BEIJING – Beijing on Tuesday accused Donald Trump of “blackmail” and warnedit would retaliate in kind after the US president threatened to imposefresh tariffs on Chinese goods, pushing the world’s two biggest economiescloser to a trade war.

Trump said on Monday he had asked the US Trade Representative to target$200 billion worth of imports for a 10 percent levy, citing China’s“unacceptable” move to raise its own tariffs.

He added he would identify an extra $200 billion of goods — for a possibletotal of $450 billion, or most Chinese imports — “if China increases itstariffs yet again”.

“Further action must be taken to encourage China to change its unfairpractices, open its market to United States goods and accept a morebalanced trade relationship with the United States,” Trump said in astatement.ARTICLE CONTINUES AFTER AD

Last week, he announced 25 percent tariffs on $50 billion in Chineseimports, prompting Beijing to retaliate with matching duties on US goods.

The US leader warned Friday of “additional tariffs” should Beijing hit backwith tit-for-tat measures.

“The trade relationship between the United States and China must be muchmore equitable,” he said in explaining his latest decision.

“I have an excellent relationship with President Xi (Jinping), and we willcontinue working together on many issues.

But the United States will no longer be taken advantage of on trade byChina and other countries in the world.”

China’s commerce ministry immediately responded by saying the US “practiceof extreme pressure and blackmail departed from the consensus reached byboth sides during multiple negotiations and has also greatly disappointedinternational society”.

“If the US acts irrationally and issues a list, China will have no choicebut to take comprehensive measures of a corresponding number and qualityand take strong, powerful countermeasures.”

The news hit stock markets in Asia, where Shanghai shed three percent inthe morning, Hong Kong lost more than two percent and Tokyo was one percentlower.

Trump is moving forward with the measures after months of sometimes fraughtshuttle diplomacy in which Chinese offers to purchase more American goodsfailed to assuage his grievances over a widening trade imbalance andChina’s aggressive industrial development policies.

China had offered to ramp up purchases of American goods by $70 billion tohelp cut its yawning trade surplus with the United States, whereas Trumphad demanded a $200 billion deficit cut.’Unacceptable’

The China trade offensive is only one side of Trump’s multi-front battlewith the United States’ economic partners as he presses ahead with hisprotectionist “America First” agenda.

Since June 1, steel and aluminium imports from the European Union, Canadaand Mexico have been hit with tariffs of 25 percent and 10 percent,respectively.

“This latest action by China clearly indicates its determination to keepthe United States at a permanent and unfair disadvantage, which isreflected in our massive $376 billion trade imbalance in goods,” Trump saidof China’s retaliatory tariffs.

“This is unacceptable.” Two decades ago, China’s economy was largelyfuelled by exports, but it has made progress in rebalancing towardsdomestic investment and consumption since the global financial crisiserupted last decade — limiting the damage trade tariffs could inflict onBeijing.

Still, strong exports this year have lifted the economy, which is nowshowing signs of losing steam under the weight of Beijing’s war on debt,launched to clean up financial risks and rein in borrowing-fuelled growth.

Initially, 545 US products valued at $34 billion will be targeted by China,mimicking the Trump administration’s tariff rollout.

Beijing wants to “demonstrate that things will be done their way or not atall,” said Christopher Balding, an economics professor at Shenzhen’s HSBCBusiness School, who believes Chinese policymakers prefer demonstrations of“power and control” over “technical policy rightness.”

“It is a game of chicken,” Balding said.

So far Beijing has targeted major American exports to China such assoybeans, which brought in $14 billion in sales last year, and are grown instates that supported Trump during the 2016 presidential election, as wellas other politically important products.

Officials also drew up a second list of $16 billion in chemical and energyproducts to hit with new tariffs, though China did not announce a date forimposing them.

More American targets are likely to follow as soon as the Trumpadministration follows through with publishing an expanded tariff list.