asian stocks, U.S. and European futures drop as Canada,

Mexico

retaliate

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Trump slaps 25% tariffs on Canada, Mexico; 10% levy on

China

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US dollar hits record high vs yuan

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Mexican peso, Canadian dollar tumble

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Hang Seng drops 1% on return from holiday; mainland

markets shut

By Kevin Buckland

TOKYO, Feb 3 (Reuters) - Asian stock markets slumped on

Monday and European and U.S. equity futures pointed sharply

lower after President Donald Trump's tariffs on Canada, Mexico

and China triggered fears of a broad trade war and a hit to

global growth.

The U.S. dollar shot to a record peak against the Chinese

yuan in offshore trading, its highest against Canada's currency

since 2003 and the strongest against the Mexican peso since

2022.

Japan's Nikkei share average tumbled 2.9% and

Australia's benchmark - often a proxy trade for Chinese

markets - dropped 1.8%.

Stocks in Hong Kong, which include listings of Chinese

companies, fell 1.1% upon reopening from Lunar New Year

holidays. Mainland Chinese markets resume trading following the

holidays on Wednesday.

Pan-European STOXX 50 futures sank 2.7%, and U.S.

S&P 500 futures dropped 2%.

Trump slapped Canada and Mexico with duties of 25% and China

with a 10% levy at the weekend, calling them necessary to combat

the flow of migrants and fentanyl into the U.S..

Canada and Mexico immediately vowed retaliatory measures,

and China said it would challenge Trump's levies at the World

Trade Organization.

The tariffs, outlined in three executive orders, are due to

take effect at 12:01 a.m. ET (0501 GMT) on Tuesday.

Trump's move was the first strike in what could usher in a

destructive global trade war and drive a surge in U.S. inflation

that would "come even faster and be larger than we initially

expected," said Paul Ashworth of Capital Economics.

A model gauging the economic impact of Trump's tariff plan

from EY chief economist Greg Daco suggests it would reduce U.S.

economic growth by 1.5 percentage points this year, throw Canada

and Mexico into recession and usher in "stagflation" at home.

Barclays strategists previously estimated that the tariffs

could create a 2.8% drag on S&P 500 company earnings, including

the projected fallout from retaliatory measures from the

targeted countries.

The U.S. dollar rose as much as 0.8% to reach an all-time

high of 7.3765 yuan in the offshore market. Onshore

trading remains shut for holidays.

The U.S. currency climbed as much as 2.8% to 21.2547 Mexican

pesos, the highest since March 2022, and rose as much as

1.4% to C$1.4755, a level not seen since 2003.

The euro dropped as much as 2.3% to $1.0125 - the

lowest level since November 2022. Trump said at the weekend that

tariffs on Europe will "definitely happen".

U.S. two-year Treasury yields rose as much as 3.6

basis points to 4.274%, a one-week high, on concerns tariffs

will stoke U.S. inflation and delay Federal Reserve

interest-rate cuts.

Two-year Japanese government bond yields rose

in sympathy, reaching their highest levels since October 2008.

Leading cryptocurrency bitcoin tumbled to as low as

$91,439.89, a three-week trough.

Oil prices rose, with U.S. Texas Intermediate crude

up 1.9% at $73.89 a barrel and Brent crude futures

adding 1% to $76.39 a barrel as investors tried to guage the

impact of Trump's tariffs on world energy.