The U.S. escalation of trade tensions won’t solve any of its problems but will create volatility in global markets and hurt the world economy, according to China’s top financial regulator.

Higher U.S. tariffs will have a “very limited” impact on China’s economy even if it raises levies to the maximum level, and would hurt the U.S. about as much, according to a speech by Guo Shuqing, head of China’s banking and insurance regulator, and delivered at a forum in Beijing by a spokesman for the agency Saturday.

Guo, also the People’s Bank of China’s Party Secretary, is the highest-ranking financial official so far to publicly comment on the trade war since bilateral negotiations deteriorated earlier this month. His speech warned speculators that shorting the yuan would cause them to suffer great losses.

Many of China’s exports can be redirected to the domestic market as the nation shifts to a more consumption-driven economy, according to the speech. China will also find new overseas markets while continuing to ship many products to the U.S., as importers will be willing to share the tariff costs and some Chinese goods will prove difficult to replace, the speech said.

Economic Disruption

The world’s second-largest economy faces severe disruption from U.S. President Donald Trump’s planned increases in tariffs on its goods, and the associated uncertainty that the worsening trade war brings. The People’s Bank of China has warned that trade tensions with the U.S. could destabilize the global economy.

U.S. restrictions on high-tech exports to China would push up the U.S. trade deficit, and the yuan’s weakness caused by a trade war makes the U.S. government worried about diminishing effects of higher tariffs, according to the speech. Rising prices could also cost the U.S. its long-term advantage of low inflation.

Regarding the recent depreciation of the Chinese currency, speculators “shorting the yuan will inevitably suffer from a huge loss,” the speech said, adding that it is rather “ridiculous” that developed countries have long asked for more currency flexibility, but when the yuan’s rate become more market oriented, some of them showed fear.

The onshore and offshore Chinese yuan are among the worst performing Asian currencies this month.

Yet domestic companies and the Chinese people aren’t panicking about the volatility, and China’s economic fundamentals would ensure the yuan doesn’t experience long-term depreciation, the speech said.