Donald Trump has insisted that there is “no rush” to secure a deal with China despite growing business and Wall Street fears that the ratcheting up of US tariffs risks a full-blown trade war between the world’s two economic superpowers.

US shares, which were falling for much of the day, staged a late rally on Friday night after Trump tweeted that trade talks “will continue” after the hiking of tariffs on $200bn of Chinese goods.

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China’s vice-premier Liu He left talks with US Treasury secretary Steve Mnuchin and trade representative Robert Lighthizer after just 90 minutes in Washington, adding to speculation that the gap between the two sides was large.

Trump had earlier prompted a warning from the International Monetary Fund that the tariff war posed a threat to the global economy, but the president subsequently used a series of tweets to insist that tariffs were good for the US economy.

Beijing has yet to respond to the new US duties – which have been raised from 10% to 25% on $200bn of new Chinese imports into the US – with tariffs of its own but has insisted that it will take retaliatory measures. Meanwhile, Trump threatened to expand tariffs to all Chinese imports into the US.

Traders seized on Trump’s later comments over talks, and remarks from Mnuchin that negotiations had been “constructive”. The Dow Jones industrial average rose 114 points, or 0.4% to close at 25,942, earlier it had fallen by more than 300 points.

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Trump sounded a defensive note after coming under fire from business lobby groups fearful that higher import costs would force US companies and farmers to lay off workers.

Trump tweeted: “Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!”

Ignoring concerns that purchasing US goods and food and then dumping them on developing world countries could put local firms and farmers out business, he said: “With the over 100 Billion Dollars in Tariffs that we take in, we will buy agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance.

“In the meantime we will continue to negotiate with China in the hopes that they do not again try to redo deal!,” he added.

China’s ministry of commerce said in a statement just after the scheduled tariffs went into effect: “The Chinese side deeply regrets that it will have to take necessary countermeasures”.

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“It is hoped that the US and the Chinese side will work together to resolve existing problems through cooperation and consultation,” it said, noting that “high-level economic and trade consultations” were underway.

The increased tariffs apply only to goods leaving China after Friday’s deadline and will go into effect only once shipments reach the US, which could take two or three weeks, leaving room still for negotiations.

However, investors now face the prospect of a damaging trade war which many fear could destabilise the already slowing global economy and escalate tensions between the two superpowers over flash points such as the South China Sea and industrial espionage. Higher tariffs act like a tax, raising prices and cutting the spending power of consumers.

Trump has also said he is preparing the “paperwork” for tariffs of 25% on an additional $325bn worth of Chinese imports, which would mean almost all Chinese goods exported to the US would be levied. Chinese exports to the US accounted for about $540bn last year.

Q&A What is the China-US trade war about? Show Hide The roots of the dispute come from US president Donald Trump’s “America first” project to protect the US’ position as the world’s leading economy, while encouraging businesses to hire more workers in the US and to manufacture their products there. Trump complains of a large trade deficit with China, which he views as a symbol of the US’s decline as a manufacturing powerhouse. Chinese imports to the US totalled $539.5bn last year, while $120.3bn was sold the other way – leaving a trade deficit of $419.2bn. The president has accused Beijing of “unfair” trade policies, including allowing the theft of US companies’ intellectual property. The threat of import tariffs on Chinese goods is being used as leverage in talks where Trump is seeking changes to Beijing’s trade policy. Tariffs have been imposed by Washington on some Chinese goods sold in the US for about a year. They came on top of broader tariffs used by Trump that have hit China and other trading partners such as the EU, Canada and Mexico, on goods including steel and aluminium. In May 2019 the US president further ratcheted up existing import tariffs of 10% on $200bn (£153bn) of Chinese goods sold in the US to 25%, hitting everything on a long list of products. Trump has previously warned that 25% tariffs could be slapped on a further $325bn of goods – which would mean all Chinese imports being covered by tariffs. However, talks in November 2019 aimed at easing tensions were welcomed as the beginning of a thaw in the trade war between the two nations. Richard Partington and Jasper Jolly

The US action followed several days in which Trump had lambasted China for backtracking on a deal negotiated over the past five months by making extensive changes to a draft 150-page agreement. Analysts say Beijing may have believed the US was in a weaker bargaining position, based on Trump’s calls to cut interest rates.

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After several days of near silence on Trump’s threats – state media did not report the president’s comments and social media platforms censored images of his tweets – China has now started to take a more strident stance.

Commerce ministry spokesman Gao Feng said on Thursday: “The US side has given many labels recently: ‘backtracking,’ ‘betraying,’ ... China sets great store on trustworthiness and keeps its promises, and this has never changed”.

An editorial published by a government-affiliated Wechat account said: “If you are willing to talk, we’ll talk. If you intend to have a war, then we fight”.

China’s options for retaliation include blocking soybean purchases from the US, devaluing the yuan to counteract the tariffs, or setting up non-tariff trade barriers like delaying regulatory approvals for US firms operating in China.