In the latest move in an escalating trade dispute, President Trump announced Monday evening that he was asking U.S. Trade Representative Robert Lighthizer to suggest $200 billion worth of Chinese goods on which the U.S. could impose a 10 percent tariff.
Shanghai stocks tumbled almost 4 percent on Tuesday to a two-year low, while the yuan fell to a more-than-five-month low against the dollar as Washington's fresh tariff threats against China raised the spectre of a full-blown trade war.
The Trump administration on June 15 said that it will impose a 25 per cent tariff on $50 billion of Chinese exports. Last week, the US levied tariffs on $34 billion of Chinese goods. These penalties would go into effect, the president said, "if China refuses to change its practices" and proceeds with its plans for retaliatory tariffs.
"Such practice of imposing extreme pressure and blackmailing is contrary to the consensus the two sides have reached through rounds of consultations, and disappoints the global community", a Ministry of Commerce spokesperson said.
China's commerce ministry reacted swiftly, saying: "If the United States acts irrationally and issues a list, China will have no choice but to take comprehensive measures of a corresponding number and quality and take strong, powerful countermeasures".
China's proposed tariffs on United States petroleum imports, part of a mounting trade war between the two countries, would crimp sales to the shale industry's largest customer, adding new pressure on USA crude prices, energy executives and analysts said in interviews this week. Those tariffs won't take effect until July 6, which leaves the countries more time to negotiate.
The move quickly drew praise from former Trump senior adviser Steve Bannon, who said: "President Trump told China and the world tonight that America will not back down when it comes to economic aggression". "We can no longer be the stupid country", Trump said.
Companies that do a lot of business in China were among the biggest losers on the Dow on Tuesday.
Given the escalating rhetoric on trade, some investors said the slide in US stocks was relatively small.
"Chinese leaders over these past few weeks have been claiming openness and globalization". Jimmy Goodrich, vice president of global policy for the Semiconductor Industry Association, said chipmakers could be forced to pay tariffs on their own products simply for doing a small portion of the work in China. "It's an unprecedented level of larceny".
China is retaliating by raising import duties on $34 billion worth of American goods. "This is predatory economics 101".
Sixty-one percent of respondents said domestic Chinese firms were already equally or more innovative than European enterprises for various reasons, including increased R&D spending and targeted acquisitions of foreign high tech firms. "Trump could put more pressure on other countries like Japan and North Atlantic Treaty Organisation courtiers", said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management in Tokyo.
"I reminded him that's not fair competition", Mr Pompeo said.
The Trump administration is using the threat of new tariffs after its efforts to deter Chinese intellectual property theft were met with retaliation from the Chinese government, according to The Associated Press.
Tariffs drive up the cost of goods coming into the U.S., forcing businesses to pay more for imported goods or buy more expensive domestically produced goods.
Wall Street has viewed the trade tensions with rising concern that they could strangle the economic growth achieved during Trump's watch.