The United States is a much bigger buyer from China than the other way around, so tariffs on Chinese imports can have a bigger impact on China's economy than tariffs from the other side.
Trump has repeatedly suggested that China is paying the tariffs, even though that is simply not true. He emphasized the talks' ongoing nature, and discouraged the term "trade war", saying that the tariffs were simply part of the negotiations. Utilities were the only sector to rise on the stock market, and prices for USA government bonds, which are considered ultra-safe investments, rose sharply, sending yields lower.
Paul, a leading libertarian-conservative, said the tariffs, which were increased by Trump last week as part of his pressure campaign against China in trade negotiations, may in effect nullify benefits US companies have received from the administration's recent tax cuts. He said officials might be anxious companies may shift operations out of China in response to "aggressive retaliatory actions".
"If you add $30 billion of tariffs in the second quarter, that's like having a $120 billion tax increase", Holtz-Eakin said. Beijing has denied the accusation and accused Washington of protectionism.
Trump has repeatedly framed the tariffs as primarily hurting China. But he said there were no "definite plans". The U.S. and other trading partners say such efforts violate Beijing's free-trade commitments.
Volume on US exchanges was 8.24 billion shares, compared to the 6.97 billion-share average over the last 20 trading days.More news: Charges Against Conor McGregor Have Been Dropped From Incident In Miami Beach
On the wider market, USA markets were hit by news that China plans to impose tariffs on $60bn (£46bn) of U.S. goods from 1 June.
Forecasters warned Friday's hikes could disrupt a Chinese recovery that appeared to be gaining traction.
Beijing is running out of USA imports for penalties due to the lopsided trade balance between the world's two largest economies.
The tensions "raise fresh doubts about this recovery path", said Morgan Stanley economists Robin Xing, Jenny Zheng and Zhipeng Cai in a report.
The latest USA charges could knock 0.5 percentage points off annual Chinese economic growth, economists said.
Senate Finance Committee Chairman Chuck Grassley, Iowa Republican, implored both countries to strike a deal. That would push annual growth below six per cent, raising the risk of politically unsafe job losses.More news: Moon's shrinkage is producing lunar quakes
Wall Street's main indexes were set to drop almost two per cent on Monday after Beijing announced plans to retaliate with tariffs on US goods, raising fears that another round of tit-for-tat measures could push the USA economy toward recession.
China is not to blame for the huge trade deficit the United States runs, and China was a hugely profitable market for US companies, the paper said, in a commentary published under the pen name "Zhong Sheng", meaning "voice of China".
Since October, the Communist Party's mouthpiece People's Daily gradually reduced mentions of "trade war" in the pages of its paper, opting instead for the less strident "trade friction", according to a content analysis by an independent researcher shared with AFP. Shares opened moderately lower in Asia on Tuesday after a dismal day on Wall Street as investors fled uncertainty over the China-U.S. trade standoff. "It is no big deal". The company had already moved some items subject to tariffs into Taiwan.
But the retaliation from Beijing was not unexpected, White House economist advisor Larry Kudlow said on Sunday the United States expected retaliation from China over the new tariffs.
No matter what Washington and Beijing decide, "there is an enormous risk in the background that tariffs could come back into play at any moment", he said.More news: Manchester United boss Solskjaer faces 'tough' job to win Premier League - Herrera