23 MARCH 2018 – China has retaliated against Donald Trump’s decision to impose tariffs on steel and aluminium by signalling that it will hit US goods such as pork, apples and steel pipe with higher duties.

As Asian stock markets plunged at the prospect of a trade war between the world’s two biggest economies, China’s commerce ministry urged Washington to negotiate a settlement as soon as possible but set no deadline.

A ministry statement on Friday said the higher US tariffs “seriously undermine” the global trading system.

“China doesn’t hope to be in a trade war, but is not afraid of engaging in one,” the statement said. “China hopes the United States will pull back from the brink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place.”

The Dow Jones industrial average dropped 724 points, or nearly 3%, after Trump’s announcement on Thursday, and Asian markets followed suit in Friday’s session.

The Nikkei in Tokyo was down almost 4% at 4am GMT while in Australia, which exports more iron ore to China than any other country, the ASX200 benchmark index was off 2%. Shares in Hong Kong and Shanghai were down 2.75% and 3.2% respectively, while the Kospi in Seoul was down 2.2%.

Hannah Anderson, global market strategist at JP Morgan Asset Management, said: “The equity market will bear the brunt of the market reaction. Most impacted will be the US, Korea, and Taiwan as companies domiciled in these markets make up a significant portion of the global production chain of Chinese exports.”

China’s foreign ministry suggested soybeans, airplanes, cars and cotton could be targeted in response, while an editorial in the Global Times, a nationalistic Chinese tabloid, also pointed to US soybeans and cars as potential targets. China could also refuse to export certain products in retaliation and ordinary citizens may take it upon themselves to boycott American goods.

“When the time comes it is not only the Chinese government that will counterattack the US trade war, there will be many Chinese people willing to turn it into a people’s war,” the editorial said. “Don’t believe it? Come try us”.

Goods targeted for possible higher Chinese tariffs include wine, apples and ethanol, which would hit agricultural areas where voters supported Trump in the 2016 presidential election.

“Chinese officials have bounced around the idea of a soybean or pork tariffs in response, which they know will hurt farm states that voted for Trump,” said Victor Shih, a professor of political economy at University of California, San Diego. “China has been preparing for this for almost two years since Trump made threats on the campaign trail, they have a whole arsenal of responses.”

The Chinese government could also target US technology companies that manufacture products in China, like Apple, in the hopes those firms would pressure Washington to back down, Shih said.