Bloomberg reports: "Officials in Beijing appear to be toning down their responses to Donald Trump's tariff threats, amid a slowing economy, a falling stock market and a weakening currency. Evidence of the shift continued Thursday when the Commerce Ministry held off detailing how it plans to retaliate against Trump's latest threat to impose tariffs on $200 billion worth of Chinese-made goods. Commerce Ministry spokesman Gao Feng said the government will take "necessary" steps to hit back, but when pressed he stopped short of repeating a previous pledge to respond with "quantitative" and "qualitative" measures and didn't outline specifics about which measures China would retaliate with."

Bloomberg reports that Scott Minerd, chief investment officer for Guggenheim Partners, says a trade war with China may be "devastating" for the world's two largest economies, raising the risk of a deep U.S. recession as soon as next year. "The tail risk is getting fatter and fatter," Minerd, whose firm oversees about $305 billion, said in a Bloomberg Television interview. "So far the Chinese have shown no interest in backing down, but neither does Donald Trump." U.S. stocks rallied Thursday after China held off from immediately retaliating against the latest salvo from President Trump. China appeared to strike a conciliatory tone in reaction to Trump's newest escalation of the trade war between the countries. Higher tariffs from a trade dispute may fuel U.S. inflation, prompting the Federal Reserve to lift its benchmark rate to as much as 3.5 percent by the middle of next year, Minerd said. That would raise the cost of borrowing and put the brakes on growth, the money manager said. The rate hikes would probably occur as the stimulus from tax cuts wears off, adding further downward pressure on the economy.