"With the United States threatening to increase tariffs to 25 per cent from 10 per cent and the Chinese vowing not to react to "blackmail" to get them back to the negotiating table, this could be the catalyst that tips sentiment and some markets into a tailspin to the downside, especially as we enter the lower liquidity holiday trading season".
The White House says the tariffs are a response to China's unfair trade policies, which Mr Trump blames for helping to create a huge trade deficit.
"China's trade abuses need to be addressed, but tariffs are not the answer", the National Retail Federation said. "The U.S. unilaterally exerting pressure on China will get the opposite of what it wants", he said. "We deal with diplomatic matters on the basis of principle, not by engaging in trade".
The Chinese yuan also ticked lower against the dollar, extending its year-to-date decline to more than 4.5 per cent.
China's top diplomat on Thursday encouraged the Trump administration to "calm down" amid escalating tariff threats, saying increased rhetoric will not lead to results. "If the United States takes further escalatory steps, China will inevitably take countermeasures and we will resolutely protect our legitimate rights", Chinese Foreign Ministry spokesman Geng Shuang said. "We hope that those directly involved in the United States' trade policies can calm down, carefully listen to the voices of USA consumers.and hear the collective call of the global community".
"The increase in the possible rate of the additional duty is meant to provide the administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens", Lighthizer said in a statement. "It's OK, we can take it" - these are incredible people", the president said.More news: Ohio State's Meyer put on leave, investigation opened
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The Donald Trump administration fires another shot in its ongoing trade war with Beijing.
Last month, the administration imposed a 25 percent tariff on $34 billion worth of Chinese goods, mostly machines and components.
Foreign Ministry spokesman Geng Shuang told a daily news briefing in Beijing that USA pressure on trade won't work, and that Beijing has always upheld using dialogue to resolve trade issues.
Trump has ultimately threatened tariffs on over $500 billion in Chinese goods, covering virtually all us imports from China.
The government will seek public comment on the idea. The tariffs target a range of Chinese imports like dog food, furniture, vehicle tires, beauty products, and food products, in addition to steel and aluminum.