The Trump administration will announce as early as Monday that it's imposing a 10 percent tariff on $200 billion of Chinese goods, which Beijing has already said it will retaliate against, according to three people familiar with the decision. The ten percent tariff will take effect on September 24, and rise to 25 percent on January 1, 2019.
Apple Inc and Amazon.com, the world's top two companies by market capitalisation, fell 2.6 percent and 3.2 percent respectively, marking their biggest fall since late April, on worries about new tariffs, which were unveiled after USA market close on Monday.
"Tariffs have put the United States in a very strong bargaining position, with Billions of Dollars, and Jobs, flowing into our Country - and yet cost increases have thus far been nearly unnoticeable", Trump said.
In Beijing, China's Foreign Ministry had already vowed to strike back.
Boats, TV sets, and cooper are among the list of imports covered by $200 billion in new tariffs against China that the Trump administration announced Monday.
Chinese imports from the United States grew by nearly 500 percent over the past five years, such that as of 2017 Chinese buyers accounted for almost one in every five dollars in U.S. export revenue. If that happens, the president said, he would immediately begin the process of approving tariffs on a further $267b in Chinese imports - effectively taxing everything Americans buy from China.
But, the official said, they will exclude some consumer electronics such as smart watches and Bluetooth devices as well as health and safety products such as high chairs, bicycle helmets, child vehicle seats and playpens.
"China may potentially pull out of trade talks entirely and escalate on the new front of outright export restrictions", analysts at JPMorgan told clients.
"I urge China's leaders to take swift action to end their country's unfair trade practices".
However, after the initial falls there were signs that some investors were ready to look past the dispute, with European markets reducing their losses to trade close to flat by 0830 GMT.
Nationwide test of emergency alert system will be sent to your phone
We don't actually know if the president will send the text himself, but it will have a headline that says "Presidential Alert". Cell towers will broadcast the WEA test for approximately 30 minutes beginning at 2:18 p.m.
Republican party US lawmakers urged the Trump administration to pursue negotiations with China to resolve trade differences, while applauding Trump's tough stance on Chinese intellectual property and trade practices.
The tariff duel is causing companies that rely on Chinese factories to rethink their business relationships, said Craig Allen, president of the US-China Business Council.
Trump has also complained about America's gaping trade deficit - $336 billion previous year - with China, its biggest trading partner.
The administration earlier this month floated the idea of talks led by Treasury Secretary Steven Mnuchin, with Chinese Vice Premier Liu He expected to lead the Beijing delegation. But Trump quickly backed away from the truce. That is below the 25 percent the administration said it was considering for this possible round of tariffs.
By expanding the list to $200 billion of Chinese imports, Trump risks spreading the pain to ordinary households.
However, some see the Dollar's days in the sun as being numbered now the November midterm elections are approaching.
Trump also proclaimed the US steel industry the 'talk of the World'. But many analysts say his combative actions seem unlikely to succeed.
If an increase goes ahead, 'China will have to take necessary countermeasures, ' said Geng at a regular daily briefing.
Still, he said, the USA economy appears strong enough to withstand the damage.
"With a narrowing focus on the U.S. midterm elections (Nov 6) and United States politics - as well as fast-money investors holding substantial aggregate long USD positions - we think the market narrative over the next few months could well transition from "default to the dollar" to "ditch the dollar", says Viraj Patel, an FX strategist at ING Group. "Fortunately, the USA economy is humming, so we don't have to worry as much about what this will do to our economy". "And they can't take actions that entirely flout the rules of the worldwide trading system", the official said. Economists warn that the effects could grow noticeably larger if Trump follows through with his threat to subject almost all Chinese imports to tariffs.