China President Xi Jinping (File Photo)
China on Monday retaliated against the US imposing additional tariffs and vowed that it will "never surrender to external pressure" after President Donald Trump warned his Chinese counterpart Xi Jinping that Beijing "will be hurt very badly" if he did not strike a deal with America.
As the two trading giants and top economies were locked in a bruising trade war, President Trump on Monday warned the Communist giant not to impose retaliatory tariffs on American products.
After the near collapse of trade talks with China last week, Trump on Friday imposed punitive duties on USD 200 billion worth of Chinese imports, raising them to 25 per cent from 10 per cent, and asked for a similar increase on tariff on the rest of the Chinese import of over USD 300 billion.
In the latest escalation of the trade war, the Chinese Ministry of Finance said tariffs on USD 60 billions of US exports to China would rise by "25, 20 and 10 per cent" respectively.
Products that were taxed at five per cent would not be affected.
The ministry said Beijing's move was "a response to unilateralism and trade protectionism."
"China hopes the United States will return to the right track of bilateral trade negotiations, work together with China and meet China halfway to reach a mutually beneficial and win-win agreement on the basis of mutual respect and equality," the ministry said in a statement coinciding with the opening of US stock markets.
US markets reacted badly to the move. Within minutes of opening, the Dow Jones Industrial Average was down more than 460 points, or 1.8 per cent, while the broad-based S&P 500 also fell 1.8 per cent and the Nasdaq shed 2.3 per cent.
Markets in Europe were also depressed by latest round of tit-for-tat tariffs, with London's FTSE 100 down about 0.5 per cent, while the main indexes in Frankfurt and Paris were more than 1 per cent lower.
The benchmark Shanghai Composite Index lost 1.21 per cent, or 35.50 points, to close at 2,903.71. The Shenzhen Composite Index, ended 1.08 per cent lower, or 16.87 points, at 1,551.75.
The Trump administration, which has accused China of backtracking on previous trade commitments, sought to turn up the pressure on Beijing after months of talks failed to produce a breakthrough.
President Trump on Monday used his Twitter handle to criticise China.
"China should not retaliate - will only get worse!" he tweeted.
"I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don't make a deal because companies will be forced to leave China for other countries," he said.
"Too expensive to buy in China. You had a great deal, almost completed, & you backed out!" Trump said ramping up his remarks against Beijing after the collapse of trade negotiations with China.
"There will be nobody left in China to do business with. Very bad for China, very good for USA! But China has taken so advantage of the U.S. for so many years, that they are way ahead (Our Presidents did not do the job).
"Therefore, China should not retaliate-will only get worse!" Trump warned.
In Beijing, the Chinese Foreign Ministry too reacted to Trump's threats.
Asked about Trump's threat to impose tariffs on all Chinese imports which totalled to USD 539.5 billion last year after the just concluded 11th round of talks in Washington failed to make head way to end the trade war between the top countries, Foreign Ministry spokesman Geng Shuang said "we have repeatedly stated that raising tariffs won't solve any problem."
"China will never succumb to external pressure. We are determined and capable to safeguard our legitimate rights and interests," he said.
"We still hope that the US will meet halfway and try to solve the issues between us on the basis of mutual respect, equality and mutual benefit. This is in line with both sides interests and is the aspiration of the international community," he said.
China's top trade negotiator Liu He has said that talks would continue in Beijing at an unspecified date.
White House economic advisor Larry Kudlow said on Sunday that Trump and Chinese President Xi could meet next month on the sidelines of the G20 summit in Japan to sort out their differences on trade.
But Geng did not confirm the likely meeting between Trump and Xi at the G20 meeting.
Trump has been demanding that China reduce the massive trade deficit which last year climbed to over USD 539 billion. He is also pressing for verifiable measures for protection of intellectual property rights, technology transfer and more access to American goods to Chinese markets.
Earlier, the ruling Communist Party of China's mouthpiece the People's Daily in a front page editorial said Beijing wants to settle its differences with the US, but warned that it will not change its system and can weather a lengthy stand-off.
"The US cannot control China, and it is even less likely that it can deter China's development," it said.
It has warned the US to not to miscalculate China's strength saying that Washington risks making "mistake after mistake."
Chinese officials say while China is willing to import more and provide access to US goods, Beijing is finding it hard to agree to Trump's demand for intrusive inspections to enforce Intellectual Property Rights which China failed to curb so far.