Trade tensions between China and the US have been ramped up after Beijing responded to US plans for putting new taxes on hundreds of Chinese imports.
China said it would place 25% trade tariffs on 106 US goods, including soybeans, aircraft and orange juice.
The tit-for-tat action comes hours after Washington detailed about 1,300 Chinese products it intended to hit with tariffs – also set at 25%.
Wall Street opened sharply lower, but regained ground by mid-day.
After starting down more than 400 points or 1.75%, the Dow was only down by about 0.6% by late morning.
The S&P 500 was about 4 points or 0.15% lower by late morning, while the Nasdaq was flat.
Boeing and Caterpillar – among the firms that investors expect to be most affected by the plans for tariffs – were among the biggest losers on the Dow, starting the day more than 3% lower.
Stock markets in Europe also fell, with investors taken aback by the speed of China’s response.
Beijing said it “strongly condemns and firmly opposes” the proposed US tariffs, calling them “unilateralistic and protectionist”, and vowing to retaliate.
But US President Donald Trump tweeted the US was not in a trade war with China.
This is the second wave of tariffs imposed by the US. Earlier this year, Mr Trump announced import taxes on aluminium and steel.
The White House said its new plans were a response to unfair Chinese intellectual property practices, such as those that pressurise US companies to share technology with Chinese firms.
It has proposed tariffs on a wide range of items, including Chinese-made communication satellite parts, flat screen televisions, semiconductors and industrial machinery, as well as more niche products such as bakery ovens and rocket launchers.
A final list will be determined after a public comment period and review, expected to last about two months.
The Office of the US Trade Representative, which is handling the negotiations, said the tariffs were “appropriate both in light of the estimated harm to the US economy and to obtain elimination of China’s harmful acts, policies and practices”.
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China’s tariffs are more narrowly aimed at politically important sectors, such as agriculture.
US chemicals, some types of aircraft and corn products are among the goods facing the taxes, China’s finance ministry said.
Tariffs will also be placed on whiskey, cigars and tobacco, some types of beef, lubricants, and propane and other plastic products.
US orange juice, certain sorghum products, cotton and some types of wheat, as well as trucks, some SUVs and certain electric vehicles, will also be subject to the new duties, the ministry added.
18.2% of all China’s exports go to the United States
$129bn worth of China-made electrical machinery bought by US
59.2% growth in Chinese services imported by US between 2006 & 2016
$347bn US goods trade deficit with China
Beijing has been adamant that it did not want a trade war, but that it would not not back down under US pressure.
“Any attempt to bring China to its knees through threats and intimidation will never succeed,” foreign ministry spokesman Geng Shuang said.
“There is no winner in a trade war, and an initiator will harm itself as well as others.”
Mr Geng said China had referred the US to the World Trade Organization.
US economists said they expect the broader economic impact of the measures to be limited if they go into effect, but warned that the risk of further escalation could weigh on business activity.
The US and China exchanged more than $700bn in goods and services last year, according to US figures.
Each list of products represents an estimated $50bn (£35.5bn) in annual trade, officials said.
“It’s the tit-for-tat uncertainty that shakes business confidence,” said Satyam Panday, senior economist at S&P Global Ratings. “Why should I invest when there’s no certainty?”
China’s economy has become less dependent on selling goods abroad in recent years, which is likely to blunt the effect of the US tariffs, according to analysts for S&P Global Ratings.
In 2016, the US was the destination for about 18.2% of all Chinese exports.
American business groups have urged the two sides to try to resolve the issues through talks, expressing concern that threatening tariffs could lead to a dispute that hurts the US economy.
Mike Thompson, a president at S&P Investment Advisory Services, said Wednesday’s initial stock market declines do not indicate that investors expect major economic havoc, and he expects share prices to recover.
“I don’t want to sound Pollyanna-ish but I think the market sees this as the opportunity to trade,” he said.