(Bloomberg) -- Chinese stocks fell, extending Tuesday’s plunge, despite efforts by the government to soothe nerves rattled by the threat of additional tariffs.

The Shanghai Composite Index slid as much as 0.9 percent to a two-year low. The gauge sank almost 4 percent yesterday, while 1,023 stocks listed on Chinese exchanges tumbled by the daily 10 percent limit -- or more than one in four. With Washington and Beijing threatening tit-for-tat moves over import tariffs, investors are worried a trade war will hurt earnings and act as a brake on China’s economy.

People’s Bank of China Governor Yi Gang said on Tuesday policy makers are prepared for outside shocks and that investors should take a rational view, while official media also projected a positive image. The China Securities Journal said in a front page article that the quality and resilience of Chinese economic development will be better than expected. The Shanghai Securities News said good economic prospects and stable liquidity would support the market.

Tuesday’s rout came after President Donald Trump threatened duties on $200 billion in Chinese imports, and another $200 billion after that if Beijing retaliates. The tariffs dealt a blow to a market that’s yet to recover from a $5 trillion collapse that began almost exactly three years ago. The Shanghai Composite is among the world’s worst performing benchmarks this year -- only a handful of emerging markets have fared as bad. Almost 80 percent of the Chinese index’s stocks closed at fresh four-week lows on Tuesday.

The slump is prompting Chinese investors to cut leveraged positions at the fastest pace since January 2017. The balance of margin debt on the Shanghai Stock Exchange fell 2.4 percent to 567.9 billion yuan ($88 million) on Tuesday.

--With assistance from Sofia Horta e Costa.

To contact the reporter on this story: Will Davies in Hong Kong at wdavies13@bloomberg.net

To contact the editor responsible for this story: Richard Frost at rfrost4@bloomberg.net

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