ICE cotton futures dropped over 1% on Monday as heightened US-China trade tensions weighed on investor sentiment even as the natural fiber faces slowing demand. Cotton contracts for December fell 0.60 cent, or 1.03 %, at 57.61 cents per lb as of 01:39 pm EDT (1739 GMT). It traded within a range of 56.59 and 57.97 cents a lb.

"The negativity in the price action is just a follow up reaction to the Friday's tariff announcement," said Bailey Thomen, cotton risk management associate with INTL FCStone. "The market is closely following the G7 summit and what will come out of it on the trade front," she added. US President Donald Trump on Friday lashed back at a new round of Chinese tariffs by heaping an additional 5% duty on some $550 billion in targeted Chinese goods in the latest tit-for-tat trade war escalation by the world's two largest economies.

Cotton has fallen 21% so far this year as the US-China trade war has hurt demand for the natural fiber. China is the world's top consumer of cotton, while the United States is one of the biggest producers. Traders were hoping for a pickup in sales after a strong sales report last week. However, the weekly US Department of Agriculture export sales report last week showed sales nearly halved from the previous week. The report showed net sales of 164,000 running bales (RB) for the 2019-2020 marketing year, primarily for Indonesia and Vietnam.

Trump on Monday offered an olive branch to China after days of intense feuding over trade that has spooked financial markets, and he opened the door to diplomacy with Iran, easing tensions on the last day of a strained G7 summit. Total futures market volume rose by 4,334 to 24,971 lots. Data showed total open interest gained 378 to 216,859 contracts in the previous session.