Asian shares declined alongside Wall Street on Thursday, while the dollar strengthened to a three-week high following U.S. President Donald Trump's announcement of new tariffs on all auto imports. This move exacerbates global trade tensions, posing a risk of inflation.

The Nikkei in Japan dropped by 1.2%, and South Korea's KOSPI fell by 0.9%, as Japanese and South Korean automakers have significant market presence in the U.S. Toyota Motor shares plunged by 4%, Mazda Motor by 5%, and Subaru by 6%.

Trump unveiled plans for a 25% tariff on automotive imports to take effect on April 2, drawing expressions of regret from the European Union and potential retaliatory tariffs from Canada. Nasdaq and S&P 500 futures in Asia both decreased, reflecting the previous sharp decline on Wall Street, particularly in the tech-heavy Nasdaq, which plummeted over 2%.

Following the announcement, U.S. automaker stocks also slumped post-market. General Motors dropped by 8%, while Ford and U.S.-traded Chrysler-parent Stellantis fell by around 4.5%.

Trump indicated that reciprocal tariffs on all countries would be moderate. In relation to China, he hinted at reducing tariffs to facilitate the TikTok deal. Analysts have cautioned that Trump's tariff strategy might fuel U.S. inflation, prompting the Federal Reserve to pause its policy easing.

In the foreign exchange market, the Mexican peso and Canadian dollar experienced declines of 0.8% and 0.2% respectively. The dollar index, which measures the dollar against six major currencies, increased by 0.5% to 104.71, marking a three-week high, and then stabilized at 104.58 on Thursday.

The dollar's momentum was supported by rising Treasury yields, with the benchmark Treasury yields maintaining at 4.354%, up by 5 basis points. Gold prices edged up by 0.1% to $3,022 per ounce, inching closer to the record high of $3,057.

Stella Qiu reporting; Edited by Kim Coghill.