The president ordered his administration to prepare a new package of tariffs affecting as much as $200 billion worth of China trade.
"The escalating set of tariffs on Chinese goods come as the Treasury Department is developing a set of investment restrictions/export controls on Chinese investment in certain industries and USA technology (due June 30)". The fact that America imports more from China will make it harder for Beijing to match Trump's attacks, according to Derek Scissors, a resident scholar at the conservative American Enterprise Institute in Washington who focuses on China.
Trump said after the legal process is complete, these tariffs worth United States dollars 200 billion will go into effect if China refuses to change its practices.
"Beijing will not panic in response to Trump's latest threat, but will be deeply concerned", said Eurasia Group in a report.
Trump's comments came hours after the top US diplomat accused China of engaging in "predatory economics 101" and an "unprecedented level of larceny" of intellectual property. "It is very unfortunate that instead of eliminating these unfair trading practices China said that it intends to impose unjustified tariffs targeting United States workers, farmers, ranchers, and businesses".
Shanghai and Hong Kong stocks plunge today on investors' fears that the U.S. and China could be heading for a full-blown trade war following tit-for-tat tariff threats.
Hong Kong-listed shares in Chinese telecoms equipment maker ZTE dived 24.8 percent after United States senators voted to reimpose a seven-year ban on U.S. high-tech chip sales to the company.
USA and European equity markets looked set to follow Asia into the red.
However and unfortunately, China has determined that it will raise tariffs on $50 billion worth of United States exports.
"I think that the other side may have underestimated the strong resolve of President Donald J. Trump", Navarro added. In 2017, the United States trade deficit with China was a record $375.2 billion, but that did not include services.
But since China holds such a huge volume of US Treasuries in its portfolios, some economists say Beijing would not want to cause its investments to plummet in value.
"If China increases its tariffs yet again, we will meet that action by pursuing additional tariffs on another $200 billion of goods".
Secretary of State Mike Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the USA and China.
The United States and China have the world's biggest trading relationship but official ties are increasingly strained over complaints Beijing's technology development tactics hurt American companies.
The tariffs target Chinese President Xi Jinping's Made in China 2025 plan that seeks to develop sophisticated manufacturing capabilities. The escalation in the dispute with China may also serve as a warning to other trading partners with which Trump has been feuding, including Canada and the European Union.
Shi Yinhong, a professor of worldwide relations at Renmin University of China, said that with the world's two largest economies now embroiled in "a semi economic cold war", Beijing faced the challenge of getting Trump back to the negotiating table. US bond yields fell in a flight to safety.