UPDATE | Tariff increases muddy prospects for US-China trade peace

WASHINGTON (AP) — The United States and China are raising tariffs on tens of billions of dollars' worth of each other's imports, escalating a trade war, spooking financial markets and casting gloom over the prospects for the world economy.

China today increased tariffs on $60 billion of U.S. goods. The move came after President Donald Trump pushed up tariffs on $200 billion in Chinese imports from 10 percent to 25 percent Friday – the same day that U.S.-China negotiations ended without a breakthrough or any specific plan for further talks.

The events have cast doubt on the conventional wisdom, dominant just 10 days ago, the world's two biggest economies were edging toward a compromise on trade.

The renewed hostilities sent stocks tumbling around the world. The Dow Jones industrial average was down more than 600 points, or more than 2 percent, in midday trading today.

12:06 p.m.

BEIJING (AP) — Deepening its trade battle with the U.S. and sending financial markets spinning, China announced tariff hikes Monday on $60 billion of American goods in retaliation for President Donald Trump’s latest penalties on Chinese products.

Punitive charges of 5 percent to 25 percent on thousands of American products including batteries, spinach and coffee will take effect June 1, the Finance Ministry said. That extends Chinese duty increases to $110 billion of imports from the United States.

The announcement followed an increase of U.S. duties on $200 billion of Chinese imports to 25 percent from 10 percent in the increasingly bitter dispute. American officials have accused China of backtracking on commitments they say it made in earlier negotiations.

On Twitter, Trump warned Chinese President Xi Jinping his country “will be hurt very badly” if it doesn’t agree to a trade deal.

Trump tweeted China “had a great deal, almost completed, & you backed out!”

The president insisted increases on Chinese goods don’t hurt American consumers, saying there is “no reason for the U.S. Consumer to pay the Tariffs.”

White House economic adviser Larry Kudlow acknowledged Sunday that U.S. consumers and businesses do pay the tariffs. “Both sides will pay,” he told Fox News.

China had vowed “necessary countermeasures” on Friday against Trump’s escalation.

Frazzled by the uncertainty, shares sank Monday across the globe. The Dow Jones Industrial Average lost 622.10 points or 2.4 percent, while the Standard & Poor’s 500 sank 2.5 percent in early trading.

China’s announcement Monday said tariff increases are going ahead based on a list of $60 billion of U.S. goods Beijing released in August. That list was issued in response to Trump’s threat to raise tariffs on $200 billion of Chinese goods to 25 percent from 10 percent. Beijing said then it wouldn’t take action until the U.S. increases took effect, which finally happened on Friday.