Chinese equities were worth US$5.99 trillion on Friday, behind Japan's $6.15 trillion, according to data compiled by Bloomberg.

"Losing the ranking to Japan is the damage caused by the trade war," Hong Kong-based CEB International Investment Corp head of research Banny Lam told the wire service.

"The Japan equity gauge is relatively more stable around the current level but China's market cap has slumped from its peak this year."

Chinese media reported the government announced late Friday it was planning additional tariffs against US products, if the US went ahead with its planned tariff increases on Chinese imports.

US president Donald Trump tweeted that tariffs were working "far better than anyone ever anticipated", referring to China's market dropping 27% this year and said the country was "talking to us".

"Our market is stronger than ever and will go up dramatically when these horrible trade deals are successfully renegotiated," he said.

The US has the largest equities market worth about $31 trillion, Bloomberg reported.