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Washington – President Donald Trump has directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports as the two nations move closer to a trade war.

In response, China has threatened what it called “comprehensive measures,” raising the risk that it would target operations of major American companies in China.

Trump’s proposed new tariffs would amount to the latest round of punitive steps in an escalating dispute between the world’s two largest economies. The two appear to be edging toward a trade fight that analysts say would undermine both their economies and likely slow global growth.

The White House has accused China of forcing U.S. companies to share advanced technology with Chinese partners as a condition of doing business there. The administration also revived its complaints Tuesday about America’s gaping trade deficit with China, which it says reflects an unfair trading relationship.

Trump previously ordered tariffs on $50 billion in Chinese goods in retaliation for Beijing’s forced transfer of U.S. technology and for intellectual property theft. Those tariffs were matched by China’s threat to penalize on U.S. exports, a move that drew the president’s ire.

Neither side has yet imposed tariffs on the other in their growing dispute over technology and the U.S. trade gap; the first round is to take effect on July 6. But the rhetoric is intensifying, with Trump lashing out at Beijing over its threat to retaliate against the administration’s latest proposed tariffs.

The president asserted in a statement Monday night that China is determined “to keep the United States at a permanent and unfair disadvantage.”

“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in the statement. “Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”

Trump’s comments came hours after the top U.S. diplomat accused China of engaging in “predatory economics 101” and an “unprecedented level of larceny” of intellectual property.

Secretary of State Mike Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the U.S. and China.

He said China’s recent claims of “openness and globalization” are “a joke.” He added that China is a “predatory economic government” that is “long overdue in being tackled,” matters that include IP theft and Chinese steel and aluminum flooding the U.S. market.

“Everyone knows … China is the main perpetrator,” he said. “It’s an unprecedented level of larceny.”

“Just ask yourself: Would China have allowed America to do to it what China has done to America?” he said later. “This is predatory economics 101.”

The Chinese Embassy in Washington did not respond to a request for comment.

Pompeo raised the trade issue directly with China last week, when he met in Beijing with President Xi Jinping and others.

“I reminded him that’s not fair competition,” Pompeo said.

U.S. stock markets fell sharply Tuesday morning, with investors increasingly nervous about the impact of the escalating fight. The Dow Jones industrial average was down about 320 points, or 1.3 percent. Shares of large U.S. companies with significant overseas business were hit especially hard. Boeing’s stock shed 3.6 percent, Caterpillar 3.7 percent and GE 1.7 percent.

Should China impose its proposed expanded tariffs, Trump warned, that he would slap duties on an additional $200 billion of Chinese imports. All told, Trump is now threatening to penalize up to $450 billion of Chinese goods – a value representing about 90 percent of Chinese imports last year.

China’s Commerce Ministry assailed Trump’s latest threat, saying it was an “act of extreme pressure and blackmail that deviates from the consensus reached by both parties after many negotiations, and is a disappointment to the international community.”

“If the U.S. becomes irrational and issues this list, China will have no choice but to adopt strong countermeasures of the same amount and quality,” the statement said.

China might be unable to match the U.S. tariffs because it imports much less from the United States – $130 billion in goods last year, compared with Chinese exports to the United States of $505.5 billion. That would leave less than $100 billion in U.S. goods to subject to a tariff hike, far short of the $200 billion Trump is threatening.

But Beijing’s mention of “comprehensive measures” suggests that it would go beyond tariffs, said Jake Parker of the U.S.-China Business Council. Parker suggested that such steps might include delaying or denying licenses required by U.S. companies in China.

The tit-for-tat moves could start to meaningfully slow U.S. growth, economists warn. Oxford Economics estimates that if Trump imposed the $200 billion in duties and China responded in kind, U.S. growth could slow by 0.3 percentage point next year.

Tariffs are already raising costs for some goods. A punitive duty the Trump administration applied to lumber imports from Canada has raised the price of a new home by $9,000, according to the National Association of Home Builders.

The White House hasn’t set a date for the imposition of any new tariffs beyond the initial list. The next step will be for the Office of the U.S. Trade Representative to identify the Chinese goods to be penalized and to conduct a legal review.

In the first round of penalties announced by both nations, to take effect July 6, the U.S. plans to impose tariffs of 25 percent on $34 billion of Chinese imports, such as construction machinery, aerospace and power generation equipment. The White House is finalizing a list of $16 billion in additional goods it will sanction later.

China is retaliating by raising import duties on $34 billion worth of American goods. They include electric cars, whiskey and soybeans – a politically and economically vital export of America’s heartland, where Trump enjoys support. And Beijing says it would impose tariffs on $16 billion more if the United States does so, too.

The tariffs on Chinese imports are the latest in a spate of protectionist measures unveiled by Trump in recent months. They included tariffs on steel and aluminum imports to the U.S. and a tough rhetoric on trade negotiations from North America to Asia.

The escalation in the dispute with China may also serve as a warning to other trading partners with which Trump has been feuding, including Canada and the European Union.

Wall Street has viewed the trade tensions with rising concern that they could strangle the economic growth achieved during Trump’s watch. Gary Cohn, Trump’s former top economic adviser, said last week that a “tariff battle” could result in price inflation and consumer debt – “historic ingredients for an economic slowdown.”

In a statement, Trump says he has an “excellent relationship” with Xi, “but the United States will no longer be taken advantage of on trade by China and other countries in the world.”

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