Europe and the United States have announced co-ordinated action against China for breaking World Trade Organisation rules, raising fears of a damaging trade war in the depths of the global recession.

The US trade representative issued a statement this afternoon criticising restrictions China has placed on exports of raw materials, to the disadvantage of American firms. Together with Europe, the US will start formal "dispute resolution consultations" at the WTO, claiming China has breached the rules of the international marketplace.