On Monday, China imposed extra tariffs on imports of American goods including wine, in response to USA duties on steel and aluminum imports.
The Trump administration on Tuesday raised the stakes in a growing trade showdown with China, targeting 25 percent tariffs on some 1,300 industrial technology, transport and medical products to try to force changes in Beijing's intellectual property practices.
A list the U.S. issued on Tuesday of products subject to tariff hikes included aerospace, telecoms and machinery, striking at hi-tech industries seen by China's leaders as the key to its economic future.
"People are anxious. These are the two biggest economies in the world - $650bn is traded just between the USA and China, so there's a lot at stake there".
"America's measures have violated the rules of the World Trade Organization, and have seriously violated China's legal rights", China's Finance Ministry said in an online statement.
But critics say the USA president's protectionist trade moves will hurt the global supply chains of US companies and could lead to higher prices for US consumers.
"It must be said, we have been forced into taking this action", a deputy commerce minister, Wang Shouwen, said at a news conference.
Aside from the trade deficit, the USA administration, says it also wants to tackle the issue of China forcing US companies - that includes automakers too - share their technology with local partners in order to give them access to the market, something that results in the theft of trade secrets.
Chinese hackers continue to steal information from US defense contractors, likely to gain a strategic edge over the USA military.
Wednesday's announcement also prompted European stocks to extend losses, with The Stoxx Europe 600 sliding 1.2 percent.
Meanwhile, Beijing said that the economies of China and the United States were highly complementary and said cooperation was the only right choice between the two countries to solve the differences.
These policies bolster China's intention of seizing economic leadership in advanced technology as set forth in its industrial plans, such as "Made in China 2025", according to USTR. Wall Street was poised for big losses at the open with Dow futures and the broader S&P 500 futures 1.4 percent lower. Those tariffs are likely in response to new American tariffs on Chinese aluminum and steel.
Also on Wednesday, analysts warned that the USA automobile industry would suffer under the new tariffs - with BMW, Mercedes-Benz and the already embattled Tesla among the worst hit.
And consumers are still likely to face higher prices for goods with tariffs in place than without them, said Victor Shih, a professor of political economy at University of California San Diego who studies China's financial industry.
UBS Securities has said that Chinese electronics and tech exports account for 43 percent of total exports to the United States.
To minimize the cost to China, regulators picked products for which replacements are available, such as soybeans from Australia or Brazil, said Tu Xinquan, director of WTO studies at the University of International Business and Economics in Beijing. Regulators could withhold licenses or alter other conditions to hamper foreign business activity.
The technology investigation was launched under a little-used Cold War era law, Section 301 of the U.S. Trade Act of 1974.
Since the agreement, security experts have observed a significant decline in Chinese cyber-enabled intellectual property theft from USA companies, and the pact has been largely cheered as a diplomatic accomplishment.
Large technology companies also struggled. Barriers to trade would obviously hurt US exporters.
"I'm not a fan of tariffs", he said, but added that they are "part of the process".