WASHINGTON (AP) China decided Monday to meet President Donald Trumps latest tariff threat with defiance, letting its currency drop to an 11-year low and halting purchases of U.S. farm products.
The moves, which came four days after Trump threatened more taxes on Chinese imports, knocked stock markets worldwide into a tailspin. On Wall Street, the Dow Jones Industrial Average was down more than 850 points by mid-afternoon.
Earlier, stocks tumbled from Shanghai to London on fears the escalation in U.S.-China trade tension will drag down a global economy that is already weakening.
Raising worries that China will wield its currency as a weapon in a trade war, Beijing let the Chinese yuan weaken to the politically sensitive level of seven to the U.S. dollar for the first time since February 2008.
Also Monday, Chinas official Xinhua news agency reported that Chinese companies have stopped buying U.S. farm products a direct shot at Trump supporters in rural America.
Together, the currency devaluation and suspension of farm purchases suggest that China has decided to stand tough, rather than cave in Trumps threats.
The Chinese side wont submit to the US, tweeted Hu Xijin, editor-in-chief of Chinas hardline Global Times newspaper.
The weaker yuan makes Chinese exports less expensive in foreign markets. It also helps offset the impact of U.S. tariffs on Chinese products.
The Chinese currency hit 7.0391 to the dollar by late afternoon, making one yuan worth 14.2 cents. The level of seven to the dollar has no economic significance but carries significant symbolic weight.
The thought of a currency war is crossing more than a few traders minds, Stephen Innes of VM Markets said in a report.
Trump promptly took to Twitter to denounce the move as currency manipulation. He added, This is a major violation which will greatly weaken China over time.
Chinas central bank blamed the yuans drop on trade protectionism an apparent reference to Trumps threat last Thursday to impose tariffs Sept. 1 on the $300 billion in Chinese imports to the United States in addition to the $250 billion hes already targeted.
The U.S. and China are engaged in a bitter dispute over allegations that Beijing steals trade secrets and pressures foreign companies to hand over technology as part of an aggressive campaign to make Chinese companies world leaders in advanced technologies such as artificial intelligence and quantum computing.
The weakness of the yuan, also known as the renminbi, or peoples money, is among U.S. grievances against Beijing. American officials complain that a weak yuan gives Chinese exporters an unfair price edge in foreign markets and helps swell the massive U.S. trade deficit with China.
The U.S. Treasury Department declined in May to label China a currency manipulator but urged Beijing to take steps to avoid a persistently weak currency and warned that it would be watching closely.
