WASHINGTON/BEIJING US President Donald Trump threatened to impose a 10 per cent tariff on US$200 billion (S$270 billion) of Chinese goods, prompting a swift warning from Beijing of retaliation.
As the U.S. trade war with China looks set to escalate, Dr Tony Syme, expert in macroeconomics and global finance at the University of Salford Business School, comments on what the impact might be and how it could reach much further than just the two countries involved.
The tariffs were quickly matched by China on USA exports, a move that drew the president's ire.
Steel stocks turned in some of the market's worst performances on the day, as traders anxious about the potential impact of a trade war between the USA and China.
The Dow Jones Industrial Average .DJI fell 287.26 points, or 1.15 percent, to 24,700.21, the S&P 500 .SPX lost 11.18 points, or 0.40 percent, to 2,762.57 and the Nasdaq Composite .IXIC dropped 21.44 points, or 0.28 percent, to 7,725.59.
Trump's move on Monday came shortly after the Senate voted to reinstate a ban on Chinese tech company ZTE, barring it from buying components from US manufacturers.
Mr Trump said after the legal process is complete, these tariffs worth $200 billion will go into effect if China refuses to change its practices.
"If the US becomes irrational and issues this list, China will have no choice but to adopt strong countermeasures of the same amount and quality", the statement said. The President threatened to impose even more tariffs if China retaliates further.
The New York Times reported Monday that the Trump administration had told Apple CEO Tim Cook that no tariffs would be placed on iPhones. Earlier this month, that measure was extended to some of the US' traditional allies - the EU, Canada and Mexico.
"Its psychological effects, its effects in increasing uncertainty, could be very serious and we're certainly getting later in a cycle of escalation", former U.S. Treasury Secretary Lawrence Summers said in an interview on Bloomberg Television. If the United States is to ever decrease its pressure against China, Beijing must find leverage - and the most effective way of doing so is to retaliate.
Even with tariffs on an additional US$200 billion in Chinese goods, the impact on both China's and the USA economy is set to be small, most economists say. But with these exemptions expiring at the beginning of the month, nations have been hitting back at the U.S.
"Given the impact from both sides, we expect Thailand will benefit from exporting certain products to replace the affected items subject to higher tariffs from the two giant economies, but the values are unlikely to be significant - just $1 billion or 0.42% of the export value in 2017", Ms Pimchanok said. China couldn't come close to matching America's tariffs on $450 billion of Chinese exports.
It could be that US President Donald Trump thinks he's on a roll: After snubbing the US' partners at the G7 summit and closing a deal with Kim Jong Un over disarmament of North Korea, the White House has now announced that the US will quit the UN Human Rights Council.
USA business groups said members were bracing for a backlash that would affect all American firms in China, not just in sectors facing tariffs. The bulk of the losses will result from the 25% tariff on aluminum.
Wall Street has viewed the trade tensions with rising concern that they could strangle the economic growth achieved during Trump's watch.
Goldman Sachs chief executive Lloyd Blankfein said Mr Trump's approach to China on trade may be "bluster".