Basically, it seems that a missionary who was serving the British as a translator was reading a letter from the Qing Empire to Queen Victoria concerning the opium trade, and rendered the Pinyin word yi as 'barbarian', rather than 'foreigner
In the words of John Keay in his seminal work 'China: A History'
The ramifications of the mistake, if that is what it was, were enormous. More even than opium, this tiny monosyllable poisoned diplomatic exchanges… It infected the translation of other Chinese characters and skewed the interpretation of whole passages, invariably rendering them more reprehensible to foreign readers.
And Lydia Liu in 'The Clash of Empires'
Never has a lone word among the myriad languages of humanity made so much history as the Chinese yi.
What I would like to know is, has this ever happened before? Has another mistranslation or similarly trivial misunderstanding ever caused two great Empires to go to war?
Source: reddit post