Update: The Dow has extended its losses after Xi's threats and is now down 450 points as VIX spikes above 19...

This move has erased almost all gains across all the major US equity markets in June.

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With the market tumbling today on worries that the tit-for-tat trade war escalation between the US and China is now "irreversible", the WSJ just poured gas on the fire with a report that China President Xi Jinping is responding to the Trump administration’s trade-clash escalations "with a bare-knuckle approach that makes a bruising fight more likely."

Citing people who were present at a meeting last Thursday between Xi and a group of 20 mostly American and European multinational chief executives, the WSJ reports that  Chinese president said that Beijing plans to strike back.

“In the West you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” the Chinese leader said, according to the people. “In our culture we punch back.”

The WSJ also adds that "Xi has urged senior officials in a recent meeting to promote China’s global role as the U.S. faces a backlash for its America First agenda, according to state media and Chinese officials."

This means that whereas until now China merely responded with tits to US tats, the gloves now officially come off.

As the Journal further writes, while for months China’s leadership and senior officials have been put off balance by Mr. Trump as he mixed calls for trade penalties with references to Mr. Xi as a friend, coupled with proactive attempts to appears Trump as Xi’s top economic lieutenant twice traveled to Washington for negotiations and offered stepped-up purchases of American goods only to come up empty-handed, Now Xi has settled on an unyielding approach in dealing with Washington.

“China is not going to yield to outside pressure and eat the bitter fruit,” a senior official said. “That’s the negotiation principle set by President Xi.”

What is perplexing about today's story is that on Friday, China's state-run Xinhua reported  a decidedly different, and far less provocative angle, one in which China's eagerness to engage the US was not mentioned:

Focusing on the summit's theme of opening up, cooperation and mutual benefit, Xi and the executives exchanged views on topics ranging from the Belt and Road Initiative, innovation and smart manufacturing, to green development and global governance.

Xi said the companies had participated in, witnessed, contributed to and benefited from the reform and opening-up drive of China over the past four decades, during which the country sustained rapid economic growth and helped more than 700 million of its people shake off poverty, according to UN standards.

In any event, while we have previously discussed extensively what tools are at China's disposal...