The People's Bank of China warned on Tuesday that the US decision to designate Beijing a ‘currency manipulator’ harms international rules and will have tremendous consequences for global markets.

“This will not only seriously undermine the international financial order, but also trigger financial market turmoil,” the Chinese central bank said in a statement, as cited by Xinhua.

On Monday, Washington escalated the trade war with Beijing by accusing China of devaluating the yuan, after US stocks saw their biggest drop in a year.

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The yuan to fell below its 7-to-1 ratio with the US dollar for the first time in a decade Monday, after the latest tariff threats from Washington. A weaker currency helps Chinese exporters deal with higher tariffs.

US President Donald Trump accused Beijing of deliberate manipulation of its currency. Shortly after Trump’s furious tweets, the US Treasury officially labeled China a “currency manipulator.” The move triggers a set of measures mandated under the Omnibus Trade and Competitiveness Act of 1988, including a complaint to the International Monetary Fund (IMF).

The People’s Bank of China refuted Washington’s accusations on Tuesday, calling the US’ actions “unilateral” and “protectionist.” It argued that Beijing has not and will not weaponize the yuan in the trade conflict with Washington.

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The latest clash between Washington and Beijing triggered a selloff on the global stock markets. The Dow Jones Industrial Average plummeted almost 2.9 percent, or 767.27 points, on Monday. The S&P 500 suffered similar losses, dropping 2.98 percent. The Nasdaq Composite closed down 3.5 percent, wiping out $162 billion in value of Big Tech stocks. It was the worst percentage drop for all three main US indices this year.

Asian markets extended losses on Tuesday. China’s Shanghai composite declined 1.56 percent to finish at 2,777.56, while the Shenzhen composite tumbled 1.39 percent. Hong Kong’s Hang Seng shed 0.67 percent to 25,976.24 points, while Japan’s Nikkei declined 0.65 percent, closing at 20,585.31 points.

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