This morning, China threatened retaliation if Washington goes ahead with U.S. President Donald Trump‘s planned tariff hikes, while the escalated trade disputes between the two biggest global economies sent shocking waves to world stock markets.
In Beijing, China’s government accused Trump of violating his June agreement with President Xi Jinping to revive negotiations aimed at ending a harsh fight over Beijing’s trade surplus and technology ambitions.
Trump rattled financial markets with Thursday’s surprise announcement of 10% tariffs on $300 billion of Chinese imports, effective Sept. 1. which would extend almost to everything the US imports from China.
If that goes ahead, “China will have to take necessary countermeasures to resolutely defend its core interests,” said a foreign ministry spokeswoman, Hua Chuying.
“We don’t want to fight, but we aren’t afraid to,” Hua said at a regular news briefing. She called on Washington to “abandon its illusions, correct mistakes, and return to consultations based on equality and mutual respect.”
Earlier, Washington imposed 25% tariffs on $250 billion in Chinese products. Beijing has retaliated by raising import duties on $110 billion of U.S. goods.
China imported U.S. goods worth about $160 billion last year. But regulators have extended retaliatory measures to include slowing down customs clearance for American companies and putting off issuing license in insurance and other fields.
Furthermore, Beijing is threatening to release an “unreliable entities” blacklist of foreign companies that might face restrictions on doing business with China. Plans for that were announced after Washington imposed crippling restrictions in May on sales of U.S. technology to Chinese tech giant Huawei Technologies Ltd.
Trump’s announcement came as their latest trade talks ended in Shanghai with no sign of a deal. Officials said they would resume next month in Washington.
Global Stocks Plunged
On the other hand, global stock markets plunged Friday. In early trading, London’s main index lost 2% and Frankfurt fell 2.5%. Tokyo’s benchmark was off 2.1% and Hong Kong retreated 2.5%. Markets in Shanghai, Sydney and Paris also fell.
Trump’s announcement came after Federal Reserve Chairman Jerome Powell disappointed traders Wednesday by suggesting the U.S. central bank had no plans for an extended cycle of interest rate cuts.
“Markets are reeling after President Trump expressed his frustration with China’s stalling techniques,” said Stephen Innes of VM Markets in a report. “With the global markets on edge after Chair Powell’s communication failed so miserably, few traders have been willing to step in front of this steamroller.”