Global markets were mixed the day after China allowed its currency to fall below the key seven per U.S. dollar level and halted U.S. farm imports by state-owned firms in retaliation to new tariff threats. After the U.S. stock market saw its worst day of the year due to this sudden escalation, the Trump administration officially declared the Asian nation a currency manipulator and accused it of trying to "gain an unfair competitive advantage in international trade."

China's central bank made attempts today to curb the depreciation of the yuan. In a statement it said it would sell short-term yuan-denominated bonds worth $4.3 billion in Hong Kong. Additionally, the reference rate it set for the the yuan was 6.9683 per U.S. dollar., which is stronger than what analysts were expecting. It is, however, weaker than yesterday's 6.9225 and the weakest in 11 years.

On Tuesday, China's Shanghai Composite Index and Shenzhen Composite Index closed 1.56% and 1.78% lower. Japan's Nikkei Index also drifted lower to end the day 0.65% in the red.

On the other hand, the STOXX Europe 600 Index, which represents companies in 17 of the region's countries, and U.S. stock futures climbed higher. At 7:00 a.m. ET, futures for all three major U.S. indexes were up close to 1% or higher. The U.S. 10-Year Treasury yield rose slightly to 1.756% after falling to its lowest level since November 2016 on Monday. Fans of the virtual currency Bitcoin have been calling it a new safe haven after its price surged amid the selloff. The world's largest cryptocurrency by market cap is now up by over 200% since the start of the year.

Major Tech Stock Selloff

Few sectors were spared in Monday's selloff, as everything from industrials to technology stocks were targeted by sellers. Microsoft, Apple, Amazon, Alphabet and Facebook each lost more than 3% on Monday, wiping out over $160 billion in shareholder value. Shares of Apple, which sources both and components and finished iPhones from China, fell more than 5%. It is poised to open slightly higher this morning, as is Microsoft.

Trade War: No End in Sight

China for its part wants the U.S. to honor the ceasefire agreed on in June and broken by the U.S. president. "The U.S. side should seriously implement the consensus reached by the two leaders, honor the words and keep promises to create necessary conditions for bilateral agricultural cooperation." said Chinese Foreign Ministry spokesperson Hua Chunying when asked to comment on the country's latest strike in the ongoing trade war. Although China officially denies the currency was devalued by the bank as a tactical move and blames the market, many saw it as the country weaponizing the exchange rate. It was taken as a sign that China gave up on talks and was prepared to up the ante.

It's unclear at this point if President Trump will walk back his threat of 10% tariffs on $300 billion of Chinese goods or double down. Citi Research analysts expect the U.S. to raise the expected September 1 tariffs from 10% to 25% in response, CNBC reported. Goldman Sachs analysts called the "manipulator" designation given by the U.S. mostly symbolic without major consequences on its own, the report added.

China has limited tools in its arsenal at this point, and many of the ways it could hurt U.S. interests, including dumping U.S. Treasuries, would hurt its own embattled economy. The U.S. is expected to pay its farmers $16 billion in aid for losses suffered due to the trade war. It's possible in this war there are no winners.