This article is more than 1 year old

This article is more than 1 year old

Donald Trump has said things are “going along very well” with China, a day after financial markets around the world fell sharply following the president’s threat to impose a new tariff on $300bn (£248bn) of Chinese goods, in a rapid escalation of the trade war between Washington and Beijing.

The FTSE 100 was down more than 2% as markets across Europe tumbled on Friday, continuing a wave of selling pressure around the world in the aftermath of the president’s announcement on Thursday evening, which dashed hopes of a resolution to the US-China trade war.

Tweeting on Saturday, Trump sought to down play the tension, and insisted US consumers were not paying for import taxes he has imposed on goods from that country although economists say Americans are footing the bill.

“Things are going along very well with China. They are paying us Tens of Billions of Dollars, made possible by their monetary devaluations and pumping in massive amounts of cash to keep their system going. So far our consumer is paying nothing – and no inflation. No help from Fed!” Trump said on Twitter.

He also said – without presenting evidence – that countries are asking to negotiate “REAL trade deals”, saying on Twitter, “They don’t want to be targeted for Tariffs by the U.S.”

Trump abruptly decided on Thursday to slap 10% tariffs on $300bn in Chinese imports, stunning financial markets and ending a month-long trade truce.

China vowed on Friday to fight back and said it would not be bullied by Trump. The foreign ministry spokeswoman, Hua Chunying, said the country would not give an inch under pressure from Washington, Reuters reported.

The White House already levies tariffs of 25% on $250bn of Chinese goods. Adding both together would mean roughly all Chinese imports to the US face higher taxes. China sold $539.7bn of goods to the US last year.

Tariffs are intended to make foreign goods more expensive to boost domestic producers, unless international exporters reduce prices.

Why is Trump imposing tariffs on China and how could it affect global economy? Read more

But there has been no evidence that China is cutting prices to accommodate Trump’s tariffs.

A study published by the National Bureau of Economic research in March found that all of the costs of tariffs imposed in 2018 were passed on to US consumers.

The US-China trade dispute has had a chilling effect on the world economy as global trade volumes plummet and major companies pause investments. Growth has eased around the world, while several major countries have flirted with recession.

Reuters contributed to this report