China may have 'underestimated' Trump's resolve

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The US lists have now been released and include aerospace parts and machinery, and it too has $16bn-worth of other Chinese goods "under review".

"Investors are waking up to the idea that all the rhetoric on trade could be more than just a negotiating tactic", said Emily Roland, head of capital markets research at John Hancock Investments in Boston.

President Donald Trump is once again threatening to hit China with more tariffs - but the Chinese government has a hidden trick up its sleeve that could help it beat Trump's tariffs while dealing a devastating blow to American companies.

The world's most valuable publicly traded company does almost all of its manufacturing and assembly in China, the culmination of a long and complicated electronics supply chain that stretches around the world and ends with the Chinese-made iPhone you may be reading this story on.

The Chinese Commerce Ministry reacted quickly to Trump's announcement, calling it "blackmail" and accused the USA of "extreme pressure and extortionist behaviour".

Elsewhere, the S&P 500 lost 26 points to 2,747 while the tech-laden Nasdaq fell close to 87 points to 7,660.

Germany's DAX was up 0.1 percent to 12,692 and France's CAC 40 added 0.2 percent to 5,400.

The declines weighed on the S&P industrials index .SPLRCI , which fell 2.1 percent, its biggest one-day percentage drop in almost two months. The dollar also got stronger, and the ICE-US Dollar Index hit its highest level since July. Apple fell 1.9 percent to $185.16 and Facebook gave up 1.2 percent to $195.92.

The report said housing starts spiked by 5.0 percent to an annual rate of 1.350 million in May after tumbling by 3.1 percent to a revised rate of 1.286 million in April. The euro dipped to $1.1572 from $1.1575.

Chinese buyers are canceling orders for US soybeans amid the prospect of higher costs. Boeing's stock shed 4.3 percent, Caterpillar 4 percent and GE 2.2 percent. But Intel shares dropped 3.4 percent to $53.22 on Monday on news of a stock downgrade and investor concerns over tariffs.

Oil prices, which were lower in early global trading, steadied ahead of an OPEC meeting where top suppliers are expected to agree to increase global crude supply. The yield on the US 10-year Treasury fell to 2.88 percent from 2.92 percent.

Shanghai stocks staged a modest 0.3 percent recovery after tumbling almost 4 percent on Tuesday to a two-year low, buoyed by soothing comments from the central bank chief and in state media, and a burst of share purchase plans.

Neither side has yet imposed tariffs on the other in their growing dispute over technology and the USA trade gap; the first round is to take effect on July 6.

The tariffs would start to slow US growth, economists warn.

Chinese officials described Trump's latest broadside as an "act of extreme pressure and blackmail" and threatened retaliatory "comprehensive measures" that could penalize American companies.

ZTE shares tumbled 24 percent in Hong Kong. She also spoke with U.S. Secretary of State Mike Pompeo over the weekend.

CURRENCIES: The dollar edged down to 110.02 yen from 110.07 in late trading Tuesday. Wall Street was also weaker at the opening bell.

Smaller U.S. companies with a domestic focus continued to do better than the multinationals included in the Dow.

The S&P/TSX composite index closed down 67.10 points at 16,316.53, led by losses in the base metal sector. The Russell is up nearly 10 percent this year while the S&P has risen 3 percent and the Dow is flat. It's fallen 2.6 percent during the losing streak.

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