In Sydney, Asia stocks mirrored the decline seen in Wall Street futures on Monday as investors grappled with uncertainties surrounding the impending U.S. tariffs. The lack of clarity on the form and extent of the levies made it challenging for investors to assess the risks.

S&P 500 futures and Nasdaq futures dropped in early trading, following a decline on Friday. The fall in Treasury yields indicated a flight to safety, with gold prices hitting a new peak.

President Donald Trump's remarks about potentially negotiating deals to avoid tariffs, juxtaposed with reports urging advisors to adopt a more aggressive approach, led to fluctuations in the market sentiment. The uncertainty persisted as Trump was set to receive recommendations on tariffs this week, with details on the tariff rates, countries, and products to be affected still unclear.

The European Union hinted at retaliatory tariffs, while also contemplating concessions to the U.S. Many economists expressed concerns about the impact of tariffs on the U.S. economy, complicating the Federal Reserve's ability to adjust interest rates and potentially boosting short-term inflation.

Economists warned of elevated recession risks due to potential negative effects on sentiment, with projections of rising core inflation and adjustments required in household saving rates to mitigate the impact.

Recent data on inflation and consumer spending heightened concerns about economic risks. Key upcoming reports on payrolls, manufacturing, services, trade, and job openings will be closely watched for further insights into the economic outlook.

In Asia, the fear of a global trade conflict led to a downturn in MSCI's Asia-Pacific index, with Japan's Nikkei facing a significant decline, particularly in automaker stocks. Bond markets indicated a belief that the slowdown in U.S. economic growth might outweigh the temporary rise in inflation, potentially prompting rate cuts by the Federal Reserve.