China stocks fell to a two year low as Trump threatened a further $200 billion (£152 billion) of tariffs against China.

The Shanghai Composite Index plunged almost four percent while the yuan fell to a five-month low against the dollar following threats of a trade war.

Zhang Yidong, strategist at Industrial Securities wrote in a note on Tuesday: “It’s the darkest hour and the most agonizing moment in the first half of this year…there are disaster victims everywhere.”

Last week, China responded to Trump’s plans to place a 25 percent tariff on $50 billion of Chinese goods by promising its own tariffs on the same amount of US goods.

On Monday, Robert Lighthizer, the US Trade Representative was told by Trump to identify $200 billion worth of Chinese goods to impose tariffs, if Beijing went ahead with the proposed tariffs.

Trump said: “China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology.”

“Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong.”

“But the United States will no longer be taken advantage of on trade by China and other countries in the world,” he added.

Fiona Cincotta, senior market analyst at City Index, said: “The list of who threatened what is getting long. With both sides seemingly determined to retaliate it is hard to see how this will end without a bloodshed for business, particularly US businesses.”

“The Federal Reserve’s officials have already warned that Trump’s tariffs are scaring companies from making new investments.”

“Ironically, though the two countries had made some progress during trade talks earlier this year when China agreed to reduce the trade imbalance with the US, the deal ended up null and void after Trump resumed his threats almost as soon as the Chinese delegation left Washington,” she added.