Washington/Beijing — US President Donald Trump’s threat to impose a 10% tariff on $200bn of Chinese goods prompted a swift warning from Beijing of retaliation, as the trade conflict between the world’s two biggest economies quickly escalated.
Trump’s latest move, as Washington fights trade battles on several fronts, was unexpectedly swift and sharp.
It was retaliation, he said, for China’s decision to raise tariffs on $50bn in US goods, which came after Trump announced similar tariffs on Chinese goods on Friday.
"After the legal process is complete, these tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced," Trump said on Monday.
The news sent global stock markets skidding and weakened both the dollar and the Chinese yuan in Asian trade on Tuesday.
China’s commerce ministry said Beijing would fight back firmly with "qualitative" and "quantitative" measures if the US published an additional list of tariffs on Chinese goods, accusing Washington of launching a trade war.
"Such a practice of extreme pressure and blackmailing deviates from the consensus reached by both sides on multiple occasions," the ministry said.
"The US has initiated a trade war and violated market regulations, and is harming the interests of not just the people of China and the US, but of the world," it said.
Washington and Beijing appeared increasingly headed towards open trade conflict after several rounds of talks failed to resolve US complaints over Chinese industrial policies, lack of market access in China and a $375bn US trade deficit.
US Trade Representative Robert Lighthizer said his office was preparing the proposed tariffs and they would undergo a similar legal process to previous ones, which were subject to a public comment period, a public hearing and some revisions.
He did not say when the new target list would be unveiled.
"As China hawks, like Lighthizer and (Peter) Navarro, appear to have gained power within the Trump administration lately, an all-out trade war now seems more inevitable," said Yasunari Ueno, chief market analyst at Mizuho Securities in Japan.
On Friday, Trump said he was pushing ahead with a 25% tariff on $50bn worth of Chinese products, prompting Beijing to respond in kind.
Some of those tariffs will be applied from July 6, while the White House is expected to announce restrictions on investments by Chinese companies in the US by June 30.
"China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology. Rather than altering those practices, it is now threatening US companies, workers and farmers who have done nothing wrong," Trump said.
Trump said if China increased its tariffs again in response to the latest US move, "we will meet that action by pursuing additional tariffs on another $200 billion of goods".
Trump said he had "an excellent relationship" with Chinese President Xi Jinping and they "will continue working together on many issues". But, he said, "the US will no longer be taken advantage of on trade by China and other countries in the world".
Shares in Chinese telecommunications equipment maker ZTE, another casualty of US-China tension, plunged more than 20% in Hong Kong after the US Senate’s passage of a defence bill set up a potential battle with Trump over whether ZTE can resume business with its US suppliers.
ZTE was hit in April with a seven-year ban barring US suppliers selling to it after it broke an agreement to discipline executives who conspired to evade US sanctions on Iran and North Korea. At Trump’s urging, ZTE and the US Commerce Department reached agreement on June 7 to lift the ban.
The intensifying trade row is threatening to put more pressure on the already cooling Chinese economy, risking an end to a rare spell of synchronized global expansion.
China’s central bank unexpectedly injected 200-billion yuan ($31bn) in medium-term funds into the banking system on Tuesday, in a move that analysts said reflected concern about liquidity but also the potential economic drag from a full-blown trade war.
China imported $129.89bn of US goods last year, while the US purchased $505.47bn of Chinese products, according to US data.
Derek Scissors, a China scholar at the American Enterprise Institute, a Washington think-tank, said that meant China would soon run out of imports of US goods on which to impose retaliatory tariffs.
China was unlikely to respond to an announcement of tariffs with changes in industrial policies, he said.
"As I’ve said from the beginning, China will back off its industrial plans only when US trade measures are large and lasting enough to threaten the influx of foreign exchange. Not due to announcements," he said.