Beijing has introduced duties of up to 25 per cent on 128 American imports following President Donald Trump's decision to slap tariffs on steel and aluminium.
China said the move was intended to safeguard its interests and balance losses caused by the new tariffs.
US stocks fell sharply and Asian shares traded lower as trade war fears mount.
On Wall Street, the S&P 500 Index lost 2.2 per cent, while the Dow Jones Industrial Average dropped 1.9 per cent.
In Asia, Japan's Nikkei 225 opened down about 1.5% on Tuesday but recovered a little to close 0.45 per cent lower. The Shanghai Composite was off 1% and the Hang Seng down by 0.6 per cent in afternoon trading.
The White House reacted angrily to China's move."Instead of targeting fairly traded US exports, China needs to stop its unfair trading practices which are harming US national security and distorting global markets," spokeswoman Lindsay Walters said. (UNI)