President Trump and his advisers said Tuesday the U.S. has the upper hand in its escalating trade and currency war with China, with the president suggesting he will impose more tariffs on Beijing next year if necessary.

A day after the Treasury Department labeled China a currency manipulator for the first time since 1994, Mr. Trump said the U.S. is “in a very strong position.”

The president also tweeted that U.S. farmers, who have been hit hard by retaliatory Chinese tariffs and the loss of markets in China, will receive more federal subsidies if the trade war persists into 2020.

“As they have learned in the last two years, our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do — And I’ll do it again next year if necessary!” Mr. Trump tweeted.

The administration has provided up to $16 billion in subsidies for farmers this year, after $12 billion in aid last year, to compensate for lost business in the feud with China.

U.S. stocks rebounded somewhat Tuesday after their worst losses of the year, after China took steps to prop up its currency. The move was viewed at the White House as China having blinked in the economic war.

“Pouring money and devaluing currency is not the answer,” White House economic adviser Larry Kudlow told reporters. “The biggest loser is China right now. They’re in poor shape economically. They brought this on themselves.”

Experts in the U.S. said the new currency accusations make it harder for the two sides to reach a compromise.

“Now that escalatory actions have been taken at the most senior levels of both governments, it’s not clear how either side stands down,” said Stephanie Segal, the deputy director of Simon Chair in Political Economy at the Center for Strategic and International Studies.

Markets rose from Monday’s 3% losses after China said it would take steps to prop up its currency. The Dow Jones Industrial Average rose 316 points, or 1.2%, to close at 26,036, and the tech-heavy Nasdaq climbed 1.5%.

China on Tuesday sharply criticized the Trump administration for “protectionist behavior” after the U.S. formally accused Beijing of manipulating its currency, but also appeared to step back from declaring that a full trade war was on the way.

The Chinese yuan, which the U.S. said was being unfairly devalued to help Chinese exporters and frustrate new American tariffs stabilized Tuesday around the sensitive 7-to-1 ratio to the U.S. dollar, after the central government allowed it to sink to an 11-year low the day before.

But the Chinese government and state-supporting media made no secret of their unhappiness with Mr. Trump’s renewed trade pressure after a brief lull earlier in the summer.

“The United States disregards the facts and unreasonably affixes China with the label of ‘currency manipulators,’ which is a behavior that harms others and harms oneself,” said the People’s Bank of China in a statement.

The central bank warned that Washington’s “wayward unilateralism” could produce fresh market turmoil and “seriously” undermine the international financial order.

China Daily, a state-run daily newspaper, accused the U.S. of “politicizing” the issue to “disrupt the normal order of international monetary governance.”

“It means Washington is willfully distorting its self-set rules to accuse other countries of something nonexistent and using that as an excuse to take actions against them,” wrote China Daily.

The official Xinhua news service in an online editorial added, “The U.S. side should stop its ugly farce and bullying, and deal with China with a little more rationality and objectivity before the situation goes too far.”

China also went directly after Mr. Trump in its media campaign.

Many in Asia see the stepped-up complaints against China as part of Mr. Trump’s 2020 campaign reelection strategy.

“Starting a currency war would seem a natural progression for Trump with trade negotiations having all but collapsed and his campaign for reelection next year already under way,” the South China Morning Post said in an opinion.

Several Chinese voices rejected the Trump administration’s claims that new weaknesses in the Chinese economy will force President Xi Jinping to soon sue for peace in the trade war.

“The U.S. side has intensified shots on China in many arenas. But the Chinese people, who have cast aside their illusions and stand ready to fight a protracted trade war with the United States, will not be intimidated,” Xinhua said. “The U.S. side should stop its ugly farce and bullying, and deal with China with a little more rationality and objectivity before the situation goes too far.”

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