Now playing
01:43
US hits China with higher tariffs
President Donald Trump shakes hands with Chinese Vice Premier Liu He, after signing a trade agreement in the East Room of the White House, Wednesday, Jan. 15, 2020, in Washington. (AP Photo/Evan Vucci)
Evan Vucci/AP
President Donald Trump shakes hands with Chinese Vice Premier Liu He, after signing a trade agreement in the East Room of the White House, Wednesday, Jan. 15, 2020, in Washington. (AP Photo/Evan Vucci)
Now playing
01:43
The trade war with China is far from over
NEW YORK, NEW YORK - NOVEMBER 12: President Donald Trump delivers a speech at the Economic Club Of New York in the Grand Ballroom of the Midtown Hilton Hotel on November 12, 2019 in New York City. (Photo by Steven Ferdman/WireImage)
Steven Ferdman/WireImage/WireImage
NEW YORK, NEW YORK - NOVEMBER 12: President Donald Trump delivers a speech at the Economic Club Of New York in the Grand Ballroom of the Midtown Hilton Hotel on November 12, 2019 in New York City. (Photo by Steven Ferdman/WireImage)
Now playing
02:50
The Trump economy is good for his reelection. Will trade stand in the way?
CNN
Now playing
02:34
IMF chief: Trade war could cost world economy $700B
U.S. President Donald Trump meets NATO Secretary General, Jens Stoltenberg at Winfield House in London, Tuesday, Dec. 3, 2019. US President Donald Trump will join other NATO heads of state at Buckingham Palace in London on Tuesday to mark the NATO Alliance's 70th birthday. (AP Photo/Evan Vucci)
Evan Vucci/AP
U.S. President Donald Trump meets NATO Secretary General, Jens Stoltenberg at Winfield House in London, Tuesday, Dec. 3, 2019. US President Donald Trump will join other NATO heads of state at Buckingham Palace in London on Tuesday to mark the NATO Alliance's 70th birthday. (AP Photo/Evan Vucci)
Now playing
02:51
'Tariff Man' Trump escalates trade tensions
trump macron nato comments response sot vpx_00004001.jpg
trump macron nato comments response sot vpx_00004001.jpg
Now playing
00:52
Trump: I'd wait after 2020 election to strike China deal
CNN
Now playing
01:58
Scaramucci on trade: China wants Trump in power
Container trucks arrive at the Port of Long Beach on August 23, 2019 in Long Beach, California. - President Donald Trump hit back at China on August 23, 2019, in their mounting trade war, raising existing and planned tariffs in retaliation for Beijing's announcement earlier in the day of new duties on American goods. (Photo by Frederic J. BROWN / AFP)        (Photo credit should read FREDERIC J. BROWN/AFP/Getty Images)
FREDERIC J. BROWN/AFP/Getty Images
Container trucks arrive at the Port of Long Beach on August 23, 2019 in Long Beach, California. - President Donald Trump hit back at China on August 23, 2019, in their mounting trade war, raising existing and planned tariffs in retaliation for Beijing's announcement earlier in the day of new duties on American goods. (Photo by Frederic J. BROWN / AFP) (Photo credit should read FREDERIC J. BROWN/AFP/Getty Images)
Now playing
01:21
China waives tariffs on some US goods
Photo Illustration: CNNMoney/Getty Images/Shutterstock
Now playing
02:37
The trade war's latest victim: Manufacturing
CNN
Now playing
02:26
Trump trade adviser defends China tariffs: They're working
Getty Images
Now playing
02:04
Why you'll feel the latest round of tariffs
Now playing
02:08
This is what a trade war looks like
Getty Images
Now playing
01:42
This is the worst case scenario for the US-China trade war
A staff member of Huawei uses her mobile phone at the Huawei Digital Transformation Showcase in Shenzhen, China's Guangdong province on March 6, 2019. - Chinese telecom giant Huawei insisted on March 6 its products feature no security "backdoors" for the government, as the normally secretive company gave foreign media a peek inside its state-of-the-art facilities. (Photo by WANG ZHAO / AFP)        (Photo credit should read WANG ZHAO/AFP/Getty Images)
WANG ZHAO/AFP/Getty Images
A staff member of Huawei uses her mobile phone at the Huawei Digital Transformation Showcase in Shenzhen, China's Guangdong province on March 6, 2019. - Chinese telecom giant Huawei insisted on March 6 its products feature no security "backdoors" for the government, as the normally secretive company gave foreign media a peek inside its state-of-the-art facilities. (Photo by WANG ZHAO / AFP) (Photo credit should read WANG ZHAO/AFP/Getty Images)
Now playing
01:29
What blacklisting Huawei means for the US-China trade war
shutterstock/cnnmoney
Now playing
01:44
You'll pay more for these, thanks to tariffs
(CNN Business) —  

Just days after they appeared to be on the verge of brokering a deal, the United States and China are fighting a trade war again.

The Trump administration made good on its threat to raise tariffs on $200 billion worth of Chinese exports from 10% to 25% earlier on Friday, marking a sharp escalation in tension between the world’s two largest economies.

After months of talks aimed at ending a year-long dispute that has already hurt global growth and rattled stock markets around the world, the latest US salvo risks triggering a new wave of tit-for-tat responses.

Beijing on Friday expressed “deep regret” at the latest US move, and reiterated that it would “have to take necessary countermeasures.” It did not specify what they would be or when they would be imposed.

What happens next could have enormous implications for businesses, consumers and investors.

China’s response

The coming days could be crucial. US and Chinese negotiators ended another round of talks on Friday without a deal to resolve American concerns on market access and intellectual property theft.

China is constrained in its response to the latest US tariffs by the fact that it buys far fewer goods from the United States than the other way round. It imposed tariffs on US exports worth about $110 billion when the trade war started last year, leaving only roughly $10 billion worth of goods to target now.

A Chinese delegation led by its top trade negotiator, Liu He, is in Washington for talks.
Manuel Balce Ceneta/AP
A Chinese delegation led by its top trade negotiator, Liu He, is in Washington for talks.

“China … is running out of American imports to tax,” said Brock Silvers, managing director at advisory firm Kaiyuan Capital. “The fact that Beijing has yet to declare a specific retaliatory intent shows that China is still hoping the peace process can be salvaged,” he added.

The Chinese government could hike the level of its existing tariffs on US products, rather than go after a new list of exports, according to Julian Evans-Pritchard, senior China economist at Capital Economics.

“They have a 25% tariff on agricultural commodity imports from the US, they could double that potentially,” he said. “I think it’s a balancing act for them. They want to retaliate for political reasons … but actually in economic terms probably their best option would be to do nothing.”

The trade war has already hurt American farmers and some of the biggest companies on both sides. Apple (AAPL) partially blamed the trade war for a revenue decline in the first three months of 2019, and construction company Caterpillar (CAT) said that Chinese tariffs cost it more than $100 million in 2018. Top Chinese firms like Alibaba (BABA) have also warned that the increased tensions are hurting business.

Further escalation?

Even as the two sides were still talking on Friday, Trump tweeted that “the process had begun” to apply a 25% tariff to virtually all Chinese exports to the United States.

“The fact that the White House has increased the tariff rate suggests that the probability has risen that tariffs will increase on the remaining roughly $300 billion in imports from China that the US has not yet targeted,” Goldman Sachs said in a note on Friday.

In response, China could make life harder for American companies operating within its borders with hurdles like customs delays and heightened scrutiny by regulators. Big names like Boeing (BA), Nike (NKE), Tesla (TSLA), General Motors, Intel (INTC) and many others all