China has just responded to the latest tariffs proposed by the U.S. by announcing its own fresh wave of tariffs on American goods.

The Ministry of Commerce in Beijing said it will levy an additional 25% tariff on 106 U.S. products, including soybeans, automobiles, chemicals, aircraft, whisky and cigars. The new measures apply to roughly $50 billion of U.S. imports, matching the scale of tariffs proposed by the U.S. government on China the previous day.

Chinese government officials indicated that its proposed measures are not set in stone and could still be reversed, provided that the U.S. also waters down its own tariffs on high-tech goods. President Donald Trump’s administration proposed 25% tariffs on 1,300 industrial technology, transport and medical products in order to strike back against the alleged improper transfer of technology from American companies to Chinese firms. The duties target about $50 billion of estimated 2018 imports.

US top exports to China in 2017, under threat of Beijing tariff retaliation to Trump’s tariffs:
• Civilian aircraft, engines, equipment, and parts: $16.3b
• Soybeans: $12.3b
• Passenger cars, new and used: $10.5b

Source of US exports to China —> https://t.co/W4PyVkpIK3
— Chad P. Bown (@ChadBown) April 4, 2018

Stock Markets Rattled

China’s retaliation against America’s latest tariffs took global stock markets by surprise. “China’s response was tougher than what the market was expecting — investors didn’t foresee the country levying additional tariffs on sensitive and important products such as soybeans and airplanes,” Gao Qi, a Singapore-based strategist at Scotiabank, told Bloomberg. “Investors believe a trade war will hurt both countries and their economies eventually.”

Share prices fell immediately across Europe and the U.S. stock market is now expected to fall sharply when trading begins. At the time of writing, the Dow Jones Industrial Average futures market was down 2.34%. Futures on the S&P 500 index fell 1.82% and those on the Nasdaq 100 index fell 2.28%.

Boeing Co.’s (BA) shares fell 6.60% in pre-market trading. Caterpillar (CAT), Ford Motor Co. (F) and General Motors (GM) were down 3.49%, 3.27% and 3.95% respectively. (See also: US Urges China to Buy More Chips, Cut Auto Tariffs to Avert Trade War.)

Commodity markets also got hammered by the news. China is the world’s largest importer of soybeans and analysts have said the tariffs could affect the country as well. Soybeans are a key part of the global food chain and are used both as a source of oil and to feed livestock such as pigs and chicken. (See also: Charles Schwab: Trade War Would 'Wreak Havoc' on Global Supply Chains.)

President Trump responded to the country's latest move in a tweet that said, "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S." Commerce Secretary Wilbur Ross told CNBC the tariffs "amount to about three-tenths of a percent of our GDP. So, it's hardly a life-threatening activity." 

No Backing Down

Shortly after Beijing made the announcement, a spokesperson for the country’s foreign ministry said at a daily press briefing reported on by the Guardian that China will continue to fight back against America’s threats. “Those who attempt to make China surrender through pressure or intimidation have never succeeded before, and will not succeed now,” the spokesperson said.

According to Reuters, Deputy Finance Minister Zhu Guangyao added that efforts to force changes in Beijing’s intellectual property practices will instead promote China’s development and innovation.