The escalating conflict between the world's two largest economies has rattled markets and companies, which fear disruption to their global supply chains.
"Recently, in disregard of our consensus, the USA demonstrated another flip flop to ignite a trade war".
The White House has accused China of forcing USA companies to share advanced technology with Chinese partners as a condition of doing business there.
"Trade is not as big an issue for us as overseas economies and it's easy to believe Trump is bluffing because he does a lot of it." said Paulsen.
Trump's new proposal comes days after he ordered a 25 percent tax on up to $50 billion in imports from China.
Economists are starting to warn that the tit-for-tat tariff threats between the United States and China, should they all be implemented, would meaningfully slow US growth.
The Japanese yen strengthened to 110.02 against the dollar, up as much as 0.47 percent on the day, after President Trump threatened to impose a 10 percent tariff on $200 billion of Chinese goods, fuelling trade war worries with Beijing.
Combined, the potential tariffs on Beijing could reach $450 billion - an amount equal to 89 percent of Chinese goods imported to the United States a year ago.
The dispute revived after the White House renewed its plan for a tariff hike on $50 billion of Chinese goods as part of the technology dispute.
"Rather than altering those practices, it is now threatening United States companies, workers, and farmers who have done nothing wrong". Asian stocks had been poised for a mixed start to trading that sees Chinese markets reopen for the first time since trade tensions with the USA escalated.
At 9:43 a.m. ET, the Dow Jones Industrial Average was down 238.78 points, or 0.95 percent, at 24,851.7, the S&P 500 was down 20.53 points, or 0.74 percent, at 2,759.13 and the Nasdaq Composite was down 57.84 points, or 0.75 percent, at 7,688.53. Shares of large USA companies with significant overseas business were hit especially hard. Boeing's stock shed 4.3 percent, Caterpillar 4 percent and GE 2.2 percent.
Disney increases bid for Fox, topping Comcast offer
Just how high can the bidding war go? Fox will have to pay Disney a $1.5 billion breakup fee if it backs out of that deal. Both companies had been scheduled to hold shareholder meetings on the previously announced transaction on July 10.
The Chinese Commerce Ministry reacted quickly to Trump's announcement, accusing the United States of "extreme pressure and extortionist behavior" and warning it would "strike back hard".
"Due to the fact that the USA continues to apply protective measures in the form of additional import duties on steel and aluminum and refuses to provide compensation for Russia's losses, Russia is using its WTO rights and introducing balancing measures with respect to imports from the United States", Oreshkin said, according to Russian newspaper Kommersant.
USA tariffs on Chinese products including steel, aluminium, and those that benefit from China's industrial development subsidy programmes including the "Made in China 2025" technology upgrade plan, could hurt a broad number of China-listed companies, said fund manager Dai, who is general manager of Shanghai Wisdom Investment.
China has hiked its list of United States goods on which it said it would slap tariffs six-fold from a version released in April, but the value was kept at US$50 billion, as some high-value items such as commercial aircraft were deleted. Beijing said it would respond with "comprehensive measures" if that happens.
The moves could start to meaningfully slow US growth, economists warn.
Brent crude futures fell 0.8 percent to $74.76 a barrel after rallying 2.5 percent overnight, while USA light crude futures retreated 0.9 percent to $65.27.
"President Donald Trump has raised the stakes once more". The next step will be for the Office of the U.S. Trade Representative to identify the Chinese goods to be penalized and to conduct a legal review. The first round of penalties announced by both nations is set to take effect on July 6. The White House is finalizing a list of $16 billion in additional goods it will sanction later.
"Just ask yourself: Would China have allowed America to do to it what China has done to America?" he said later. They include electric cars, whiskey and soybeans - a politically and economically vital export of America's heartland, where Trump enjoys support.
But after matching U.S. tariffs, the world's second-largest economy is starting to run out of options after importing just $129.8 billion of American imports.
Energy would be added for the first time to a burgeoning trade dispute that has hit imports of Chinese metals and solar panels, and exports of USA medical equipment and soybeans.
Wall Street has viewed the escalating trade tensions with wariness, fearful they could strangle the economic growth achieved during Trump's watch.
Gary Cohn, Mr Trump's former top economic adviser, said last week that a "tariff battle" could result in price inflation and consumer debt - "historic ingredients for an economic slowdown".