US stock markets have suffered their worst day since January after China announced tariffs on $ 60bn worth of US goods, in the latest escalation of the trade war between the world’s two biggest economies.
Beijing’s finance ministry said it would target 5,140 US products, including batteries, spinach and coffee from 1 June, with penalty duties of 5% to 25%.
President Donald Trump criticised the move via Twitter and later announced that a $ 15bn aid plan was being drawn up for US farmers affected by tariff hikes.
He added that he would meet Chinese president Xi Jinping at the G20 meeting in Japan next month for, what he hoped would be, “fruitful” talks.
..There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken so advantage of the U.S. for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliate-will only get worse!
— Donald J. Trump (@realDonaldTrump) May 13, 2019
US markets were sharply lower in reaction to the tariff retaliation, with the Dow Jones Industrial Average and the S&P 500 down by 2.4% at the close – and the tech-focused Nasdaq 3.4% lower.
Uber’s market debut continued to be dominated by the negative sentiment – falling a further 11% on top of Friday’s 8% decline.
The FTSE 100 earlier closed almost 0.6% down to a seven-week low while its counterparts in France and Germany were more than 1% worse off.
Neil Wilson, chief market analyst at Markets.com, said: “Make no mistake this is a serious escalation and we have a trade war on our hands again.
“The breakdown last week has not proved temporary and it seems China is prepared to go toe-to-toe with the US on this.”
It comes after the Trump administration last Friday raised tariffs on $ 200bn of Chinese imports from 10% to 25% – saying China had backtracked on commitments it made during talks.
Donald Trump’s top economics adviser Larry Kudlow admitted over the weekend that both countries would be hurt by a trade war – including US businesses and consumers hit by the impact of higher duties on imported goods.
But the president has remained bullish, tweeting hours later that “we are right where we want to be with China”.
On Monday, he reiterated his view that China “has taken advantage for so many years” and warned: “China should not retaliate – will only get worse.”
Markets have been through a turbulent period over the last week amid fears about the renewed escalation in tensions between the two countries – and the consequences of a full-blown trade war which could hold back global growth.
Mr Trump began raising tariffs last July over complaints that China steals, or pressures US companies to hand over, technology.
There had been hopes of a deal between the two countries to resolve the dispute but earlier this month, the president abruptly announced plans to raise tariffs.