Sawt Falasteen - Asian stocks drop as tariff fears return, new AI programme emerges

Traders were also assessing the impact of a new, cheaper Chinese generative AI programme amid claims it can outperform big-name rivals and worries that a recent surge in the sector may be called into question.

Equities enjoyed a healthy run-up last week on the hope that Trump 2.0 will take a less hardball approach to global trade as he held off imposing stiff levies on China and other partners immediately on taking office, as he warned he would.

His comments that he would "rather not" hit Beijing, and a signal of openness to a trade deal added to the optimistic tone.

However, news Sunday that he would hit Colombian goods with a 25 percent tariff -- rising to 50 percent next week -- and revoke the visas of government officials set off alarm bells.

The move came after President Gustavo Petro blocked deportation flights from the United States.

In response to Trump's decision, Petro initially announced retaliatory levies of 25 percent on imports from the United States.

But Bogota later backed down and agreed to accept the deported citizens, with Foreign Minister Luis Gilberto Murillo saying they had "overcome the impasse".

"Actions speak louder than words. The situation with Colombia just shows how little it takes for Trump to use tariffs as a negotiation tool," said Dane Cekov at Sparebank 1 Markets.

Traders were already gearing up for a big week that will see the Federal Reserve hold its first policy meeting of the year.

While it is widely expected to hold rates, investors will be keeping a close eye on its statement and comments from Federal Reserve head Jerome Powell.

There is a concern that Trump's pledges to impose tariffs while slashing taxes, immigration and regulations could reignite inflation and force the central bank to pause its rate cuts or even hike them again.

- Eyes on DeepSeek -

The move against Colombia sent the dollar up against most of its peers, piling on around one percent against the Mexican peso. Gold, a safe haven in times of uncertainty, was sitting just shy of its record high.

"This pivotal week kicks off in Asia, setting the stage for a global market spectacle intensely focused on the unfolding of... Trump's economic agenda amidst key inflation reports and anticipated Fed guidance," said Stephen Innes at SPI Asset Management.

He added that markets were bracing for "a torrent of earnings reports from companies constituting nearly 40 percent of the S&P 500's market capitalisation".

"Their outcomes could either amplify the recent bullish surge or instigate a reevaluation of market sentiments."

All three main indexes on Wall Street fell Friday, with the S&P 500 off a record high on profit-taking and as tech firms took a hit following the launch of the DeepSeek AI programme last week.

The firm said only $5.6 million was spent developing the model.

The programme's arrival has sparked competition fears, as tech titans -- including Nvidia, Meta and Alphabet -- have made huge investments worth hundreds of billions of dollars into AI products and sent their valuations soaring.

It also came on the heels of Trump's announcement of a new $500 billion venture to build infrastructure for artificial intelligence in the United States.

Tech and chip firms were among the big losers in Tokyo as the Nikkei ended in negative territory, with Advantest down more than eight percent and Tokyo Electron off almost five percent.

SoftBank, which is a key investor in Trump's AI project, tumbled more than eight percent.

"What we've found is that DeepSeek... is the top performing, or roughly on par with the best American models," Alexandr Wang, CEO of Scale AI, told CNBC.

There were also losses in Shanghai, Singapore, Wellington, Mumbai, Bangkok and Manila but Hong Kong rose.

- Key figures around 0710 GMT -

Tokyo - Nikkei 225: DOWN 0.9 percent at 39,565.80 (close)

Hong Kong - Hang Seng Index: UP 0.7 percent at 20,201.14

Shanghai - Composite: DOWN 0.1 percent at 3,250.60 (close)

Dollar/yen: UP at 156.11 yen from 155.93 yen on Friday

Euro/dollar: DOWN at $1.0458 from $1.0500

Pound/dollar: DOWN at $1.2451 from $1.2484

Euro/pound: DOWN at 83.99 pence from 84.06 pence

West Texas Intermediate: DOWN 0.7 percent at $74.12 per barrel

Brent North Sea Crude: DOWN 0.7 percent at $77.95 per barrel

New York - Dow: DOWN 0.3 percent at 44,424.25 (close)

London - FTSE 100: DOWN 0.7 percent at 8,502.35 (close)

P.AbuBaker--SF-PST