China Adds More Stimulus As Trade Dispute Escalates

China's central bank added more funds into the financial system on Tuesday after the US President Donald Trump threatened to impose a 10 percent tariff on an additional $200 billion of Chinese imports.

The People's Bank of China added CNY 200 billion via medium-term lending facility on concerns over liquidity as well as negative impact from trade conflicts.

After the US threatening, China's Ministry of Commerce called the action "blackmail." China cautioned that it will take comprehensive and powerful measures to protect its interest.

The ministry said the US action deviates from the consensus reached by both sides on multiple occasions and disappointed international society.

If the tariffs did lead to a fall in US imports from China, this would have knock-on effects for those countries in Asia which export intermediate goods to China, which are then assembled before being shipped off to their final destination, Gareth Leather, an economist at Capital Economics, said.

Last week, the PBoC had maintained its key borrowing costs after the U.S. Federal Reserve decided to hike its rate for the second time this year.

The bank left the 7-day reverse repo unchanged at 2.55 percent and the rate on 14-day tenor at 2.70 percent.

The benchmark one-year lending rate has been unchanged since October 2015.