China's Commerce Ministry said it "resolutely opposes" U.S. President Donald Trump's threat of escalating tariffs, and vowed to take countermeasures to safeguard its own rights and interests.
The comments came after Trump said he would impose an additional 50% duty on U.S. imports from China on Wednesday, if Beijing does not withdraw the 34% tariff it imposed on American products last week.
"The U.S. threat to escalate tariffs on China is a mistake on top of a mistake," the statement said, according to a CNBC translation. "China will never accept it. If the U.S. insists on its own way, China will fight to the end."
Last Friday, China's Finance Ministry announced 34% in additional tariffs on all goods imported from the U.S., starting April 10, in retaliation for Trump imposing new levies of 34% on China.
The across-the-board tariffs followed two previous rounds of 10%-15% tariffs, targeting mostly agricultural and energy products imported from the U.S. The broadened tariff scope reflects the Chinese leadership's diminished hopes for a trade deal with the U.S., said Gabriel Wildau, managing director at Teneo.
Trump's 34% tariffs on China were on top of the 20% duties rolled out since February, bringing the total new tariffs this year on China to 54%. The additional levies have lifted the U.S. weighted average tariff rate on China to as high as 65%, and could dent China's economy by 1.5 to 2 percentage points this year, according to Morgan Stanley.
"Since China already faces more than 60% in tariff rate, it doesn't really matter if it goes up by 50% or 500%," said Tianchen Xu, senior economist at the Economist Intelligence Unit, suggesting Beijing is prepared for a "full on" trade war with the U.S.
"China is on the defensive side, but basically the two sides are testing each other's limit," Xu said.
As risks of an intense U.S.-China trade war rise, Beijing might resort to further retaliatory measures, such as stopping purchases of U.S. agricultural goods, matching U.S. tariffs, and further expansion of export controls on metals and minerals, Xu added.
Beijing has already placed export curbs on key rare earth elements, prohibited exports of dual-use items to a dozen of U.S. entities, and added U.S. firms to its "unreliable entities list," subjecting them to broader restrictions while operating in China.
The People's Bank of China on Tuesday set the midpoint rate for onshore yuan at 7.2038 per dollar, the weakest level since September 2023, according to data provider Wind Information. The yuan is allowed to trade within a 2% band of this midpoint rate.
The yuan's weakening is a "big signal," Robin Brooks, senior fellow at the Brookings Institution, told CNBC's "Squawk Box Asia," "this is Beijing politely saying this is getting a little too much, we are putting you on notice, we can devalue if we want and bigger things may come if you keep this up."
"This is a clear shot across the bow of Washington," Brooks added.
Chinese onshore yuan weakened as much as 0.39% to 7.3363 per dollar, while the offshore yuan was little changed.
Trump has shown few signs of backing down on tariffs despite the mounting pressure in the financial markets and signs of frustration even among his allies. In a post on social media platform Truth Social on Monday, the president said, "all talks with China concerning their requested meetings with us will be terminated!"
U.S. State Department did not respond to CNBC's request for comment.
"Escalation is probably the only short-term outcome, but negotiations will ultimately come as both sides feel the pinch of the economic slowdown," Xu said.
At a regular news conference on Tuesday, Lin Jian, a Chinese Foreign Ministry spokesperson, said Beijing would take "necessary measures" against U.S. tariff threats, according to a CNBC translation of reports in Chinese state media.
He reiterated the Commerce Ministry's statement, "If U.S. insists on waging a tariff war, a trade war, China will fight till the end."