Donald Trump has denied the US is in a trade war with China, as markets fell on the back of retaliatory tariffs unveiled by Beijing this morning.
The US dollar fell against the yen, euro and pound this morning after China revealed its tit-for-tat $50bn measures. Beijing confirmed a 25 per cent levy on US vehicles and "soft" agricultural products including beef, soybeans, wheat and orange juice, sending stocks in both countries down.
The Hang Seng index has closed down 2.2 per cent, while soybean futures have dropped more than three per cent.
Boeing, which is exposed to the levy on aircraft parts, was down five per cent in pre-trading, while Tesla, which will be affected by the tariff on electric cars, was down 4.4 per cent.
The dollar was down 0.4 per cent against the yen, 0.2 per cent against the euro and 0.1 per cent against the pound at the time of writing.
The measures, which has seen gold climb 0.8 per cent, are the latest move in an increasingly tense relationship between China and the US, and one that is increasingly being viewed as the start of a trade war.
Trump tweeted: "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue."
China's deputy finance minister Zhu Guangyao told a press conference a trade war would be "lose-lose", but added that while Beijing wanted to solve this issue "constructively", it would not bow to pressure.
Vice minister for Commerce Wang Shouwen added that Trump's actions were not about national security, claiming they were discriminatory and "a clear violation of multilateral trading rules".
Stressing the "mutually beneficial" relationship between the two countries, the pair urged Washington to rethink its stance.
Barclays chief executive Jes Staley said he was hopeful the "jousting" between the two countries would remain "a side issue". Speaking at Kings' Business School, he added: "The powers that be will recognise the importance of having a global economy which is integrated... I don't think the political bodies are going to put up walls, even real ones."
But not everyone agreed.
Naeem Aslam, chief market analyst at Think Markets, said: "China has taken out big guns to answer Trump’s tariffs: the trade war is here. Farmers over in the US are going to be very nervous as China is planning to put tariffs on soft commodities such as soybean. The commodity has taken a nose dive after the announcement.
"Agriculture isn’t the only sector which China is targeting, it is only a start... We know that it was the US which was going to lose more by adopting these tariffs."
President Trump is expected to confirm a list of more than 1,200 Chinese imports that will be targeted with tariffs by Friday, in response to alleged intellectual property infractions. They were first announced by the White House a fortnight ago but the preliminary list, which spans 44 pages, has only just been released. It shows the US is planning to target China's emerging high tech sectors.
On Monday China imposed tariffs of up to 25 per cent on 128 US imports including pork and wine, saying it had made the decision to safeguard its interests and the losses caused by Trump's higher tariffs. The move will affect $3bn of US imports.