Update: During a scheduled press briefing, the Chinese envoy just said the European Union and China “must act together” to counter US protectionism.

It appears to have reminded the machines to stop buying the dip…

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China has responded to President Trump’s calls for an additional $100 billion in tariffs, saying that it would counter U.S. protectionism “to the end, and at any cost.”

“The Chinese side will follow suit to the end and at any cost, and will firmly attack, using new comprehensive countermeasures, to firmly defend the interest of the nation and its people,” the Commerce Ministry said in a statement on its website on Friday.

“We don’t want a trade war, but we are not afraid of one.”

President Trump’s decision to push for a more trade tariffs may well be the tipping point for the US dollar as global reserve currency since it leaves Beijing with limited tit-for-tat retaliation… forcing the cornered nation to ‘get creative’.

As Bloomberg reports, China acted swiftly this week to announce reciprocal tariffs on $50 billion worth of American imports, unveiling a match for the Trump administration’s move against Chinese imports less than 12 hours before.

Now that U.S. President Donald Trump has ordered a review of measures on $100 billion of additional Chinese goods, China will have to get creative to keep up the like-for-like rhetoric.

There aren’t enough American goods imports to target…

Of course, China could still take other measures – like curbing package tours or student transfers to the U.S., or steps against American companies’ operations in China; or the final threat of ‘going nuclear’ by withdrawing from US Treasury auctions, devaluing its currency (think Aug 2015 turmoil), or a more petrodollar-focused retaliation.

As Petromatrix managing director Olivier Jakob wrote in a recent reports, if the trade war between U.S. and China continues “there is a risk for oil prices that China uses the bazooka option it has on U.S. crude oil exports,”which would be to curb shipments from America.

China is one of the biggest importers of U.S. crude at ~400k b/d, so any counter-tariffs on crude could become very heavy for the U.S. supply and demand picture, and would weigh on U.S. prices and spill over to global oil pricing.

Jakob concluded that the market needs to start balancing downward price risk of trade-war escalations with upside risk of Iran sanctions as oil flows could be about the same.

For now the market is proceeding as normal when faced with a potentially damaging global economy blow – it’s buying the dip…

“This is starting to feel like the beginnings of a trade war, if simply each proposal is matched with a retaliation,” said Patrick Bennett, a Hong Kong-based strategist at Canadian Imperial Bank of Commerce. “The U.S. risks isolating itself from global trade in this process and we think the U.S., USD and U.S. asset markets have more to lose.”

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