U.S. President Donald Trump on Friday dug in on his criticism of the Federal Reserve's policy on raising interest rates, saying it takes away from the United States' "big competitive edge", and lamented the strength of the U.S. dollar.
The FTSE 100, which had edged up 11 points in early trading, fell almost 18 points to 7,666.00 after Donald Trump told CNBC's Joe Kernen in a Squawk Box interview today that he was prepared to tax all of the $505.5 billion of imports from China.
The US and China have already imposed tit-for-tat tariffs of $34bn on each other's goods.
The reaction to Trump's remarks in the financial markets was muted.
The comments sent USA markets sliding early Friday. "I may not look like much, but I'm very important", says the animated character in a video posted on Friday on the website of China Global Television Network (CGTN), the overseas news network of state-owned China Central Television.
He also said that higher interest rates will strengthen the U.S. dollar too much, putting the United States at a "disadvantage" while central banks in Europe and Japan keep rates low. Those Chinese practices include cyber-theft and an insistence that American and other foreign companies hand over technology in exchange for access to the Chinese market.
Washington also is now targeting another US$200 billion in imports which see fresh tariffs imposed as soon as September. Beijing vowed "firm and forceful measures" in response. Most notably, during the Bill Clinton administration, Robert Rubin, first as head of the National Economic Council and later as Treasury Secretary, was to refrain from pressuring the Fed on policy, a precedent that has been followed by the administrations of George W. Bush and Barack Obama.
"I'm not doing this for politics - I'm doing this to do the right thing for our country", he added.
"We're down a tremendous amount", Trump said in the interview, which was recorded on Thursday, about trade imbalances with China. That's because China only imports $129.9 billion in USA goods each year. Its central bank is allowing China's tightly controlled currency to drift lower against the dollar, a move that could help Chinese exporters.
The yuan dipped to a 12-month low of 6.8 to the dollar, off by 7.6 percent since mid-February. Markets were already wary over increased trade tensions between the U.S. and the European Union over tariffs on vehicle imports.
The Fed has hiked interest rates five times since Mr. Trump took office, with the last two increases coming under Chairman Jerome Powell, whom the president picked to replace Janet Yellen.
China imports just under $130 billion in USA products each year, according to the Census Bureau, which would seemingly put that country at a disadvantage in the dispute.