Donald Trump’s regime of tariffs is “irrational and will make America poorer,” says William Hague. The former Tory leader stressed that the US president’s levies could rock the world economy. Lord Hague added that even if Trump withdraws tariffs they would still damage investment as business chiefs may be reluctant to expand businesses in countries at risk of being hit by the levies again. China on Tuesday imposed tariffs on some US imports in a swift response to Trump’s duties on Chinese goods, raising the stakes in a showdown between the world’s top two economies.

The move came after the US president offered reprieves to Mexico and Canada who he had threatened with 25 per cent tariffs. Additional 10% tariff across all Chinese imports into the US came into effect at 12:01 am ET on Tuesday (0501 GMT) after Trump repeatedly warned Beijing it was not doing enough to halt the flow of illicit drugs into the United States. Within minutes, China’s Finance Ministry said it would impose levies of 15% for U.S. coal and LNG and 10% for crude oil, with farm equipment also being affected.

China also said it was starting an anti-monopoly investigation into Google, while including both PVH Corp the holding company for brands including Calvin Klein, and U.S. biotechnology company Illumina on a list for potential sanctions in China. Separately, China’s Commerce Ministry and its Customs Administration said it is imposing export controls some rare earths and metals that are critical for electronics, military equipment and solar panels.

Trump on Monday suspended his threat of 25% tariffs on Mexico and Canada at the last minute, agreeing to a 30-day pause in return for concessions on border and crime enforcement with the two neighbouring countries. He is due to speak to China’s president Xi Jinping later this week but Beijing is expected to take a tougher stance to the US president’s move. Lord Hague told Times Radio: “The Chinese retaliation, if this all continues, it does effect the whole of the world economy.

“This is not just a hoax, a boy crying wolf, this is a very serious and negative development in the world economy and in my view an irrational policy that will in the end make America poorer and the whole world poorer.”. Trump has signalled he will soon hit the European Union with hefty tariffs, but has hinted that the UK could escape the levies. During his first term in 2018, Trump initiated a brutal two-year trade war with China over its massive US trade surplus, with tit-for-tat tariffs on hundreds of billions of dollars worth of goods upending global supply chains and damaging the world economy.

“The trade war is in the early stages so the likelihood of further tariffs is high,” Oxford Economics said in a note as it downgraded its China economic growth forecast. Trump warned he might increase tariffs on China further unless Beijing stemmed the flow of fentanyl, a deadly opioid, into the United States. “China hopefully is going to stop sending us fentanyl, and if they’re not, the tariffs are going to go substantially higher,” he said on Monday.