Steel and iron ore plunged the most since March on escalating fears over a global trade war as China vowed to retaliate after President Donald Trump threatened tariffs on another $200 billion of Chinese goods. Copper extended losses among metals, while gold climbed on haven demand.

Futures for steel reinforcement bar in Shanghai fell as much as 4.3 per cent, the biggest drop since March 29, while iron ore in Dalian slumped 6.4 per cent, the most since March 23. The decline in iron ore took prices to the lowest level in two months, while steel continued its retreat from a three-month high.

Trump has instructed the U.S. Trade Representative to identify more Chinese products for additional tariffs of 10 per cent, and pledged to impose duties on another US$200 billion after that if China retaliates. He threatened last week to slap 25 per cent levies on US$50 billion of goods. China has vowed to retaliate forcefully. Iron and steel for construction uses are included in the U.S. list.

“The worsening trade tensions are exacerbating investor fears,” broker First Futures Ltd. said in a note on Tuesday. “This could inflict downward pressure on high steel prices in the near term, although in the long term, lower supply because of environmental curbs should support the market.”

China’s government has launched a fresh round of environmental checks that may affect the big steel hubs. Officials have been fanning out through 10 provinces for a month-long so-called “look back” campaign aimed at ensuring mills’ compliance with environmental regulations imposed last year.

Copper, known as a barometer of the economy because of its use in autos and homes, sank 1.5 per cent in London, while nickel fell 1.3 per cent and zinc 0.9 pe rcent. The London Metal Exchange index of six contracts hit the highest since 2013 earlier this month. Gold was up 0.3 percent from the lowest this year.

Rebar futures closed 3.4 per cent lower at 3,769 yuan a ton in Shanghai, while iron ore ended with a loss of 5 per cent in Dalian.

  • Hot rolled steel coil declined 3.1 per cent in Shanghai
  • Coking coal dropped 5.1 per cent in Dalian