U.S. Customs and Border Protection hiked tariffs at midnight on Friday from 10 percent to 25 percent on $200 billion worth of Chinese goods, intensifying a 10-month trade war with the world's second-largest economy. "I did get last night a very handsome letter from President Xi (Jinping)".
He added that in the meantime, "the United States has imposed Tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!"
Liu, China's top economic official, said the country's economy was improving after bottoming out at the end of past year.
Michael Taylor, managing director and chief credit officer for Asia-Pacific at Moody's Investors Service, said the US move exacerbated uncertainty in global trade, added to US-China tensions, and negatively affected global sentiment.
"This shows Xi and other senior Chinese leaders are willing to accept an escalation of the trade dispute over what they perceive as a direct and intolerable challenge to China's sovereignty, in the form of United States demands that China make substantial changes to key laws and regulations to formally enshrine China's concessions", they said.
According to people familiar with the talks, the mood between China and America's top trade envoys had been downbeat prior to talks ending.
The developments came as two days of talks ended on Friday with no deal - but no immediate breakdown either - offering a glimmer of hope that Washington and Beijing could find a way to avert damage to the global economy.
China said Friday it "deeply regrets" the increased tariffs and will take the "necessary countermeasures", without giving any details.
The three major USA indexes had been near all-time highs May 3, with the Dow up 12 percent for the year, the S&P 500 up more than 15 percent and the Nasdaq ahead 20 percent.
"Of course, China believes raising tariffs in the current situation is not a solution to the problem, but harmful to China, to the United States and to the whole world".
A range of consumer products - including cell phones, computers, clothing and toys - were hit by the tariff rate increases from 10% to 25% on Friday.
"We think these differences are significant issues of principle", Liu said.
The added levy could reduce USA gross domestic productby 0.3% and China's by 0.8% in 2020, consultancy Oxford Economics said.
Who is really paying for the tariffs, the U.S. or China?
"Pushing rates to 25% will prove extremely damaging to those companies, and the collateral damage will ripple around the globe".
Some economists, however, predict such tariffs would cut by half the rate of US economic growth seen in the first quarter of this year.
China's Vice Premier Liu He waves as he departs the office of the US Trade Representative in Washington on Thursday.
Locked in a trade dispute for more than a year, officials from the world's two biggest economies returned to the bargaining table late Thursday, led by Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin.
Chinese officials have said they will take action to answer the increase. "We absolutely can not make concessions on such issues of principle".
In April 2018, when Mr Trump's tariffs were still largely just threats, China's Commerce Ministry responded to his escalatory tweets by declaring that the two sides could not conduct negotiations "under these conditions".
Stock turbulence continued to rock US markets on Friday - positioning them for their worst weekly finish of 2019 - as investors began to price the fallout from President Trump's higher tariffs on Chinese goods. They were not expected to go into effect for several months.
The Yangshan container port in Shanghai.
For now, however, the London-headquartered independent research firm does not think the tariffs will have a major impact on Chinese GDP, and are predicting a 0.7% drag on growth, but only in the event the higher tariffs are extended to all USA imports. Still, the burden of Trump's tariffs on imports from China and other countries falls entirely on USA consumers and businesses that buy imports, said a study in March by economists from the Federal Reserve Bank of New York, Columbia University and Princeton University.