The chair of the Morrison government's economics committee, Tim Wilson, has accused the Reserve Bank of giving up on stimulating the economy, as the China-US trade war rattles markets and sends business confidence to its lowest level in five years.

Global ratings agency S&P warned on Wednesday "the fragile truce between the US and China is now tumbling" as local policymakers grapple with how to respond to the threat posed by growing tensions between two of Australia's largest trading partners.

US President Donald Trump racheted up tariffs on $US300 billion worth of products this week, provoking China into forcing down the value of its currency, chilling investment, sending stocks tumbling and pushing the Australian dollar to a decade low.

China’s foreign ministry stood its ground on Wednesday. An embassy spokesman said it does not want a trade war “but we are not afraid of fighting one”.