More on Navarro’s comments, from Associated Press:

The White House is not planning any imminent talks with China on the trade dispute, the FT is reporting (£).

Peter Navarro, a senior US trade adviser told reporters on a press call that China had been given a chance to address US complaints over the past year, and no more discussions were planned.

The prospect of US mid-term elections could determine how the trade dispute plays out, with some suggesting Trump will continue to play hardball to prove to the voters that he is still putting “America first.” But this could backfire. Fiona Cincotta, senior market analyst at City Index, said:

The only potential stop for Trump could be the reality of mid term elections. A large percentage of the US population are not going to be happy about paying more for imported goods. This is a long shot and still sufficient time away for damage to the markets to continue, however it could also prevent this trade war from spiralling out of control.

Here are some major US companies with trade links to China:

Here’s our report on the market losses following Trump’s escalation of the trade dispute with China:

US stock markets fell sharply on Tuesday morning, following similar drops across the world, as investors feared that escalating tensions could trigger an international trade war.

Donald Trump threatened to impose an additional $200bn in levies on Chinese goods on Monday evening, days after the US announced $50bn in tariffs aimed at punishing what the US administration sees as unfair trade practices. China has already said it will retaliate for last week’s move and said it would escalate its response if further tariffs were imposed.

Monday night’s move sent global stock markets sharply lower and the Dow followed suit when it opened, dropping over 340 points (1.37%) in early trading. The S&P 500 and tech-heavy Nasdaq also fell close to 1%.

Some of the US’s biggest exporters were among those most affected. Boeing dropped 3% and construction and mining equipment maker Caterpillar shed 2.7%. Tech companies, too, felt the pinch with Apple down 1.5%.

The full story is here:

US markets continue to fall, with the Dow Jones Industrial Average now down more than 400 points or 1.6%. Connor Campbell, financial analyst at Spreadex, said:

There was no let up on Tuesday, the US open extending the disastrous trading that began on Monday.

Plunging 400 points to hit a 2 week nadir, the Dow Jones was the latest index to display its abject terror at the trade war Donald Trump seems intent on provoking. The Dow’s day was made worse by the strength of the dollar; though the greenback struggled against the yen, it stomped all over the euro and the pound, sending the single currency and sterling to 19 day and 7 month lows respectively.

Over in the Eurozone, where political issues in Germany cut the legs out from under the region on Monday, the situation was just as nasty. The DAX shed 200 points for the 2^nd consecutive session, leaving it on track for its worst close since the start of May, while the CAC lost 1.5%.

It was cable’s 0.6% fall that arguably helped the FTSE avoid the kind of gory losses seen by its US and Eurozone peers. Though hardly something to celebrate, the UK index’s 0.5% decline was nevertheless half of its post-open drop, and roughly a third of the losses incurred elsewhere.

Emerging markets are also under pressure as the fears of a trade war grow.

A US tech industry group is very unhappy about Trump’s planned tariffs, saying they raise prices for Americans, harm US competitiveness, and will hinder economic growth. Jose Castaneda, spokesman for the Information Technology Industry Council, said:

The Trump Administration’s decision to escalate trade tensions with China is irresponsible and counterproductive. We appreciate President Trump’s efforts to protect the United States’ ‘crown jewels’ but tariffs are simply the wrong way to do it. Tariffs will harm U.S. workers and businesses from Silicon Valley to Silicon Prairie. The White House needs to work with our allies to create lasting change with China – too many jobs and livelihoods are at stake to get this wrong.

A trade war which would benefit no one may not actually happens, says Chris Payne, managing director at GWM Investment Management:

Despite all this tit-for-tat posturing, an all-out trade war is unlikely to ensue because it will not benefit anybody, especially China whose economy is going through a major deleveraging process. It should also be noted that China will soon run out of US goods on which to impose retaliatory tariffs which will move this negotiation to a more sensible and constructive forum.

Although as noted previously, China could slap higher tariffs than 10% if it really wanted to push back at Trump.

We’ve put together a Q&A on the US-China trade dispute:

Here’s a flavour:

Why is Trump imposing the tariffs?

During the 2016 election campaign, Trump promised to protect American jobs and to renegotiate US trade deficits with countries around the world. The US has the world’s largest trade deficit – meaning it buys more goods and services from other countries than it sells overseas – worth $568bn last year.

China is responsible for the bulk of the deficit in terms of goods, exporting $376bn more to the US than it bought from US producers.

Raymond Ma, portfolio manager at Fidelity International, predicts that the trade battle between the US and China will hurt company profits - which likely leads to weaker wage growth and more job cuts.

Ma warns that the situation could escalate further:

“The latest development suggests the recent détente in US-China trade talks has slipped. Indeed, recent months have seen economic relations between the world’s two largest economies in a dance best characterised as two steps backwards for every step forwards.

“The concern now is how China could retaliate against President Trump’s latest action by increasing its own reciprocal tariffs. Such a move could push up input prices, which may prompt Chinese companies to either pass on the increased costs to consumers or allow them to eat into profits; neither outcome is favourable.

Commodity prices are also sliding today.

Oil is down 1.5%, sending the cost of a barrel of US crude down by one dollar to $64.87.

That reflects concerns that a trade war would damage economic growth, leading to less demand for energy.

US cotton and soybeans futures both fell by 2.5%, as traders calculate that American farmers could lose out badly.

Last weekend, China announced retaliatory tariffs on US exports such as electric cars, soybeans and whiskey, in response to Donald Trump’s original $50bn of tariffs -- a move that triggered Trump’s new threat against $200bn of Chinese goods and services.

The US stock market is expected to fall sharply when trading begins at 9.30am New York time (2.30pm BST).

America’s Dow Jones industrial average is being called down 330 points, or 1.3%, as traders react to the latest twists in the trade spat between the US and China.

Craig Erlam of financial trading firm OANDA says risk aversion is rising fast:

With China showing no desire to be bullied into submission, with its Commerce Ministry promising to retaliate to any new tariffs and its Foreign Ministry reaffirming that while it doesn’t want a trade war, it’s not afraid to engage in one, it’s difficult to see how and when this ends. Moreover, it’s difficult to fully grasp just how much damage will be done in the process, particularly with the European Union also drawing up counter-tariffs against the US.

The clear escalation that’s occurred in recent days has shaken investors and appears to brought an end to the good run that US stock markets had been on since the start of May. While Chinese stocks are faring much worse at the moment, US companies are obviously not immune to a trade war and could come under more pressure unless both sides find a solution.

The US dollar has hit its highest level in almost a year, as traders scramble to protect themselves from a trade war.

The US dollar index (which measures the greenback against a basket of other currencies) has gained 0.5% today to levels last seen in July.

Obviously the pound is one casualty, but the damage is wide-spread; the euro is down 0.6% at $1.155, the Australian dollar is down 0.8%, the Swedish krona shed 1.4% and the Indian rupee lost 0.5%.

At first glance that may seem odd; if America’s economy will be hurt by tariffs, why is the dollar attractive?

Answer: tariffs will drive US inflation up, forcing more interest rate rises to control the cost of living, making the dollar a higher-yielding asset.

This capital flight out of emerging markets will cause serious pain. Any developing-market company which has issued debt in dollars, but earns revenue in its local currency, faces higher repayment costs.

Emerging market policymakers may also be forced to hike interest rates to prop up their currencies, which will damage economic growth.

Analyst group Oxford Economics has estimate that economic growth in the US and China would suffer a hit if reciprocal tariffs are imposed:

They say:

• By threatening to impose 10% tariff on an additional US$200 billion of imports from China, President Trump has upped the ante on the trade conflict between the two. China has quickly vowed to retaliate - and if such an escalation does materialise, it would have significant economic impact on China, the US and the rest of the world, at a sensitive time for the global economy.
• In principle, there is still room for negotiation and we cannot rule out de-escalation in the coming weeks. But attitudes seem to be hardening. Meanwhile, deeper conflicts are also hard to resolve. Indeed, it looks like the probability of a full-blown trade war between the world’s two largest economies is rising.
• In terms of economic impacts, we estimate that 25% US tariffs on US$50 billion plus 10% tariffs on US$200 billion worth of imports from China, with one-to-one retaliation by China, would reduce real GDP growth in China and the US by about 0.3 percentage points and 0.2 percentage points, respectively, in 2019-20.

Seema Shah, Senior Global Investment Strategist at Principal Global Investors, fears that the global economy will suffer as China and the US march towards a trade war.

“The latest escalation in trade tensions between China and the United States should have investors worried. Recall that the original tariffs on about US $50 billion worth of Chinese imports motivated sharp declines in equity markets, despite not being expected to have a meaningful impact on the global economy. The latest ratcheting up in the trade dispute may trigger even more severe market turmoil.

After all, not only will this latest round of tariffs have a direct negative impact on China’s growth outlook and the rest of the Asia region via the integration of global value chains, but China’s inevitable retaliation will surely hurt the U.S. economy in turn.

“Emerging markets have had to contend with a long line of challenges this year. Rising U.S. interest rates, the strengthening U.S. dollar and higher oil prices have already made it a tough six months, and this lurch towards protectionism will be felt most acutely in already vulnerable emerging market economies.”

America’s factory bosses fear that fresh tariffs on Chinese imports will cost jobs.

Kip Eideberg of the Association of Equipment Manufacturers says Trump’s latest threat is “terrible news for equipment manufacturers in the United States”.

He also points out that consumers will pay the price too:

Asian tech firms who supply components to Apple have been hit hard today, due to fears that a trade war would hurt demand.

Marketwatch has the details:

IPhone-camera maker Cowell Holdings skidded 11.5% in Hong Kong to fresh record lows, while smartphone-lens maker Sunny Optical pulled back a further 5% and acoustics firm AAC Technologies fell 3.3%.

In Taiwan, Sunny peer Largan Precision was off 5.2%. Apple product assembler Hon Hai Precision Industry dropped 2.3%.

The selloff came despite a report that the Trump administration has told Apple that tariffs would not be placed on iPhones imported from China.

CEO Tim Cook had told the White House that imposing tariffs against Chinese goods could hurt Apple.

American consumers will feel the pain if Trump imposes 10% tariffs on $200bn of Chinese imports, as he threatened last night.

As Kit Juckes of French bank Societe Generale explains, such tariffs would be paid by customers in the US:

$200bn of goods represents over a third of likely 2018 imports from China.

The important point to note about the escalation, which will surely result in a Chinese response, is that while the tariffs imposed may be lower on the expanded range of goods, they will include more consumer goods, and therefore have a more direct impact on US consumers apart from anyone else.

Away from the political implications, these tariffs will deliver higher prices to the US and weaker growth to China. In due course we will find out how Chinese policy-makers respond

Asian stocks have hit a six-month low today, Bloomberg reports:

European stock markets are a sea of red, as trade war fears ripple through the trading floors.

It is impossible for China to retaliate in kind to Trump’s new threat.

That’s because China imported $170bn from America in 2016 -- $115bn of goods and $55bn of services.

So by threatening to impose 10% tariffs on $200bn of Chinese goods, Trump is (deliberately?) putting a tit-for-tat response out of Beijing’s reach.

However, China could technically impose a higher tariff on that $170bn, which would certainly escalate the situation even further.

Simon Rabinovitch of The Economists explains:

Donald Trump’s threat has met with an immediate, chilly response from Beijing, implying that the US is losing the plot.

The Ministry of Commerce in Beijing has vowed to hit back if the US actually imposes $200bn of fresh tariffs.

“If the U.S. loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully.