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China has said it will impose tariffs on $60bn (£46bn) of US goods from 1 June, extending a bilateral trade war.
The move comes three days after the US more than doubled tariffs on $200bn of Chinese imports.
The escalation sent stock markets tumbling, with the Dow Jones Industrial Average falling more than 700 points.
US President Donald Trump had warned China not to raise levies but Beijing said it would not swallow any “bitter fruit” that harmed its interests.
China has raised tariffs on more than 5,000 US products, with the new rates ranging from 5% to 25%.
Items affected include beef, lamb and pork products, as well as various varieties of vegetables, fruit juice, cooking oil, tea and coffee.
Chinese foreign ministry spokesman Geng Shuang told a news briefing in Beijing that China would “never surrender to external pressure”.
Stock markets in both Europe and the US fell.
By mid-afternoon the Dow Jones was 2.25% lower while the S&P 500 had dropped 2.42% and the Nasdaq index lost 3%. In London, the FTSE closed 0.5% lower, while the main indexes in Frankfurt and Paris were more than 1% lower.
The latest round of US-Chinese trade negotiations ended in Washington on Friday without a deal.
The US argues that China’s trade surplus with the US is the result of unfair practices, including state support for domestic companies.
It also accuses China of stealing intellectual property from US firms.
As well as ordering a tariff increase on $200bn worth of Chinese imports, Mr Trump also directed the US trade department “to begin the process of raising tariffs on essentially all remaining imports from China”, estimated to be valued at around $325bn.
Though on Monday, Mr Trump said that he had “not made a decision” on whether to go ahead with those additional levies.
Earlier, the president had warned China against a tit-for-tat response to his actions last week.
“China should not retaliate – will only get worse!” Mr Trump tweeted shortly before news of the Chinese decision came.
Mr Trump also said China had “taken so advantage of the US for so many years”.
What you asked about US-China trade
He added that US consumers could avoid the tariffs by buying the same products from other sources.
“Many tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!” he said.
Mr Trump’s approach in the dispute has put him at odds with his own top economic adviser, Larry Kudlow, who has said “both sides will suffer”.
