Stock markets have been hit by fears that US President Trump's plan to impose a 25 per cent tariff on up to $60bn of annual imports from China, could start a trade war between the world's two largest economies.
Japan's Nikkei share index fell 4.5% and in the US the Dow Jones sank 2.9%.
President Trump is planning to impose the tariffs for 'misappropriation of US intellectual property'. The US launched a complaint against China at the World Trade Organization (WTO) on Friday.
Its statement said: "China appears to be breaking WTO rules by denying foreign patent holders, including US companies, basic patent rights to stop a Chinese entity from using the technology after a licensing contract ends."
"China also appears to be breaking WTO rules by imposing mandatory adverse contract terms that discriminate against and are less favourable for imported foreign technology."
China responded to news of the planned tariffs by saying that while it did not want a trade war, it was 'absolutely not afraid' of one.
"China will not sit idly by its own legitimate rights and interests. We are fully prepared to defend our legitimate interests," China's ministry of commerce said.
Beijing had already outlined plans to introduce tariffs on 128 US products equating to approximately $3bn in imports. These would include a 15 per cent tariff on US steel pipes, fresh fruit and wine and a 25 per cent tariff on pork and recycled aluminium. This was in response to the steel and aluminum tariffs announced by the US earlier this month.
