China's producer deflation deepened to its worst level in almost two years in June as the economy grappled with uncertainty over a global trade war and subdued demand at home, piling pressure on policymakers to roll out more support measures.

Rare earths at a factory in Tianjin, China. Manufacturers speak of resilience yet some keep only a week’s supply of rare earth magnets in their inventories © Doug Kanter/Bloomberg China’s weaponisatio

After years of mounting concern over deflation and the bruising price wars that have plagued much of China’s economy, President Xi Jinping’s government is showing signs of finally taking action.

Its new deal with Vietnam and its fresh tariff threats issued to many other countries seem designed to reduce China’s role in their supply chain. Countries that had hoped to stay out of the new cold war now fear they are being forced to pick a side. To appease the world’s biggest market, they must anger the world’s biggest trader.

President Donald Trump’s threat to impose new tariffs on India over its participation in the BRICS forum puts New Delhi in a tough position as it races to finalize a favorable trade deal with the US.