Oliver Jones from Capital Economics has warned that China's response to Trump's latest tariff threat could hit the United States stock market hard.
Investors fear an escalating trade war between the world's two biggest economies could hit global growth. That came four days after Washington added 25 per cent duties on US$34 billion worth of Chinese goods and Beijing responded by increasing taxes on the same amount of American imports.
The move has been swiftly and heavily criticised by China, which said it was "totally unacceptable" for America to keep escalating the trade dispute.
"China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology", Trump said in June.
"China is forced to strike back to safeguard core national interests and the interests of its people", the Commerce Ministry said.
"Tonight's announcement appears reckless and is not a targeted approach", said Senate Finance Chair Orrin Hatch in a statement. They are meant to put pressure on China to stop stealing USA companies' trade secrets and forcing them to hand over intellectual property to Chinese firms as a condition of doing business there.
The 200-page document, released on Tuesday by the US Trade Representative's office, gives notice to those who wish to comment on the proposal and lists hundreds of products that would be subjected to the new tariffs. "Consumers, businesses and the American jobs dependent on trade, are left in the crosshairs of an escalating global trade war", said Hun Quach, the head of worldwide trade policy for the group.
Trump has been considering tariffs against China since his officials concluded in March that Beijing violates USA intellectual-property rights, such as by forcing American firms to hand over technology.
In its policy agenda released in January, the United States trade office said the WTO needed to change its "self-declared" policy for developing nations to stop major economies like China and India from getting the preferential treatment that should be reserved for the world's poorest nations.
The FTSE 100 finished 100.08 points or 1.3 percent lower and Germany's Dax fell 1.53 percent.
Industrial metal markets are often viewed as an economic bellwether and the losses suggest that traders are starting to price in a slump in global growth.
Hong Kong's Hang Seng index fell 1.3 percent, with the China Enterprises index giving up 1.5 percent.
The more it turns up the heat therefore, the more likely the tariffs get implemented as just like the 25 per cent levies on $34 billion of Chinese and U.S. imports triggered on Friday.