Asia's factory activity weakened in January as soft Chinese demand and threats of higher tariffs by U.S. President Donald Trump weighed on business sentiment, private surveys showed on Monday, darkening the outlook for the region's economy.

Investors are bracing for a potential trade war that could hit the earnings of major companies and dent global growth. Canada and Mexico have said that they will hit back with retaliatory tariffs while China promised to respond with "corresponding countermeasures" and vowed to challenge Trump's move at the World Trade Organization.