Asia Pacific stocks trade higher despite Trump’s China tariff threat

In Japan, the Nikkei 225 recovered from its earlier decline to trade up by 0.22% and the Topix index added 0.38%.

Shares in mainland China rose in early trade, with the Shanghai composite rose 0.49% and the Shenzhen component higher by 0.56%. The Shenzhen composite also gained 0.54%.

South Korea’s Kospi traded 0.15% higher as shares of LG Electronics soared more than 4%.

Over in Australia, shares traded higher after returning from a holiday. The ASX 200 advanced 1.24% as most sectors saw gains.

Overnight on Wall Street, stocks advanced as investors cheered the agreement struck between the U.S. and Mexico to avoid tariffs being implemented. The Dow Jones Industrial Average advanced 78.74 points to close at 26,062.68, while the S&P 500 rose around 0.5% to finish at 2,886.73. The Nasdaq Composite added 1.1% to close at 7,823.17.

Meanwhile, on the U.S.-China trade front, Trump told CNBC on Monday that China would have to make a deal with the U.S. “because they’re going to have to. ”

The U.S. president also confirmed that more tariffs on Chinese goods will kick into place should Chinese President Xi Jinping fail to attend the upcoming G-20 meeting. The president previously threatened to put levies on another $300 billion in Chinese goods if a trade agreement is not reached soon.

“The end of month G20 meeting is gearing up to be another major ‘binary’ risk event that should keep markets very edgy in the coming days and weeks. It also complicates the (Federal Open Market Committee) meeting next week where the Fed has (to) decide whether downside risks to US growth justify an immediate shift to a formal easing bias,” Ray Attrill, head of foreign exchange strategy at National Australia Bank, wrote in a morning note.

“It doesn’t feel (like) the needle has moved a whole lot since June of 2018” as the accusations and measures from the U.S. “remain the same,” Taimur Baig, managing director and chief economist at Singapore’s DBS Bank, told CNBC’s “Squawk Box” on Tuesday.

“There probably is some sort of a method to this gambit, if you will, but I fail to see it because so far it seems like the sort of rhetoric that is coming out of the White House is going to make it impossible for a trade deal to be achieved,” Baig said.

Last week, Federal Reserve Chairman Jerome Powell said the U.S. central bank will “act as appropriate to sustain the expansion” after “closely monitoring” the impact of developments surrounding “trade negotiations and other matters.”

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 96.766 — still off highs above 97.6 seen last week.

The Japanese yen traded at 108.59 against the dollar after seeing an earlier high of 108.34, while the Australian dollar changed hands at $0.6959 after its decline from levels above $0.7000 in the previous session.

Oil prices were higher in the morning of Asian trading hours, with international benchmark Brent crude futures edging up 0.22% to $62.43 per barrel and U.S. crude futures gaining 0.43% to $53.49 per barrel.

— CNBC’s Michael Sheetz contributed to this report.