Tokyo is hoping to avoid falling into the firing line after U.S. President Donald Trump followed through on his campaign promise to impose steep tariffs on three trading partners.

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.

Policymakers, investors and economists are watching Trump’s trade policy amid fears that his threatened use of tariffs could batter global commerce.

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.

Japanese stocks plunged, with the Nikkei average losing almost 3% at one point, after President Donald Trump slapped tariffs on the United States’ top three trade partners, threatening major economic disruption.