Markets slide as Chinese hit back

ESCALATING its trade war with the US and sending world financial markets into a slide, China announced higher tariffs on Monday on $US60 billion ($A86 billion) worth of American goods in retaliation for President Donald Trump’s latest penalties on Chinese products.

Tariffs of 5 per cent to 25 per cent will take effect on June 1 on about 5200 American products, including batteries, spinach and coffee, China’s Finance Ministry said.

The announcement followed a move by the US on Friday to raise duties on $US200 billion of Chinese imports to 25 per cent, up from 10 per cent. American officials did so after accusing China of backtracking on commitments it made in earlier negotiations.

With investors unnerved by the potential for economic damage on all sides, stocks sank across the globe. The Dow Jones industrial average was down more than 600 points, or close to 2.5 per cent, in midafternoon trading.

Two days of trade negotiations between US and Chinese representatives broke up on Friday without any agreement. Both countries have indicated more talks are likely.

Top White House economic adviser Larry Kudlow said on Sunday that China had invited US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin to Beijing.

And Mr Trump said on Monday that he expected to meet Chinese President Xi Jinping in late June at the G20 summit in Osaka, Japan.

The two countries have given themselves some breathing room: The higher Chinese tariffs don’t kick in for two weeks. The US increases apply to Chinese goods shipped since Friday, and those shipments will take about three weeks to arrive at US seaports and become subject to the higher charges.

On Twitter, Mr Trump warned Mr Xi that China “will be hurt very badly” if it doesn’t agree to a trade deal.

Mr Trump tweeted that Beijing “had a great deal, almost completed, & you backed out!” The president has repeatedly insisted, most recently on Monday, that increased tariffs on Chinese goods don’t hurt American consumers.

But Mr Kudlow acknowledged over the weekend that US consumers and businesses will bear some of the costs.

THE PRESIDENT HAS REPEATEDLY INSISTED, MOST RECENTLY ON MONDAY, THAT INCREASED TARIFFS ON CHINESE GOODS DON’T HURT AMERICAN CONSUMERS