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HONG KONG/SHANGHAI: Chinese markets slumped on Friday, with investors rushing for cover after U.S. President Donald Trump slapped fresh tariffs on China citing a lack of progress in their bilateral trade talks.

Trump said on Thursday he would tax the remaining $300 billion of Chinese imports with 10% tariffs from Sept. 1, breaking the tariff ceasefire since his meeting with Chinese President Xi Jinping at the G20 summit in June.

The U.S. leader said Xi was moving too slowly in the negotiations, after being briefed by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on their meeting with Chinese officials this week, which were the first such in-person talks since the June trade truce.

Chinese shares plummeted with the Shanghai Composite Index  down 1.7% in the morning session, while the blue-chip CSI300 lost 1.8%. In Hong Kong, the Hang Seng Index  shed 2.4% and H-shares 2.7%.

The Chinese yuan slid to its weakest since November 2018 in early trade, before paring some losses. Onshore spot was last seen at 6.9330 per dollar, still down 0.5% on the day - its biggest daily fall in more than two months. The offshore yuan was trading at 6.9572 at 0410 GMT.

Traders said the yuan's slump was encouraged by a weaker-than-expected official fixing, from which the spot can only trade 2% above or below. The People's Bank of China set the midpoint at a seven-month low on Friday.

"The deteriorating China growth outlook amid the full-blown trade war suggested that the Chinese government would be tempted to allow further renminbi depreciation to support the growth," Ken Cheung, senior Asian FX strategist at Mizuho, wrote in a note on Friday.

But given China's priority for stability, he said the PBOC might use the CNY fixing to guide a gradual depreciation towards 7 per dollar.

Trump's latest threat came just two weeks after China's second quarter economic growth slowed to 6.2%, its weakest pace in at least 27 years.

Analysts expect the continuing stand-off to be a drag on China's economy but also present trading opportunities.

Beijing could retaliate by curbing rare earth exports, excluding certain U.S. companies from doing business in China and increasing existing tariffs on U.S. goods, Iris Pang, economist for Greater China at ING, said in a note on Friday.

Zhou Yu, analyst at Pacific Securities, said in a note on Friday investors should bet on agriculture products, a sector where tariffs could drive domestic businesses to buy local.

Rare earth and agriculture stocks surged, with Hong Kong-listed China Rare Earth Holdings Ltd rising as much as 30%.

Others said the current turn of events was not entirely surprising.

Zhang Qi, analyst at Haitong Securities, said Chinese investors had been bracing for higher U.S. tariffs, given the lack of progress in the latest round of talks and reflected in the falling share prices before Friday.

"Disputes will be on-and-off. Frictions will be part of life," said Wu Kan, head of equity trading at Shanghai-based Shanshan Finance.

(Reporting by Noah Sin, Jindong Zhang, Luoyan Liu and Samuel Shen; Writing by Noah Sin; Editing by Michael Perry and Jacqueline Wong)

Copyright Reuters, 2019