President Donald Trump dramatically increased pressure on China on Sunday to reach a trade deal, saying he would hike US tariffs on $200 billion worth of Chinese goods this week and target hundreds of billions more soon.
The yuan plunged the most since August, U.S. stock futures tumbled along with crude oil prices after U.S. President Donald Trump threatened to increase tariffs on Chinese imports, casting a cloud over talks this week that were expected to finalize a trade deal.
Increasing the tariffs to 25 percent on $200 worth billion of Chinese goods would turn that figure to 0.9 percent, while imposing 25 percent tariffs on the rest of the $325 billion worth of goods would drag GDP growth down by 1.5 percent.
Trump said on Twitter that tariffs will increase to 25 per cent on Friday and that more Chinese goods will face additional tariffs.
"The Trade Deal with China continues, but too slowly, as they attempt to renegotiate". Trump complained on Sunday.
The warning will throw a shadow over the next round of talks, with a delegation from Beijing due in Washington this week, with Bloomberg News reporting the Chinese side are considering their position. Washington already is charging 25% duty on another $50 billion of Chinese imports, while Beijing has imposed penalties on $110 billion of American goods.
Fears that Trump's comments could sink the trade talks were compounded when the editor of China's Global Times newspaper said on Monday that China's vice premier Liu He was now "very unlikely" to go to the United States this week. Last week, the mood among gold investors had turned gloomy, pushing the metal to a four-month low after the U.S. Federal Reserve Chairman Jerome Powell dashed hopes of a rate cut this year.
Futures on the S&P 500 Index slid 1.8 percent as of 11:15 a.m.in Hong Kong.Contracts on the Nikkei 225 Stock Average fell 2.3 percent in Chicago.China's CSI 300 Index tumbled 5.3 percent, the most since October on an intraday basis.
The White House, the Treasury and the U.S. Trade Representative's office did not immediately respond to CNBC's requests for comment. "Sorry, we're not going to be doing that anymore!"
Mindful of his 2020 re-election bid, Trump suggested the measures were not leading to price increases for USA consumers. American businesses, while supportive of Trump's crackdown on China's trade practices, are eager for the tariffs to be removed, not expanded. The Tariffs paid to the United States of America have had little impact on product cost, mostly borne by China. Analysts said Trump's comments might be a negotiating tactic, but might also make Beijing reluctant to appear as if it was giving in to US demands.
Investors took fright at a worsening of the dispute between the world's biggest economies, with the USA president vowing to hike tariffs this week on $200bn of Chinese products.
"Trump has taken the proverbial sledgehammer to the walnut this morning and the only two words likely to be on the minds of traders and investors this week are "trade talks", Jeffrey Halley, a senior market analyst at OANDA, said.