Japanese auto stocks fell sharply after new U.S. tariffs against Mexico, Canada and China raised concerns about their U.S. sales of cars made in the North American trading partners and a further escalation in trade conflicts.

Japan’s economy risks taking another hit if US President Donald Trump slaps fresh tariffs on China, sparking a renewed US-China trade war, according the government’s chief economist.

Japanese shares ended lower as risk-aversion gathered steam following President Trump's decision to impose tariffs on Canada, Mexico, and China. The Nikkei Stock Average finished 2.7% lower at 38520.09.