Investors worry that the protracted tariff war between the world's top two economies, which has dented global economic growth, could see further escalation with no signs of a resolution in the near term.
Reuters reported late on Wednesday that the U.S. administration was considering Huawei-like sanctions on Chinese video surveillance firm Hikvision over the country's treatment of its Uighur Muslim minority.
Thai shares were the top losers in Southeast Asia with a drop of 1.1%, weighed down by energy and material stocks.
Oil & gas firm PTT PCL lost 1.6%, while PTT Global Chemical PCL fell 4%.
Singapore shares declined 0.7% even as April core inflation eased to its lowest level in a year due to falling electricity costs and lower food inflation.
Data released earlier in the day showed core inflation rose 1.3% in April from a year earlier, in line with a Reuters poll estimate, and easing from the prior month's 1.4% rise.
Lender DBS Group Holdings Ltd and conglomerate Jardine Matheson Holdings Ltd weighed on the Singapore stock index, slipping 0.9% and 1.6%, respectively.
Malaysian shares were marginally down ahead of inflation data due on Friday.
Consumer prices likely increased 0.4% in April from a year earlier, at a slightly faster pace than the previous month's 0.2% year-on-year rise, according to a Reuters poll.
Meanwhile, Indonesian shares gained 1.6% with calm returning to the streets of Jakarta after post-election protests.
Unrest ensued in the world's third-largest democracy after the election commission confirmed earlier this week that incumbent President Joko Widodo's had beaten ex-general Prabowo Subianto in the April 17 poll.
The market was relieved that the post-election situation calmed down and was confident that stability would return, said Anugerah Zamzami Nasr, an equity research analyst with PT Phillip Sekuritas Indonesia.
(Reporting by Niyati Shetty in Bengaluru, Additional Reporting by Shreya Mariam Job; Editing by Subhranshu Sahu)
By Niyati Shetty