A late newsflash: the US trade representative’s offices will hold public hearings on June 17 about whether to impose a new round of tariffs on China.

These talks will focus on around $300bn of Chinese imports that haven’t been dragged into the trade war so far.

That would include mobile phones and laptop computers.

But some products would still be exempt, the USTR suggests, such as pharmaceuticals, other medical goods, and some rare minerals (thanks to Reuters for the info).

Today’s market mayhem is prominently covered in tomorrow’s UK newspapers. Here’s a few early front pages....

China’s decision to impose higher tariffs on thousands of US goods -- from spinach and coffee to batteries and antiques -- has clearly given investors a lot to think about.

It’s clearly a punchy response, just hours after president Trump tweeted that Beijing should do no such thing. Some investors had clearly expected a more moderate reaction.

With $60bn of US goods affected, there are concerns that US exporters will suffer. The move is also fuelling concerns that the trade war could become even more intense.

Kristina Hooper, chief global market strategist at Invesco in New York, sums up the mood:

“It’s clear that there is a lot of nervousness around the U.S.-China trade negotiations and concern that it’s really deteriorating pretty significantly and that’s impacting all areas of markets.

William Reinsch of Washington’s Center for Strategic and International Studies suspects that Donald Trump and Xi Jinping will eventually try to resolve the trade war themselves.

But who would win such a battle? Reinsch’s money is on the Chinese leader.

He writes:

One clear consequence is that the two presidents have effectively declared themselves the chief negotiators. Trump has been overruling his various representatives for some time, and it looks like Xi Jinping did the same to Liu He. The result is that both negotiators know they do not have full authority, and anything they agree to risks being countermanded.

That means reaching an agreement can only be done at the top. If you’re going to act as the negotiator, then eventually you actually have to negotiate. This is also one of those cases where each president thinks he can get the better of the other. Xi probably thinks, correctly, that he will know the details better than Trump and can outwit him. Trump thinks, less correctly, that he is a better negotiator and can intimidate Xi. Not a recipe for a successful outcome, but the two presidents have, by their own actions, made a meeting inevitable.

From Washington, my colleague David Smith has written about how Donald Trump is at odds with some in his own party over trade:

Not for the first time, Trump is scrambling political allegiances. It is especially awkward for Republicans. The president’s protectionist “America First” agenda flies in the face of the party’s free market principles and threatens to hurt voters in red states.

Farmers are one example. At a news conference organised by the campaign group Tariffs Hurt the Heartland, in response to the raising of tariffs to 25%, Brent Bible, a soybean and corn farmer in Lafayette, Indiana, said: “Our competitive advantage has always been we are a reliable source of product. This has taken that away.

“It has made it … so uncompetitive that other countries are willing to now take the risk that some of the South American countries have in terms of logistics, safety and being reliable. China and others are now willing to take that risk since we are priced so far out of the market.”

The White House has already paid out $12bn in aid for farmers hurt by Chinese tariffs against soybeans and other agricultural products, effectively wiping out financial rewards Trump claims tariffs have reaped.

More here:

Hmmm. Newswires are now reporting that president Trump has said he’s not decided whether to impose new tariffs on all remaining Chinese imports.

This is helping stocks pull back in New York...

Here’s our news story on the latest trade war developments, and the stock market losses.

Investors weren’t expecting such a firm response from Beijing, says Samantha Azzarello, global market strategist for JP Morgan.

She told Bloomberg:

China retaliating as fast as they did was a clear signal they’re not going to be pushed around.

Markets would like a little bit more play nice and maybe even a bit of complacency from China. It was interesting it wasn’t done on the weekend. It was done just in time, Monday morning for markets to open.

That helps explain the scale of today’s selloff - the biggest since January.

It’s certainly been a volatile May:

Today’s rout means the Dow Jones industrial average has lost 5% this month, its worst start to any May since 1970, according to Dow Jones Market Data.

The Nasdaq has lost 5.7%, which is its worst early May since 2000 (after the dot-com bubble burst).

The sell off is intensifying in New York.

The Dow Jones industrial average now down 701 point at 25,240, a slide of 2.7%. That’s one of the worst drop in several months.

Apple is being hit on two fronts today.

As well as the trade war angst, the tech company has lost a legal challenge from a group of iPhone owners who claim its App Store monopoly breaks antitrust rules

The Supreme Court has narrowly ruled by 5-4 that the case can proceed.

Justice Brett Kavanaugh, nominated to the bench by Donald Trump last year, was among the five justices who backed the move. He concluded that citizens have the right to sue, when “retailers engage in unlawful anticompetitive conduct that harms consumers.”

Marketwatch have created this neat chart showing how much US-China trade is at stake.

Comparing the clash to a fantasy battle, they write that the trade war will overshadow all over economic news:

When the world’s two largest economies — Godzilla and Ghidorah — engage in a major clash there’s bound to be little attention paid to anything else.

Retail sales, home construction and industrial production are on the docket this week, but it won’t matter much to Wall Street if the U.S. and China can’t resolve a tense dispute over trade rules that’s festered since last summer.

There’s not been any official response from the US to China’s decision to hike tariffs on up to $60bn of goods.

But Donald Trump will not be happy -- having warned China this very morning not to retaliate.

Andrew Hunter of Capital Economics suspects the US president could take fresh tit-for-tat action, by pressing on with tariffs on ALL Chinese goods.

Hunter writes:

The move will risk provoking the ire of Mr Trump, who had warned China earlier on Monday not to retaliate to the latest US measures.

That could make the prospect of US tariffs being imposed on the remaining $300bn of Chinese imports – provisional details of which were due to be published by the US Trade Representative later on Monday – even more likely.

Wall Street traders are looking pensive, and even a little shell-shocked today, as markets suffer a hefty rout:

Boom! The Dow Jones industrial average has now sunk by 610 points, or 2.35%, to 25,331 points.

That’s a fresh two-month low.

The trade war between the US and China has been rumbling on for roughly a year now.

The latest escalation, with fresh tariffs imposed at both borders, could hurt global growth badly, says Neil MacKinnon, global macro strategist at VTB Capital.

“Uncertainty over the outcome of the US-China trade talks has rattled investor sentiment and an escalation in tariffs threatens to worsen the outlook for the global economy.”

The UK stock market is sliding towards its lowest level in two months, as US-China trade war fears give global investors the shivers.

The FTSE 100 index has lost 38 points to 7,167 points in late London trading; it hasn’t closed lower since mid-March.

The sell-off on Wall Street is getting worse.

The Dow Jones industrial average has now shed 585 points, or 2.2%, to 25,356 points -- its lowest level in two months.

The top fallers on the Dow are Apple (-5.6%), machinery maker Caterpillar (-4.5%), Cisco (-3.6%) and Boeing (-3.2%) -- all likely casualties of a deeper trade war.

The Nasdaq has lost 3%, dragged down by a range of technology stocks.

China hasn’t said anything officially about stopping buying US government debt. But the very hint (via the Global Times newspaper) that the idea is being talked about in some quarters is worrying investors.

Neil Wilson of Markets.com says China has hit back hard at America:

US equity markets are taking a battering as China has responded in kind to US tariffs. Beijing will slap tariffs on up to $60bn in goods, and reports suggest China may also stop purchasing US agricultural products. There is even talk – the ultimate worry – of China dumping US Treasuries. This was also the ace up the sleeve for China. Whilst China is running out of US goods to tax, it does have other tools it can use to put pressure on the White House.

Make no mistake this is a serious escalation and we have a trade war on our hands again. The breakdown last week has not proved temporary and it seems China is prepared to go toe-to-toe with the US on this. Ultimately though we should assume that after this spat – which is about face as much as anything – we should see the parties come around to talks again. Quite whether they can ever achieve a meaningful deal is another matter – talks could extend into 2020 with no result. I just have this sense this going to rumble on fruitlessly for a long time.

Shares in Boeing have lost 3% of their value.

The suggestion that Beijing is considering buying fewer planes from the US manufacturer is unnerving investors in New York.

It’s early days, but Wall Street is on track for its lowest close since late March.

Major technology companies are being hit hard by the latest tit-for-tat retaliations between Washington and Beijing.

Apple is looking particularly bruised, sliding by 5%. It would be hurt if America imposes tariffs on all goods made in China, as many products such as iPhones are assembled there.

Facebook and Amazon are also being swept up in the selloff:

European stock markets have sunk to new seven-week lows, as traders fear that the US-China trade war is escalating alarmingly.

Every bourses is in the red, dragging the EU-wide Stoxx 600 index down by over 1%.

Rupert Thompson, head of research at asset managers Kingswood, says there’s a risk that the negotiations break down completely:

There is a danger of miscalculation with Trump overplaying his hand and the Chinese being unwilling to lose face and accommodate his demands.

Somewhat surprisingly, the direct impact on economic growth of these tariff increases - even if they all went ahead – should not be that large. Rather, the main risk lies in the indirect effects on growth stemming from the hit to business confidence and likely sell-off in equity markets. These would very likely exceed the total direct impact.

Here’s some instant reaction to China’s retaliation:

Ouch! Wall Street is now heading for sharper falls, as the sight of China hitting back against the US gives investors a fright.

The Dow Jones industrial average is bring called down 464 points, or 1.8%, to 25,500.

The Nasdaq index is rattling towards a 2.5% plunge -- it’s full of technology companies who would suffer badly if trade relations between the US and China get any frostier.

European markets have been dragged deeper into the red too, with Germany’s DAX falling 1.3% today.

Wall Street is still heading towards a weak open, with less than 90 minutes to go.

Another eyebrow-raising tweet from the White House....

Putting our fact-checking boots on again, the president’s absolutely right about the Q1 growth rate (it’s the equivalent of a 0.8% quarter-on-quarter growth).

But..that was mainly due to a rise in consumer spending, a build-up of company inventories (perhaps firms stock-piling ahead of a trade war), and a drop in imports (again, perhaps trade-war related).

And if tariffs are mainly paid by US companies, they’re effectively a tax -- so not actually good for growth at all.

Is Donald Trump correct that China picks up most of the new tariffs on their goods entering the US, as he just tweeted?

It appear not.

The president has claimed before that China pays 21% of the 25% additional tariff [presumably by cutting their prices to absorb the hit]. If this were true, then tariffs wuld indeed be bringing money into the US.

However, most economists argue that it’s incorrect, and that US companies bear the burden when they import goods.

Bloomberg examined the 21% claim last week, and declared it fault, saying:

Those numbers appear to be estimates from a 2018 report based on historical data, said David Weinstein, an economics professor at Columbia University and one of the authors of the March study. Actual data on tariffs and trade from 2017 and 2018 showed that foreign firms didn’t lower their prices at all, so the full impact was born by U.S. firms and consumers, he said.

A separate paper published in March by economists Pinelopi Goldberg, the World Bank’s chief economist, Pablo Fajgelbaum of UCLA, Patrick Kennedy of the University of California, Berkeley, and Amit Khandelwal of Columbia Business School also found that consumers and U.S. companies were paying most of the costs of Trump’s tariffs.

It also went a step further: After factoring in the retaliation by other countries, it concluded the main victims of Trump’s trade wars had been farmers and blue-collar workers in areas that supported Trump in the 2016 election.

Trump really is taking aim at China...

Remarkably, he’s now tweeted that the country will be ‘hurt very badly’ unless they agree a trade deal.

(‘backed out’ is a reference to US claims that China tried to renegotiate some of the pledges made in recent negotiations).

China’s CSI 300 index has ended the day down 1.6% at 3,668, a drop of 61 points.

Traders were in cautious mood as they waited for Beijing’s formal response to the new US tariffs on Chinese imports -- and the prospect of more to come.

Neil Wilson of Markets.com says:

President Trump on Friday raised tariffs on $200bn worth of Chinese imports from 10% to 25% and is now examining slapping tariffs on all remaining goods imported from China – worth about $300bn. The rhetoric and posturing is not good for risk and events over the last few days diminish the likelihood we will see a meaningful deal done.

When we look at the posturing with Iran, it looks like the geopolitical hawks in the White House are in control. And unlike the weak Theresa May, Donald Trump is prepared to do no deal rather than a bad deal.

Chinese state television is also hammering home the ‘never surrender’ message.

Reuters reports:

State television said...that the effect on the Chinese economy from the U.S. tariffs was “totally controllable”.

“It’s no big deal. China is bound to turn crisis to opportunity and use this to test its abilities, to make the country even stronger.”

China’s People’s Daily Newspaper has also declared that Beijing won’t back down in the trade dispute.

An editorial in the state-controlled newspaper says:

“China has been pushing forward the bilateral talks with a high sense of responsibility and maximized sincerity, but it will never yield to the extreme pressure from the U.S., or compromise on matters of principle.”

The piece also blames the US government for the deterioration in the trade talks, by hiking tariffs on Chinese goods last week.

Dawn is about to break in New York, but investors there aren’t in a sunny mood....

Eleanor Creagh of Saxo Bank fears that the Chinese yuan could keep falling, as the trade war intensifies.

The yuan is typically tightly managed by Beijing, so weakening the currency would make Chinese exports more competitive -- cushioning the blow from new higher tariffs at the US border.

Leading Chinese journalist Hu Xijin believes China is absolutely serious about not backing down to US pressures.

He’s tweeted that Beijing is committed to its three key demands, and won’t compromise otherwise:

Reminder, those three demands are:

• The U.S. must remove all the additional tariffs imposed on China
• The targets set by the U.S. for Chinese purchases should be in line with real demand
• The text of a deal should be “balanced” to ensure the “dignity” of both nations

Chinese car sales have fallen for the 10th month running, in a sign that its economy is weakening.

Auto sales slumped by 14.6% in April, compared with a year earlier, government figures show. That follows a 5.2% decline in March, showing that consumers are cutting back.

Sales shrank in 2018 for the first time since the 1990s, and this year doesn’t appear to be any better -- despite Beijing’s attempts to stimulate its economy.

One piece of good news -- sales of new energy vehicles jumped 18% year-on-year to 97,000 vehicles.

The stock market boards in China are a sea of green today - and that’s bad news for investors, as it means shares are falling.

Red (or lucky) stock moves were in short supply, as the benchmark CSI 300 index slid by 1.8% in nervous trading today.

Stocks had rallied on Friday, despite America hiking the levy on $200bn of Chinese goods to 25%. But the news that the remaining $300bn of goods could soon face hefty tariffs too has alarmed investors.

Jingyi Pan of IG says:

“The lack of resolution in the latest U.S.-China trade talks coupled with continued provocative tweets from President Trump provides no relief for risk sentiment as we look to another weak start to the week for Asia markets.”

That weak start has knocked 0.7% off Japan’s Nikkei today, and wiped 1.3% off South Korea’s Kospi index.

Donald Trump’s chief economic advisor, Larry Kudlow, revealed yesterday that the White House expects China to hit back soon.

He told Fox News:

“The expected countermeasures have not yet materialized. We may know more today or even this evening or tomorrow.”

He suggested it could take several months to impose new tariffs on all remaining Chinese exports,saying:

Call it three months. I don’t know. That will take some time and then of course the president’s going to have to make the final decision on that.”

Kudlow also suggested that Trump could discuss the trade issue with China’s president Xi at next month’s G20 leaders’ meeting. More here: