Global trade war beckons as China to retaliate if Trump increases tariffs

China has pledged to retaliate if President Trump goes ahead with his threat to impose more tariffs on its exports, escalating the trade war between the biggest economies in the world and rattling global markets.

Beijing said that it would not succumb to blackmail after the White House revealed plans to extend duties across almost all Chinese goods exported to the United States within weeks.

The rise in hostilities hit equities, with indices across Asia, Europe and America falling into the red. The FTSE 100 fell by 177.81 points, or 2.3 per cent, to 7,407.06, while the CAC 40 in France and the Dax in Germany fell by 3.2 per cent and 2.8 per cent, respectively.

Earlier, the CSI in China fell by 1.5 per cent and the Nikkei in Japan lost 2.1 per cent. On Wall Street, the Dow Jones industrial average closed 0.4 per cent down, while the technology-focused Nasdaq dropped by 1.3 per cent.

The US has imposed import levies on Chinese exports worth $250 billion as Mr Trump sought to assert a protectionist trade agenda. Beijing has hit back with tariffs on American products worth $110 billion.

Mr Trump surprised markets on Thursday by announcing that a new $300 billion catalogue of goods from China would face US duties of 10 per cent from September 1. This is set to include consumer goods such as mobile phones, toys and shoes.

Chinese officials expressed hope that the Trump administration would “give up its illusions” and resume negotiations based on equality and mutual respect. “If America does pass these tariffs, then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Hua Chunying, a foreign ministry spokeswoman, said. “We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle, we won’t give an inch.”

Wang Yi, the Chinese foreign minister, said that introducing more tariffs “is definitely not a constructive way to solve the economic and trade frictions”.

Mr Trump indicated that talks between American and Chinese officials in Shanghai this week had failed to bear fruit. He accused Beijing of failing to deliver on a series of promises and said that President Xi was “not going fast enough” in seeking a deal.

He has vowed from the outset to shield his country “from the ravages of other countries making our products, stealing our companies and destroying our jobs” and has claimed that trade wars are “good, and easy to win”.

Mr Trump’s officials also have sought to put China’s alleged illicit trading activity, which include forced technology transfers, at the centre of talks. Mike Pompeo, US Secretary of State, lamented “decades of bad behaviour”. Beijing denied claims of economic malpractice.

The president unveiled an agreement to open European markets to American beef exports yesterday, which allows the US to fulfil up to 35,000 tons of the EU’s 45,000-ton annual quota for hormone-free beef imports. It comes after repeated threats from Mr Trump to launch a full-scale trade war against the EU, by imposing

25 per cent tariffs on all vehicles imported to America from the bloc, among other things. Negotiators from both sides of the Atlantic continue to try to thrash out a broader trade agreement.

Mr Trump said yesterday that the beef deal would increase American exports by 46 per cent in the first year and by 90 per cent within seven years, and ultimately to $420 million annually from $150 million today.

His latest blow in the tit-for- tat row with China dominated markets, however. Gold and government bonds — assets deemed to be safe havens at times of uncertainty — jumped as investors sought security. Oil prices, after their worst day in three years, recovered slightly. Brent crude rose by 2.6 per cent, or $1.56, to $62.06 per barrel.

Hu Xijin, editor of the Chinese state-run Global Times, said that Beijing “will focus on the national strategy under a prolonged trade war” and wrote on Twitter: “New tariffs will by no means bring closer a deal that the US wants, it will only make it further away.”

Oxford Economics, the consultancy, said that US-China relations had “obviously soured” further, and added: “We expect this step to make China less keen to achieve a deal and more determined to prepare itself for long-term economic tension with the US.”

Government announces £500m plan to help farmers hit by no-deal Brexit

Ministers are working on a no-deal Brexit plan for farming in which the government would step in and buy slaughtered livestock at set prices in the event of a collapse in European demand because of high tariffs.

Boris Johnson travelled to Wales today and pledged that British farmers would be better off if the UK left the European Union at the end of October even if it were without a deal.

Under plans being finalised by Michael Gove, the former environment secretary who is now in charge of Whitehall no-deal planning, the government would agree to buy any lamb and beef at the point of slaughter at a pre-determined price.

The commitment, expected to cost the Treasury about half a billion pounds a year, would also cover some arable crops where EU exports might dry up.

Mr Johnson also pledged today to unveil a replacement to the EU’s Common Agricultural Policy that will ensure farmers get a “better deal” than at present.

But farmers’ leaders are concerned that the government scheme may have to last for several years while trade deals are negotiated.

There is also concern that they may never make up for the lack of market access to the EU, which would be hard to win back, even if an eventual trade deal were struck.

The UK beef industry exports about 92,000 tonnes of beef to the EU which will face tariffs of 65 per cent of wholesale value, depending on the category of product. The cumulative cost of beef exports facing EU tariffs is more than £250 million.

EU sheep meat and live animal imports will face tariffs of about 46 per cent, making British lamb exports to Europe uneconomic. Economists have predicted that a no-deal Brexit would depress the market rate for lamb by 30 per cent.

Alun Cairns, the Welsh secretary, suggested that new global markets, including in Japan, would be available to sheep meat producers.

“We are now looking to the growth that will come from right around the world,” he told Today on BBC Radio 4.

“I would point to the market in Japan that has just been opened to Welsh and British sheep, for example, so exports are already taking place there. That is a significant market for which we haven’t even scratched the surface yet.”

However, Liz Saville Roberts, Plaid Cymru’s Westminster leader, pointed out that Japanese market had been opened up to Welsh lamb by the EU-Japan trade deal.

Mr Cairns insisted that as an independent trading nation “there will be these markets and these opportunities there”.

Asked what he would say to those who said were threatening civil unrest if their export markets were destroyed, he said: “New markets have already opened up and there are new protocols in place for additional markets as well.”

Minette Batters, president of the National Farmers’ Union, said the mass slaughter of livestock was “absolutely something that we want to avoid at all costs”, as she queried where lamb products would go if farmers were “tariffed out of the EU market”.

“Trade deals don’t just get picked off the shelf in a couple of months,” she said.

Helen Roberts, development officer for the National Sheep Association (NSA) in Wales, called on Mr Johnson to “stop playing Russian roulette with the industry which he appears to be doing at the moment”.

She told Today: “If we do go out with a no-deal it will be absolutely catastrophic, even if it’s just for a few months.”

Asked about the possibility of civil unrest, including roadblocks and tractor protests, among sheep producers, she said: “I think they will, I think it’s time to come and stand up for ourselves and be counted.”