* Shippers worst performers on the board
* Machinery makers stumble on worries China demand will fall
* Idemitsu extends gains after merger news on Tuesday
By Ayai Tomisawa
TOKYO, July 11 (Reuters) - Japan's Nikkei dropped more than 2 percent on Wednesday morning after the United States said it would impose tariffs on an additional $200 billion worth of Chinese goods, hurting shippers and machinery makers in particular.
The Nikkei share average .N225 fell as much as 2.1 percent to 21,744.25 in mid-morning trade, retreating from a 2-1/2-week high hit the previous day.
Washington decided to impose the extra tariffs after efforts to negotiate a solution to the trade dispute failed to reach an agreement, senior administration officials said on Tuesday. officials released a list of thousands of Chinese goods the administration wants to hit with the tariffs, including hundreds of food products as well as tobacco, chemicals, coal, steel and aluminium. also includes consumer goods ranging from car tires, furniture, wood products, handbags and suitcases, to dog and cat food, baseball gloves, carpets, doors, bicycles, skis, golf bags, toilet paper and beauty products.
"Most of us didn't expect that the U.S. would disclose a new list that soon, so the stock market had not priced in the U.S. move," said Shogo Maekawa, global market strategist at JPMorgan (NYSE: JPM ) Asset Management. "Now the market is cautious on what China will do next. Stocks are expected to be volatile for the time being."
On Wednesday, China's shares opened sharply lower, dampening sentiment in companies whose businesses heavily rely on Chinese demand such as shippers, construction machinery makers and machine tool makers. shipping sector .ISHIP.T tumbled 2.8 percent and was the worst performer on the board, with Mitsui OSK Lines 9104.T stumbling 3.7 percent, Kawasaki Kisen 9107.T dropping 2.0 percent and Nippon Yusen 9101.T tanking 2.7 percent.
Oil refiner Idemitsu Kosan 5019.T , which jumped 13 percent on Tuesday after it and Showa Shell (LON: RDSa ) Sekiyu 5002.T agreed to merge on April 1 next year, extended its gains and was up 5.7 percent.
The broader Topix .TOPX declined 1.3 percent, with all but the oil sub-sector in negative territory. (Editing by Jacqueline Wong)
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