A man walks past Qualcomm stand while attending the Mobile World Congress in Barcelona March 3, 2015. REUTERS/Albert Gea/File Photo - S1BEUEEIPSAA

HONG KONG (Reuters Breakingviews) - Xi Jinping is taking off the trade war gloves. Beijing’s effective veto of chipmaker Qualcomm’s $44 billion bid for NXP - by dragging its feet to clear the deal - likely wasn’t what President Donald Trump expected when he lifted a ban on China’s ZTE earlier this month. But in weaponising monopoly law, President Xi has found a sharp response to U.S. tariffs.

As the trade war between the world’s two largest economies heats up, it is getting harder to sort tit from tat. ZTE looked in deep trouble when it was slapped with U.S. sanctions after admitting to violating rules on exports to Iran and North Korea. Perhaps Trump thought easing up on the company would be reciprocated by approval of Qualcomm’s bid.

The American leader’s gesture, though, was undermined in two ways. First, when Trump implemented tariffs on $34 billion in Chinese goods and promised duties on hundreds of billions more. Second, by new policies targeting inbound investment from the People’s Republic which saw its FDI in the United States fall 90 percent in the first half of 2018, according to the Rhodium Group.

U.S. exports to China are much lower which leaves less for Xi to target. Letting the Qualcomm bid die on the vine without explanation was an easy additional measure. The central bank has also let the yuan plunge 7 percent against the dollar since April, which naturally offsets the price impact of any trade duties. True, the slide has inversely tracked a rally in the global dollar, but if Xi wants to send a sharper message to Trump, he could make a radical decision to order the central bank to force the pace of depreciation.

On Thursday, Trump called China “vicious” for targeting American agriculture exports. His response to Qualcomm’s failed deal could further up the ante. He might move to further warm relations with Taiwan, which China considers a renegade province. He could also re-apply pressure to ZTE, in theory. Whatever comes next won’t be pretty.