Escalating trade war between US & China sends shock waves through markets

Timeline of trade tensions between the US and its partners from metal tariffs to duties on Chinese imports

Asia stocks slide to four-month low as Trump threatens more China tariffs

Since June 1, steel and aluminum imports from the European Union, Canada and Mexico have been hit with tariffs of 25 percent and 10 percent, respectively.

In addition to the $200 billion worth of goods to be targeted by the Office of the US Trade Representative, Trump said a further $200 billion would be hit with tariffs if China responded in kind.

It was retaliation, he said, for China's decision to raise tariffs on $50 billion in US goods, which came after Trump announced similar tariffs on Chinese goods on Friday.

The president said the move was a retaliatory response to China's decision to raise tariffs on $50 billion of American goods, including cars, tobacco, petrochemicals and agricultural products.

The trade frictions have kept financial markets on edge, with investors increasingly anxious that a full-blown trade conflict could derail global growth.

"Trump appears to be employing a similar tactic he used with North Korea, by blustering first in order to gain an advantage in negotiations".

Secretary of State Mike Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the US and China.

The first round of USA tariffs worth $34 billion will go into effect on July 6, while a second batch valued at $16 billion will undergo further review, USTR said last week. But there is always potential for Trump to keep increasing his threats which could have broader implications.

"Russia has been aggressively affirming itself by adding oil to market ahead of the upcoming meeting and is pushing for a significant output hike, Saudi Arabia is suggesting for a modest increase and others are in favour of the status quo", said Stephen Innes, head of Asia-Pacific trade at OANDA.

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The Hong Kong Hang Seng index lost 2.8 percent as Shanghai Composite dropped 3.78 percent. "But it's a joke", Pompeo said.

"The rising risk of a disruptive trade conflict makes a bad situation tentatively worse" for an economy already clouded by a sharp slowdown in investment growth, a mounting debt burden and rising credit defaults, Nomura said in a note on Tuesday.

Trump said that the new tariff would go into effect if the Chinese government did not lower recently announced tariffs on U.S. goods and failed to address the theft of U.S. intellectual property by Chinese companies. The yen is often sought in times of market turmoil and political tensions.

China's yuan skidded to a five-month low.

He has in recent weeks chose to implement steep tariffs against China and other key USA allies, despite warnings from congressional lawmakers that doing so could harm American workers and erase gains made from the Republican tax package.

The initial USA tariffs are aimed at items such as semiconductors, electronics, plastics and other goods from sectors expected to benefit from China's "Made in 2025" initiative to dominate the world in technology areas such as robotics, driverless cars and advanced medical devices.

The two major producers have kept a ceiling in place since late 2016, which has helped ease a supply glut and lift prices, which had fallen to multi-year lows.

Spot gold XAU= was up 0.4 percent at $1,283.11 an ounce.

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