New US tariffs on $200 billion worth of Chinese goods kicked in on Monday.
China has pulled out of trade talks with the US in response and issued a white paper attacking what it called the Trump administration's "trade bullyism."
Asian and European markets opened lower on Monday, with investors concerned that the trade war "may enter phase III."
LONDON — European and Asian markets were lower Monday after China said it wouldn't negotiate with the US on trade if the Trump administration continued to threaten higher tariffs.
China published a white paper on Monday attacking what it called the "protectionist practices" and "trade bullyism practices of the US administration," according to the state-run Chinese news service Xinhua.
Beijing said the Trump administration had "abandoned the fundamental norms of mutual respect and equal consultation that guide international relations." Bloomberg reported that the white paper said trade negotiations “cannot be carried out under the threat of tariffs," suggesting talks between the two sides were unlikely.
A fresh round of US tariffs came into force against Chinese goods on Monday. The duties on $200 billion worth of imports took effect just after midnight in Washington. China has promised to respond with tariffs on $60 billion worth of US goods.
"While these actions seem to be already priced in, investors are becoming increasingly worried that the trade war may enter phase III," Hussein Sayed, the chief market strategist at the trading platform FXTM, said in an email on Monday morning. "With Beijing canceling planned trade talks on Saturday and the US State Department imposing sanctions against China's defense agency, relations between the two largest economies in the world may further deteriorate."
Markets reacted negatively to the most recent developments in the tit-for-tat trade dispute between the US and China. Stock markets in China and Japan were closed for a local holiday on Monday, but Hong Kong's Hang Seng index remained open and was down by 1.66% at 8:30 a.m. BST (3:30 a.m. ET).
Negative sentiment spread to Europe, with stock indexes opening lower there too. Germany's Dax was down by 0.45%, France's CAC 40 was down by 0.25%, and Britain's FTSE 100 was down by 0.17% after about half an hour of trade in Europe.
"The implementation of President Trump's tariffs and the Chinese reaction to cancel talks in the face of the US President's decision should force investors to come to grip with reality," Konstantinos Anthis, the head of research at ADSS, said in an email on Monday. "However, whether this will take a meaningful toll on the upwards trend in place or will only trigger a short-term correction remains to be seen."
Separately on Monday, the Australian investment bank Macquarie said that Mexico stood to benefit the most from rising trade tensions between the US and China.