By Andrew Galbraith and Winni Zhou
SHANGHAI (Reuters) - China's shares tumbled and the yuan weakened on Wednesday after the United States said it would impose tariffs on an additional $200 billion of Chinese imports in a sharp escalation of the trade conflict.
Washington's latest move, which comes just days after both countries imposed tit-for-tat tariffs on $34 billion of each other's goods, ups the ante in a heated trade dispute that has rattled global financial markets.
Investors are particularly worried the trade conflict could harm an already slowing Chinese economy in a blow to global investment and growth.
The Shanghai Composite index was 1.6 percent lower around 0224 GMT, while the blue-chip CSI300 index fell 1.7 percent.
Hong Kong's Hang Seng index fell 1.4 percent.
"With China importing only USD162bn from the U.S. the last twelve months ending May, markets will be anxiously awaiting China's response," FX strategists at DBS Group Research wrote in a note.
The threat of additional tariffs on $200 billion worth of goods "would mean that around half of Chinese exports of goods to the U.S. would face significant U.S. punitive tariff measures," Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit, said in a note.
"China's export sector will therefore suffer a significant deterioration in export competitiveness to the US compared to other emerging markets' manufacturing exporters."
The trade war worries extended to China's onshore yuan, which followed its offshore counterpart lower. Traders said they were keeping an eye one the key 6.7 per dollar level as pressure mounted on the currency.
The onshore yuan opened at 6.6694 per dollar and was changing hands at 6.6660 as of 0226 GMT.
The offshore yuan was at 6.6726 per dollar at 0225 GMT after hitting a low of 6.6918, down nearly 0.5 percent on day at one point in early Asian trade.
"Investors confidence was rocked after the U.S. administrations latest trade salvo which reminded us that not all is quiet on the western trade war front after the Trump administration released a list of 10 percent tariffs on $200 billion in Chinese goods," Stephen Innes, head of trading for Asia Pacific at OANDA wrote in a note.
"But none the less, this is a very sobering reality check as to just how fragile sentiment around trade war rhetoric is and should keep markets trading defensively during Asia."
Chinese 10-year treasury futures for September delivery, the most-traded contract, were 0.13 percent higher at 95.630.
(Reporting by Andrew Galbraith and Winni Zhou; Editing by Sam Holmes & Shri Navaratnam)
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