Chinese stocks plunge amidst Donald Trump's trade war

US President Donald Trump's latest trade threat has spooked the local market today. Photo / AP

China's benchmark sharemarket index tumbled to a two-year low after US President Donald Trump threatened to slap tariffs on another US$200 billion ($288.5b) in Chinese imports.

The Shanghai Composite Index slid almost 5 per cent after Trump upped the ante in his trade dispute with the world's second largest economy.

A gauge of technology stocks in Shenzhen fared even worse, plummeting as much as 6.7 per cent, the most since February 2016.

Trump raised the stakes in the trade dispute with China by threatening to impose tariffs on another US$200b worth of Chinese goods. That follows the plan for tariffs on US$50b of Chinese goods — which comes into effect on July 6.

The Chinese quickly responded — the Ministry for Commerce in Beijing saying it would respond "strongly" if Trump followed through.

The New Zealand market was also hit, with the NZX 50 closing down more than one per cent — down 1.24 per cent.

On currency markets, the Australian dollar was hit hardest, although the Kiwi dollar also dipped against the greenback. The yuan fell to a five-month low against the US dollar.

The Aussie dollar copped one of the bigger hits as currency traders assessed it to be at the greatest risk of economic fallout from a trade war.

"Simply put, it just has a larger percentage of exports that go to China," said Westpac senior market strategist Imre Speizer. "The Kiwi hasn't been too damaged by it," he said.

"[It] is under downward pressure but not as much as the Aussie."

Meanwhile the local share market had followed the US futures down, he said.

"The S&P 500 futures dropped about half a per cent on the news. The New Zealand equity market is pure follower of what goes on offshore."

The International Business Forum's Stephen Jacobi said the escalation of the tension was worrying for New Zealand in the medium to long term as it threatened to dampen global growth and undermine existing trade rules.

But short term he was optimistic that New Zealand would be clear of immediate fallout from new tariffs.

"There could actually be a bit of a lift for our exports to China, if the Chinese retaliate against the US on dairy beef, wine — these are all things we export to China and we could fill the gap," he said.

"I don't think we'll be caught out by anything in the United States — our export profile to the US is quite different."

Broadly the escalation of tariff rhetoric was very worrying Jacobi said.

But he still held out some hope that there might time before the July 6 "trigger date" for talks to continue and for a pull back from the brink.