Worries the United States and China are digging in for a longer, costlier trade war are weighing on financial markets with Beijing accusing Washington of harbouring "extravagant expectations" of a dispute-ending deal.
Investors have added up the costs of higher tariffs on Chinese and US goods as well as the effects of severe US restrictions on China's Huawei Technologies for the US technology sector.
Their calculations sharply drove down shares on Monday of suppliers Qualcomm, Micron Technology and Broadcom Inc .
Apple Inc fell 3.3 per cent, hurt by a warning from HSBC that higher tariffs on Chinese goods would force the tech company to raise prices, with "dire consequences" on demand for its products.
Morgan Stanley analysts warned a collapse of the trade talks and a lasting breakdown with higher tariffs on all US-China trade would push the global economy towards recession.
In a note to clients, they said such a scenario would prompt the US Federal Reserve to slash interest rates back to zero by the spring of 2020.
However lags in policy transmission "would mean that we might not be able to avert the tightening of financial conditions and a full-blown recession."
Negotiations between the United States and China have soured dramatically since early May, when Chinese officials sought major changes to the text of a proposed deal the US says had been largely agreed.
A subsequent round of talks ended with no movement as President Donald Trump increased tariffs to 25 per cent from 10 per cent on $US200 billion ($A289 billion) worth of Chinese imports and threatened to impose duties on all remaining Chinese goods sold in the United States.
China imposed a retaliatory tariff increase and the Trump administration followed up on Thursday by adding telecom equipment giant Huawei to a trade blacklist that restricts its ability to purchase American components and software and do business with other US companies.
No new talks have been scheduled, and a sterner tone from Beijing suggests negotiations are unlikely to resume soon.
It also raises questions about a possible meeting between Trump and Chinese President Xi Jinping next month at a G20 Summit in Japan.
